Bloodgood's Notes #139
Gensler's crusade against crypto continues, Bitcoin drops further down and more
Fundamental Overview
If you thought that Gensler’s campaign against crypto couldn’t get any crazier, a new development last week made it clear that he can go way further than ever before. On Wednesday, August 28, OpenSea disclosed that they’ve become the next company to be targeted by Gensler’s crusade of regulation by enforcement, because the SEC apparently believes that NFTs are securities. This is interesting because it ventures into completely uncharted territory: NFTs are essentially collectibles, so one option for OpenSea to respond would be to claim that the SEC would also have to go after other platforms that offer collectibles—digital or otherwise—meaning that they would have to explain why they’re suing OpenSea but not the likes of Disney or even eBay.
What’s more, OpenSea has always been extremely cautious about regulation, which is why they never launched a token, even though almost everyone in the industry thought that they should (and they probably lost a lot of market share precisely because of that). And yet, all they get in return for being so careful is a lawsuit. The lesson for founders in the current regulatory environment is clear: you’ll get sued no matter what, so you’re better off dropping a token and trying to make as much money as possible so that you can have enough capital and be prepared for the legal battle.
Bitcoin
Red candles continue for Bitcoin.
Last week, we discussed that the accumulation zone looked weak, and we saw a breakdown of that level before the week ended. Breaking below the accumulation zone potentially confirms our theory that a new low is possible. If that’s the case, then $46,700 is on the table, and it wouldn’t be unwise to place some bids around that level.
This theory will be invalidated if bulls manage to push Bitcoin back above the breakdown area at around $59k.
SPX, Gold, and DXY
Over $1 trillion was wiped from the stock market yesterday as SPX got rejected at the all-time highs. We discussed that this was an unpredictable zone, and many got burned. The levels to monitor remain the same: $5,261 is the support, and the all-time high remains the resistance.
Not much has changed on the Gold chart. It continues its reversal pattern toward $2,430, and there’s nothing to do at the moment except wait patiently.
As risk-on assets drop, we see DXY thrive. It has reclaimed its 101 level, which could be a good start for a bigger move upwards. Pay close attention to this weekly close because if DXY goes up, risk-on assets could drop further.
Ethereum
Ether continues its move toward $2,000.
There is nothing bullish to say about Ethereum at the moment. The $2,600 level was not reclaimed, and my eyes are glued to the $2,000 level for any potential bids.
In my opinion, if we reach $2k, it will be a golden opportunity to load some cheap ETH.
Concluding notes
Last week I mentioned the NVIDIA earnings report—sure enough, it had quite an impact on the market. The company’s numbers did manage to beat estimates, but only by around 5%, which wasn’t enough to justify its insane valuation. The stock tumbled almost 20% over the following days, bringing much of the market down with it.
The key point here, however, is that this doesn’t change the longer-term outlook for crypto one bit. What will matter much more is how the Fed and the Treasury will act to stabilize the stock market and keep bond yields at an acceptable level. Given that elections are just around the corner, they will act sooner rather than later, which is why the key objective for most people should just be to not get shaken out in the meantime.