Bloodgood's Notes #113
Grayscale outflows slowing down as IBIT takes on more market share, FTX creditors to be paid but there is a catch and more
Fundamental Overview
After last week’s FOMC, the odds of a rate cut for the next meeting on 20 March tumbled from around 50% to just over 15% at the time of writing. Since we’re in an election year, Powell has to be extra careful in treading the fine line between crashing the financial markets and causing unemployment by keeping rates too high and letting inflation run rampant by cutting too soon. In any case, it’s safe to say that it’s only a matter of time now before “higher for longer” becomes nothing more than a memory.
Given the inevitable pivot, I was surprised to see many takes claiming that cutting will be bearish for stocks and consequently crypto. At first, that might seem justified: if you look at some charts with the dates when the Fed previously started cutting rates, you’ll see that the market often continued to dump. What that simple analysis fails to take into account, however, is the fact that the Fed usually starts cutting in a very specific situation, namely that of a recession. On the other hand, as long as we don’t have something extremely unexpected happen out of the blue in the coming months, there’s every reason to believe that rate cuts in a non-recessionary environment will be very bullish.
Bitcoin
Bitcoin stays above the key weekly level.
A week has passed and Bitcoin continues on its bullish path, even though the breakout was retraced right back to the level. We have the halving event coming up in April and no major events until then, which means there could be a bit less volatility, especially if things in TradFi are also relatively calm. Ideally we keep ranging in the $40k-$47k area where altcoins have a chance to catch up.
The daily structure confirms that $42k is an important weekly level as it was tested a couple of times. Bulls will want to see this level hold or else we will print a new low somewhere around $38k or even lower.
I’ll share a detailed plan on Twitter in case a breakdown happens.
SPX, Gold, and DXY
While stocks and gold take a breather, DXY moves higher.
Stocks are slowing down right above the previous all time highs and I expect a retest of the level sooner rather than later. The key move here will be to defend it, as if it’s lost and this turns out to be a fakeout, well… we certainly don't want to see that.
Gold remains where it was last week, trading inside the $1981-2000 range. With low volatility and being almost in the middle of the range, there is not much we can do right now.
DXY broke above the level I was warning you about. The 103.5 level was broken with force and I expect it to reach 105 soon, which could impact Bitcoin’s price in the near future. I will keep you updated as it develops.
Ethereum
Ethereum looks healthy after retesting its breakout zone.
So far that’s exactly what we want to see, with ETH testing the $2500 level as much as possible and exhausting sellers. The “ping-pong” inside the range is good and provides lots of trading opportunities for both sides. For now we’ll keep our eyes glued to the range low and range high and keep trading them until proven wrong.
A breakout above $2500 will be a huge move for ETH as well as for alts, and given that the Bitcoin halving will occur in April, I can see it happening soon. I will develop a plan in these weekly newsletters and share updates as we go along.
Blood’s content recap
Play smart > Try to get high PNLs
“I have met lots of crypto millionaires during my time here.
Most of them lost everything in 2023.
Taking profit early can make you feel bad cause you missed on more gains.
But loosing millions cause of stupidity feels worse, trust me.
Play this bull smart.”
Don’t try to find a perfect trade
“Loosing a trade hurts, but it’s an important step towards greatness.
Finding winning trades isn’t easy and many are scared of losing their hard earned money.
You are so focused to find the perfect trade that you rarely take one.
Action will deliver an outcome.
Trade.”
Concluding notes
Since the previous newsletter, Grayscale outflows have been trending down heavily, coming in at just $108 million yesterday, which was more than made up for single-handedly by the $137m of inflows into BlackRock’s IBIT. Interestingly—if not unexpectedly—IBIT seems to be taking more and more of the market share, since it’s the only ETF that had only one day with less than $100m in inflows, even as interest in other issuers’ ETFs has started to wane. Who knew that the crypto crowd would be rooting for BlackRock of all things, but for now, their interest in collecting fees from people’s retirement savings is definitely playing right into the diamond hands of BTC hodlers.
Finally, one of the most important headlines of last week was about FTX: plans for restarting the exchange were apparently scrapped, but on the other hand, it looks like customer claims will be paid out in full. That might sound good, and it definitely isn’t the worst outcome for creditors, but “in full” refers to the dollar value according to the prices on the date the exchange went bankrupt. Hence, anyone that had a bunch of BTC or (especially) SOL won’t exactly be happy about that, but at least it’s better than getting nothing as bankruptcy lawyers eat up all the capital.