Bitcoin and Crypto Market Updates (Aug 28th)

Bounce or die this week…

This week we have some exciting events on the macro calendar

Thursday: CORE PCE

Thursday: Unemployment claims

Thursday: Personal income/spending

Friday: Average Hourly Earnings

Friday: ISM Manufacturing PMI’s

I would say this is quite critical information when we consider the inflation picture. Last week Pow Pow didn’t reveal too much other than saying if they need to go higher… they will. This creates a risk when we look at the market's expectation for a rate hike with only 20% pricing in a hike.

This is bounce or die because some of the indexes hit support last week, mainly the big 7 and the tech indexes – See QQQ. Hitting the first Fib level here. IWM also hitting the MID level of the range.

Then we look at the USD – Top of the range here.

So as you can see we are at some critical areas on the legacy side and with the macro we have coming up this week I expect we will bounce or die.

This also couldn’t be more true for BTC – We’ve tested this zone several times in the last couple of weeks. I consider this strong support and an area we could see a bounce, however, if it fails then look out for 20/21k.

Tether reports a $3.3Billion shareholder capital buffer

Often subject to frequent FUD (Fear, Uncertainty & Doubt), Tether, the issuer of stablecoin USDT has reported some healthy financials this month. Tether's recent financial update reveals a slight decrease in its assets, dropping from $86.5 billion to $86.1 billion since July. The total liabilities also saw a reduction from $83.2 billion to $82.8 billion. Notably, Tether maintains a significant $3.3 billion shareholder equity buffer, meaning they have more reserves than the entire circulating supply of USDT tokens. As part of an agreement with the New York Attorney General's office, Tether is now releasing monthly financial reports, in addition to fulfilling its quarterly reserve report commitments.

Tornado Cash Founder released on bail after $1B money laundering charge

Following the controversial arrests last year, Tornado Cash's founder, Roman Storm, has been granted bail following charges of laundering $1 billion by the U.S. DOJ. Although accused of aiding software development rather than direct money laundering, this case raises concerns for all software creators not just within crypto. Both Storm and co-founder Roman Semenov were charged with helping a North Korean hacking group, Lazarus, launder money in a $1 billion scheme. Tornado Cash was an Ethereum-based coin mixing system, previously sanctioned by the U.S. in 2022 for national security reasons, designed to enable users to obscure their digital assets. Many saw this as a witch hunt, and it raised significant concerns over censorship of technology, particularly within crypto.

Mastercard ended their partnership with Binance

In what has been a very testing period for the world’s largest centralised crypto exchange, Binance, the latest developments have seen Mastercard end their relationship with the company. The development saw Mastercard terminate its partnership with Binance, discontinuing Binance-branded cards in Latin America and the Middle East, following a similar move by Visa in Europe. The feeling is the broader financial industries are sceptical of collaborating with Binance, with fears of regulation and compliance from the firm. Mastercard reaffirms its commitment to digital assets and security despite this development, stating the decision has “no impact on our wider commitment to enabling and securing digital assets, which we continue to support.”

Shopify enable USDC payments via Solana Pay

The E-commerce giant has integrated with Solana Pay, allowing e-commerce enterprises to integrate the Solana blockchain for transactions. Through this integration, merchants utilising Solana Pay on Shopify can facilitate cross-border transactions, NFT-based loyalty schemes, and token-based incentives. The partnership will use USDC initially with the outlook to add further assets and stablecoins in the future.

DeFi TVL at lowest levels since 2021

In the DeFi landscape, the total value locked (TVL) has reached $37.66 billion, the lowest TVL since 2021. Even after the FTX collapse, levels were not this low, raising questions around what are the problems DeFi faces and where are the solutions. Challenges facing DeFi include diminishing interest in stable yields due to risk, ineffectiveness of token rewards during market downturns, notable hacks eroding trust, and unappealing liquidity provision due to low yields and systemic risks. Potential solutions to these issues involve incorporating real-world assets to decrease risk, generating stable yields from performing assets and enhancing the user experience for broader accessibility.

Navigating Trader Expectations

From Dreams to Reality

For those embarking on the journey of trading, the initial thrill is comparable to a child receiving a bag of candy. The allure of working in pyjamas, bidding farewell to a regular job, and envisioning money flowing effortlessly from the trading platform is a tantalizing dream. However, this euphoria often gives way to a more sobering realization – the intricate blend of education and psychology that trading demands. Expectations loom large in the trader's mind; the belief in being consistently victorious dominates. Yet, the world of trading rarely bows to such rigid expectations. It’s here that the distinction between novice and professional traders comes into play.

Seasoned traders harness the initial excitement, channelling it towards more grounded expectations. They understand the importance of patience in dealing with the random and uncertain nature of the markets. The professional trader adapts his expectations flexibly. Trying to predict outcomes on a daily or weekly basis becomes an exercise in futility due to the minuscule sample size. To anticipate the results of the next five trades, one might need to accumulate around 150 trades to establish a valid statistical pattern. However, there are instances when even strategies that have shown consistent success over an extended period may begin to yield diminishing returns or cease to be effective altogether.

By cultivating realistic expectations, the focus shifts from anticipating outcomes to embracing the reality of positive, neutral, or negative results after each trade being adaptable and proactive.

A Window into the Future

Expectations function as personalized glimpses into the future. Using knowledge about how an environment operates, we project our beliefs forward. These expectations also trigger emotional highs and lows. When reality aligns with our anticipated future, we rejoice; when it diverges, disappointment follows.

This mental mechanism is vital in trading. The human mind possesses a pain-avoidance mechanism that assists in handling both physical and emotional suffering. Drawing a parallel to real-life scenarios, individuals instantly withdraw their hands from hot surfaces. However, in trading, the pain-avoidance mechanism revolves around emotional discomfort. To circumvent the pain of unmet expectations, one unconsciously filters out information that contradicts their assumptions.

This subconscious denial often leads to rationalization, excuses, minimizing contradictory data's significance, and even self-deception. These actions are undertaken to preserve a sense of positivity.

Perils of Unrealistic Expectations

Setting expectations isn't inherently negative, but the danger arises when they become unrealistic. Striving for outcomes that are profitable yet improbable can breed disappointment and frustration when the envisioned results don't transpire. The repetitive cycle of disappointment can escalate into anger or resentment towards oneself or the market. A cascade of negative emotions might drive traders to abandon trading altogether.

A classic example of misguided expectations in trading is stubbornly clinging to a losing trade. Despite glaring signals indicating a different direction, traders fixate on minor supportive details, a coping mechanism that ignores the evident trend.

Finding Balance

In trading and life alike, managing expectations is paramount. The key lies in the nuanced distinction between removing and managing expectations. Eliminating expectations might lead to apathy, diverting focus from trading. Conversely, managing expectations empowers traders to adapt their viewpoints based on price action signals.

Expecting the market to behave in a certain manner is acceptable, but steadfastly adhering to that view in the face of contrary evidence is perilous. Embrace what you can control – your expectations – and relinquish attempts to command the unpredictable market.

By mastering this approach, rational trading decisions are fostered, potentially tipping the scales toward more wins than losses. In the world of trading, managing expectations proves to be an invaluable compass that guides traders through the ever-shifting landscape.

If these lines have triggered you in some way I encourage you to go ahead and up your game by reading the book Trading in the Zone by Mark Douglas. If you decide to take that step, come and join our large Discord community of traders and investors and share your experience with us! It’s free.

Safe trades, I will be seeing you next week with more.