Weekly Update August 29th

Welcome to our Weekly newsletter!

BTC

Looking at the weekly bitcoin cart we are testing a critical support zone at around 19k – If this fails then the next logical zone would be 11.6k – 14k. if that fails then 6 – 8k. Price needs to flip the 29 – 31.6k zone to start looking nice on the weekly chart.

ETH

Uploaded this charT around 1200 ETH and its been incredibly accurate calling the 1700 – 2k squeeze target. For me this is a much easier chart to play than BTC – With the merge round the corner all eyes on if we can put in the higher low – negate the 20 MA above 2k then we could be looking good for a sustained rise. No interest in buying until we can do this…

ON CHAIN

So there’s a load of on-chain metrics would call on here… But really there’s only one I really want to continue focusing on and that’s new address data – WITHOUT new blood we don’t move higher for a sustained period of time, yes we may see high bear market rallies as we did recently but to confirm the move we need to see this tick in the right direction. BOTH BTC and ETH new address data is looking weak… This plays nicely into the macro, as people continue to see there finances squeezed I doubt they have funds to yolo into crypto.

LEGACY

SPY – 400 needs to hold here to negate further downside. If 400 doesn’t hold then expect 390 then a test of the lows. I think the lows could act as nice support as the 200 MA grinds a bit higher and should be in line with the low by the end of this week. If this level fails then likely we see 338 – taking us back to where we were before the covid drop.

SPX – Just taking this day by day and it's been the MAIN TOOL for me to navigate these markets. 4200 worked perfectly as a key level – last week we tried to get above it but failed dramatically. 4000 is the level to defend this week – If SPY can't hold 400 and this 4000 then all bets are off and that’s where we see BTC’s current support fail. If we can get above 432 on SPX the chart would start to look quite nice on the weekly.

MACRO

So Powell took the stand last week and basically walked back his previous dovish comments that made us pump… Pretty sure what he’s been doing here is trying to talk up the market to allow them as much room as possible to tighten so it wouldn’t shock me if we get more of this… talk the market up into a bear market rally… then slam it… rinse and repeat and hopefully, this saves them some stock market downside.

Personally, I think the base case here is a recession – Has to be right? I don’t really see a world where we can see positive GDP numbers, manufacturing and employment over the next 3-4 months through to end of year. Additionally with he consumer already in a tough spot I think the spending slowdown will be dramatic over the rest of the year as we see pressures from all angles.

We have to see continued demand destruction before we can say we’ve bottomed and I think we have started to see this kick up a gear recently BUT I think were only half way down this road – The recent stock market mania proved that… How can we be done yet if retail are still buying stocks at a record pace over the last few weeks? There’s still to much speculation in the markets for my liking…

BUT despite this at present I have to say Powells plan is working to some degree… The demand destruction is now starting to feed into housing / jobs and consumer spending and that’s evident in the data and I expect over the coming weeks we should see the jobs numbers start to take a hit. New postings on indeed are now on an aggressive decline… Plenty more room to run but coming down and coming down fast.

MY PROJECTIONS

I’m going to make this as brief as possible and we can all discuss it deeper on SPACES TOMORROW and in discussion throughout the day

14k/15K BTC

360 / 340 SPY

3600 / 3400 SPX

Base Case: Rising energy in the world, consumer capitulating, fed funds rate is at 2.25/2.50 – inflation running over 9%, Powell will continue until something breaks.

And that’s the line right there to be aware of ‘’Powell will continue until something breaks’’ – The fed NEED to bring inflation down and until two areas really start to break they will continue with restrictive policies. Those two areas are JOBS and CREDIT

CCC Credit spreads – Powell can still go mad hiking rates while the credit markets remain tame… IF this starts to spike like in 2000, like in 2008, 2016 and 2020 – there will be no pivot imo.

Unemployment – still only running at around 3.5% - Historically low levels. Powell will use this to defend the hikes and until this starts hitting 5%+ no pivot… What will happen here is we will hit 5%... then, 8% then possibly higher as it’s a lagging indicator and providing we keep an eye on more real-time data we can be ahead of the fed here….

WHEN WILL I BE DEPLOYING THE BIG BAGS?

So I’m really looking for four conditions to be met here

1. Inflation coming down (Currently looking good)

2. Spike in Unemployment / Further layoffs and a continued drop in New jobs postings (Not happened yet)

3. Credit spreads to widen dramatically to previous crisis levels (Not happened yet)

4. Sentiment - A noticeable shift in retail stock/options activity from buying to ‘’short everything’’ (Not happened yet)

With regards to 4, we really need to see a change in sentiment for the market to shift in… retail doesn’t buy the bottom in stocks then we go on a multi-year rally… They sell the lows and capitulate.. then start to short… Then we go on a multi-year rally. This is easy trackable through crypto and options so I’ll be looking at this almost every day.

Like everything I doubt we get the holy grail (all happening at the same time) – For example, I’d consider the conditions met if we see inflation coming down still with a spike in unemployment above 5% and sentiment in the gutter. The KEY one that needs to be evident in every scenario is inflation coming down.

For now, I’ll just continue to take it day by day using SPX as my guide… Still only bullish above 4200. Will be shorting any bounces.

Mastercard Working With Binance to Let People Pay With Crypto at 90m+ Stores

The CEO of Mastercard recently announced that the credit card giant would be working with Binance to enable users to use crypto to pay for everyday items. If successful this would enable Mastercard users to pay for in-store items using their crypto assets as payment. Mastercard CEO, Michael Miebach said “We can unlock the full potential of blockchain technology when we make it easier to access + easier to use. One way we do that is by bringing crypto to everyday purchases”. Miebach statement comes after Mastercard announced that they have partnered and launched a Binance card in Argentina.

Famous Games Designer and Creator of ‘The Sims’ is Working on a Memory Simulation Game Powered by Blockchain and NFTs ‘

The Sims’ creator Will Wright raises $6m for Blockchain Games. The move comes as venture capital firm Griffin Gaming Partners backs Will Wright to develop simulation games powered by the blockchain and NFTs. Wright is developing a memory stimulation mobile game for Gala Games called Proxi (which will be the company’s main product). Artificial Intelligence will play a vital role in the game and leverage NFTs to augment player experiences. One limitation of NFT integration which Wright has cited is the issue of NFT whales - who have little interest in the underlying games but buy up assets to sell for higher prices. Amazing to see more top developers embracing blockchain technology and points to where the industry may head in the future

Largest Stable Coins Could be Banned in the EU Under New MiCA Legislation

The European Union could ban dollar-pegged stablecoins under its new MiCA legislation. This has been met by crypto lobbyists who are seeking clarity from the EU over the potential incoming restrictions. The new EU crypto law has been approved but there are still some technicalities to be ironed out before it comes into action. The law would only apply to non-euro currencies and include major stablecoins such as USDT, USDC and BUSD. The legislation could cause some major short-term volatility in crypto markets if fully enforced and cause crypto markets in EU nations to freeze up as the ban is implemented. It is stated that this would come into effect from 2024

M&Ms Releasing 3 Limited Edition Bored Ape Yacht Club-Inspired Products

Mars as the creators of M&Ms is releasing some limited edition M&Ms in partnership with the Bored Ape Yacht Club. The sweets will have some BAYC imagery printed onto the chocolate itself. Mars Wrigley Global Vice President Jane Hwang recently said “Consumers' expectations for what they want from their favourite brands [have] shifted, and at Mars, we know we need to be more innovative than ever with such a culturally famous brand like M&M’s”. Mars will sell just 10,000 total packages of the chocolates as gift boxes and jars. The deal itself isn’t with Yuga Labs or the BAYC collection itself but instead is Universal Music Group and their owned BAYC NFTs. BAYC holder can't license their own artwork to other brands to allow them to use the specific imagery.

Coinbase Wants to Pivot to a Subscription-Based Model to Rely Less on Trading Fees

Coinbase CEO, Brian Armstrong said that the exchange has been building subscription revenue streams for years but will see this strategy continue into the future. This would see Coinbase generate less revenue from traditional trading fees and would instead pivot to subscription services as a revenue stream. The company said “This is why we’re investing today in so much subscription and services revenue and we realize that trading fees will still be a major part of our business in 10 or 20 years from now. But I’d like to get to a place where more than 50% of our revenue is from subscriptions and services.”. Subscription revenue at Coinbase is up to 18% from just 4% in 2020. The focus will be on areas such as NFTs and staking services

Portfolio Diversification

One of the best ways to increase wealth and reach your financial goals is investing.

While the logical question seems to be, “Invest on what?”, the truth is that it should be more correlated with the “How?”, and the answer to that would be “Diversifying”.One of the main keys to success while investing is to have a diversified portfolio. As with anything in finance, it might seem difficult at the beginning but the truth is that it’s a quite simple guideline to follow.

Let’s have a look at what diversification means, why it’s important, how to do it and more.

What is a diversified portfolio?

A diversified portfolio is one that has a variety of different types of assets in it. Diversification should help to reduce the risk exposure of being tied to a single asset or asset type where its performance alone would affect your entire portfolio.

There are fundamentally two lines of diversification to follow: across asset classes and within asset classes.

When the spread of investments is across multiple types of assets, that’s diversification across asset classes. For example, instead of investing only in crypto, you might also invest in stocks, bonds, metals, real estate, and more.

Diversifying within an asset class, the spread of investments is done across many assets within a certain type of asset. For example, rather than buying a single cryptocurrency such as Bitcoin, you would invest in many different cryptos of different use cases, blockchains or market caps for example.

Why is diversification important?

The main goal of diversifying your portfolio is to spread out the risk so the performance of one investment isn’t correlated with the overall portfolio performance.

The principle is the same as the old saying; “you don’t want to put all your eggs in one basket”, so if something happens to the basket you’re likely to lose all your eggs while having multiple baskets and spread your eggs among them reduces the chances of losing all your eggs in a single blow.

With investments it is similar, if you invest in a single asset or a handful of them and one of those ends up being a failed project, your portfolio will fail too.

You don’t want the success of your investment portfolio to hinge on a single company, so you can reduce your risk by spreading your investments across many different companies, or even other asset classes.

Different types of assets or even different assets within the same asset type are going to behave differently to market conditions. Being diversified in a proper way should mean that if a part of the portfolio is down, the entire portfolio isn’t necessarily down.

Diversification should also help in being exposed to assets that bring different potentials and risks. A part of the portfolio could be invested in a high-risk high-return kind of asset and other parts in a low-risk lower-return.

How to diversify the portfolio?

There is no magic answer to that question, however, as a basic rule, the assets of a well-diversified portfolio shouldn’t be correlated. This way when the market affects some of the assets in the portfolio, others shouldn’t be affected.

You can diversify across or within asset classes. Probably the first to do would be to include some stocks or bonds in your crypto portfolio. Afterwards, make sure your cryptos are properly diversified.

There are multiple ways to diversify within crypto, for example by having assets with different:

• Use cases.

• Blockchains.

• Market capitalization.

• Geography.

• Industries.

• Risk level.

Make sure you are good at avoiding the rookie mistake of thinking that having more positions is the same as being diversified. Good diversification is having positions in different areas of the market that don’t behave the same.

The portfolio diversification should be flexible and correlated to your financial goals, time horizon and your risk tolerance; those are things that change over time so should your asset allocation.

There is a practice that is as important as the diversification itself, the rebalancing. As market conditions change usually your diversification does too without you realising it. When one of your investments or a class of assets performs particularly well over time, it might come to represent a larger part of your investment portfolio in terms of monetary value. If this happens, you may want to buy or sell certain assets to restore your portfolio back to its original distribution.

Conclusion

Diversification is a great risk management strategy that many investors use in both crypto and traditional assets. While it will not protect you from a market-wide correction or a bearish cycle, it will reduce your risk if one of your portfolio assets exits the crypto market or has a poor run.

As a result, keep in mind that investing is risky, but risks can be managed to some extent. You can significantly reduce the impact of global slashing events on your portfolio by making smarter investments.

Examine your portfolio to see if it needs to be diversified. If it does, make the wise decision to implement a diversification strategy that works for you.

Start your diversification plan with these 5 simple steps:

1. Review your current crypto portfolio

2. Compare it to the digital economy

3. Identify gaps in your portfolio

4. Reallocate your investments

5. Rebalance your portfolio periodically