Bloodgood's Notes
First newsletter after a short break, Spot ETFs approved, Grayscale selling, traders discus Bank Term Funding Program again and more
Fundamental Overview
The moment we had been waiting for and talking about for much of 2023 finally arrived in the second week of 2024, as the SEC approved the spot Bitcoin ETFs, which then began trading already on January 11. The price action since then hasn’t exactly been a moon mission by anyone’s standards, but that shouldn’t be too surprising—unless you’ve never heard of “buy the rumor, sell the news,” that is. Probably the most-discussed reason for the recent correction is that everyone is exiting $GBTC due to their high fees, which leads to sell pressure: given that redemptions of GBTC (which was impossible to exit until it got converted into an ETF) require Grayscale to sell BTC, a lot of attention is focused on their massive daily Coinbase deposits that keep coming like clockwork.
This isn’t the whole story, however: even though Grayscale is dumping huge clips of BTC, there’s enough inflow into the other ETFs—the ones with actually reasonable fees—to make up for this. Instead, it seems like the dip is driven by two key factors: the self-fulfilling prophecy of sell-the-news and the ever-important role of dollar liquidity. While there haven’t been any major changes to U.S. monetary policy since the last newsletter, it does look like the market was getting a bit too confident in a dovish turn and now, with many important decisions coming up soon (not least whether the Bank Term Funding Program that I discussed a while back will be renewed), traders are becoming more cautious again.
Bitcoin
Bitcoin makes a new high slightly above $49,000 and retraces back below $40,000.
Whatever the reason for this crash, it's not relevant here. In this segment of the newsletter we will discuss technicals. The weekly timeframe shows a test of the $47k resistance which was strongly rejected and even broke down through the $42k level which is not ideal for continuation.
We were discussing a possible retest of the $36.5k-$38k region, however I can imagine bulls are not happy with structures being broken. Our eyes are glued to the $38k level and we will patiently wait to see the reaction if retest happens. The ultimate level that is a MUST hold for the current bullish scenario to stay intact is $36,500 and that's where my biggest bids are.
The year 2023 was dominated by bulls and they managed to almost retrace the whole 2022 yearly candle. May this year's price action break all-time highs and bring all of you life-changing money.
SPX, Gold, and DXY
SPX prints new all time high to kick off 2024
While Nasdaq had already broken into price discovery, SPX remained trading right under it until the end of 2023. To answer the question whether this breakout is confirmed or not, we will have to wait a week or two and see how everything plays out.
Gold is having a tough time breaking previous ATHs
Gold has been among the top assets on my watchlist since it printed that giga weekly candle at the start of October. Since then it has been among the top performers, making new all time highs and showing strength. At the time of writing however, gold is still unable to break above the previous ATH. You know the drill, the more times a level is tested the sooner it will break.
Dollar Index rebounds and shows signs of strength.
As crypto is crashing, DXY once again rises. As seen from the weekly chart, DXY printed a higher low which is bullish, however the real test will come when it tests the high at 107. I suggest that you closely monitor the DXY chart as I am positive that it is a great tool to predict where BTC goes next.
Ethereum
Ethereum bulls managed to push ETH higher right after the BTC spot ETF news came out. The narrative was that rotation will happen from BTC to ETH, which was quickly proven wrong. As ETH hit its major resistance at $2500 we saw bears step in and defend the level. Successfully I might say. At the time of writing, bulls are fighting to defend the breakout level at $2100. Loosing $2100 and $2000 would bring bulls and bagholders at least a few more months of pain. The best scenario right now is that Ethereum continues to ping pong between the breakout level and the $2500 resistance until bulls regain power.
Ethereum/BTC moved!
We saw a giga candle right after ETF news (as explained above). If there was a glimmer of hope that Ethereum will outperform BTC, it is now mostly gone. At the time of writing ETH/BTC is already trading below the infamous 0.055 BTC level and if nothing major happens over the weekend, it will also close below the level; i.e., not bullish. Fake breakouts are not what you want to see for ETH to take off.
Blood’s content recap
My routine after a losing trade.
“1. Log out
2. Get some fresh air
3. Listen to some techno
4. Tell myself to stop being a bi*tch
5. Log back on
Loosing a trade can cloud your judgement which leads to a bigger loss.
Make a routine.”
Gem Hunting Tip
I made most of my wealth with 2019/2020 lowcaps.
One of things that helped me:
Spent hours in TG groups, mostly project groups, and asked tons of questions.
These questions helped me understand their viability and potential.
Can be done via phone if you are lazy.
Concluding notes
In spite of the immediate aftermath of the ETF approvals, it should still be obvious that this is an extremely bullish development in the long run. With much more capital getting the green light to diversify into Bitcoin, I expect that the long-term effects will be reduced volatility and more of a slow but steady grind upwards. This isn’t to say that BTC will become less volatile than the S&P 500, but simply that the way it trades will slowly start to reflect the fact that it is maturing as an asset and becoming far more mainstream. Apart from being bullish for the orange coin itself, this kind of change will be amazing for altcoins, with ETH being the obvious next candidate for a spot ETF, while other alts will benefit from the wealth effect and relative stability of BTC.
Finally, I have to mention one thing that happened a while ago but didn't get nearly enough attention. Remember the Sam Bankman-Fried trial, namely how it was supposed to be the first of two trials, with the second covering campaign finance violations? Well, right in the middle of the holiday season, the Department of Justice announced that they won't be moving forward with the second trial, which means no shady dealings with politicians will be made public. This doesn't matter that much for SBF himself—he’ll get locked up for a long, long time anyway—but it's easy to see why some very influential people had a very strong motive to prevent that trial from taking place, as well as for announcing the change at the time when it's by far the easiest to have it fly under the radar. As much as certain politicians like to (falsely) claim that crypto is mainly used for illicit purposes, I think it's obvious in this case where the real corruption lies.