Bitcoin and Crypto Market Updates (March 6th)

We need to see a bounce soon…

Last week we had a really strong bounce in equity markets right at a key support on SPX (Below). As per my last update, this zone is critical for bulls to defend.

I took some profits on shorts once we started to see a bit of a bounce at this level and now I remain pretty neutral on market direction. The main thing I’m looking for here is a follow-through in CRYPTO to legitimise the risk on move in equities.

The 200MA on SPX + the 100 / 200 cross creates an algorithmic buying process – Loads of funds that purely trade moving averages would have been on auto-buy last week as we tapped the 200MA + formed this 100/200 MA cross.

These algorithmic moves are often targeted by market makers – rope the algo funds in… then use them as exit liquidity and a means to drive outputs/shorts before nuking price.

Due to this dynamic, we need evidence from the wider market that this move actually has legitimate legs, or it's going to reverse quickly.

To legitimise this move we want to see crypto catching a bid. Without this, I think that’s an obvious sign that this is just a dead cat bounce in equities and so far we’ve had nothing… So time is running out.

I’m willing to give it a couple of sessions to see what we can do. Once we get some more evident signs of legitimate risk on I’ll start jumping into some longs/spot plays in crypto and stonks but until we get that proof I’m happy to sit back and observe.

Yuga Labs to launch Bitcoin NFT collection

Yuga Labs, the parent company of Bored Apes NFTs, has launched a new experimental collection called TwelveFold, which is a mathematically-based art system that uses a 12x12 grid to represent data. The collection will be inscribed onto satoshis and will feature 3D and hand-drawn elements. Each satoshi within the collection can be located by tracking when it was minted via the Ordinal Theory protocol. The company has also announced that TwelveFold will be housed on the Bitcoin blockchain, which is a departure from what's expected from the company, according to Yuga Labs. The company expects the technology and ecosystem around inscriptions to evolve and become more sophisticated over time leading to further experimentation and releases down the road.

Kraken & Coinbase willing to fight the SEC on token listings

US-based Crypto Exchanges like Coinbase and Kraken have been subject to rigorous oversight and regulatory pressure around the token listings on their exchanges. Coinbase and Kraken are confident that the tokens listed on their platforms are not securities, according to regulatory leaders from both exchanges. The SEC has been investigating unregistered securities offerings in the US, but Coinbase and Kraken are comfortable that their products are not securities. Kraken recently settled with the SEC for $30 million and an agreement to discontinue its staking product. Despite this, Kraken's global head of policy believes the industry is ready to fight and looks forward to more guidance around staking.

Silvergate Bank suspends crypto payment network

Silvergate Capital Corp announced on Friday that it has discontinued its Silvergate Exchange Network, a crypto payments network, due to a "risk-based decision." The network-enabled round-the-clock transfers between investors and crypto exchanges, unlike traditional bank wires, which can often take days to settle. After the announcement, Silvergate shares fell more than 2% in after-hours trading, following a record low on Thursday, and cryptocurrency heavyweights including Coinbase Global and Galaxy Digital dropped Silvergate as their banking partner. Other stablecoin issuers and crypto exchanges also suspended their partnerships with Silvergate.

Coinbase buys asset manager One River to fuel growth

Coinbase has acquired digital asset management firm One River Digital Asset Management (ORDAM) to expand its services and take advantage of lower valuations of digital asset companies. The financial details of the deal were not disclosed, but ORDAM will be renamed Coinbase Asset Management and become a fully-owned unit of Coinbase. The acquisition will allow Coinbase to offer institutional clients exposure to digital assets through investment products.

Bybit halts USD deposits on exchange

Bybit, a Dubai-based cryptocurrency exchange, has suspended United States dollar deposits via bank transfers due to "service outages from a partner". Users can withdraw funds through wire transfers until March 10th, but USD deposits via Wire Transfer and Wire Transfer for US banks are no longer available. The company has advised clients to withdraw funds as soon as possible to avoid potential disruptions. Bybit is the latest exchange to suspend US dollar wire transfers, following Binance's temporary suspension and Signature Bank's announcement that it would only process trades by users with US dollar bank accounts over $100,000.

Trading Against Yourself

Trading in the financial markets is not just about predicting market trends and making the right investment decisions. It also involves a significant psychological component. As a trader, you have to contend with your own emotions, cognitive biases, and self-destructive tendencies. As I commented in the previous week's lesson conclusion; trading is, in essence, a game you play against yourself.

Let's take a look at some practical examples of how traders can fall prey to their own psychological biases:

Fear of Missing Out (FOMO)

This is a common siren that can lead to disastrous trading decisions. Imagine a situation where you're convinced that a particular stock is going to take off and make significant gains. You may be so afraid of missing out on the profits that you put on too much size, only to watch the trade move against you, resulting in a big loss.TIP: Instead of trying to jump into a trade out of fear of missing out, take a step back and do your research. Analyze the market trends and make an informed decision based on your trading strategy. Avoid rushing into trades without a clear plan.

Fear of Being Wrong

No one likes to be wrong, especially when it comes to investing their hard-earned money. However, the fear of being wrong can prevent traders from cutting their losses when they need to. They may hold onto a losing position, hoping that the market will eventually turn in their favour. This type of behaviour often leads to even larger losses.

TIP: Remember that losses are a part of trading. Set clear stop-loss orders and stick to them, even if it means accepting a loss. Don't let the fear of being wrong cloud your judgment.

Greed/Hubris

Winning streaks can be dangerous for traders. When everything seems to be going your way, it's easy to become overconfident and believe that you can do no wrong. This can lead to bending rules and taking on excessive risks, resulting in significant losses.TIP: Avoid taking excessive risks, even during winning streaks. Stick to your trading plan and avoid deviating from it. Don't let success make you overconfident, keep your guard up.

Regret

This is another common psychological bias that traders have to contend with. Regret can occur when you sell a stock too soon or fail to buy a promising investment. Traders may try to make up for missed opportunities by jumping into other trades, which can lead to impulsive decisions and further losses.TIP: Instead of trying to make up for missed opportunities, focus on analyzing your past trades and learning from your mistakes. Keep a trade journal and evaluate your performance regularly to identify areas for improvement.

Frustration

Sometimes, traders can experience a feeling of anger or frustration after a losing trade or strike. This can lead to a desire to "get even" with the market by making impulsive trades that go against their original trading plan. Revenge trading is a dangerous behaviour that can result in further losses and is driven by emotional impulses rather than rational decision-making. It's essential to recognize and control these emotions before they lead to destructive behaviour in the markets.TIP: If you feel the urge to revenge trade, take a break from trading and reflect on what caused the emotions. Revisit your trading plan and identify what went wrong in the losing trade. Have a look at your journal notes.

Addiction

For some traders, the act of trading can become addictive. They are not necessarily trading to make a profit but rather to experience the thrill of placing trades and watching the market move. This type of behaviour can lead to overtrading, where traders make trades excessively and without a solid trading plan. It's essential for traders to recognize when they are trading for the sake of the thrill rather than following a sound trading strategy.

TIP: Just make and respect a trading system that includes your goals, risk tolerance, entry and exit strategies. This can help prevent impulsive and emotional trading and keep you focused on your long-term goals. Additionally, it's important to take breaks from trading and engage in other activities to maintain a healthy balance in your life.

In conclusion, successful trading is not just about reading market headlines and following guru recommendations. It requires self-awareness, emotional intelligence, and the ability to recognize and overcome one's own psychological biases. By trading against themselves, traders can develop the discipline and resilience necessary to thrive in the complex and dynamic world of finance.

To overcome these psychological biases, traders must develop procedural memory and trade consistently. Keeping a trade journal is a powerful tool that can help traders track their behaviour and avoid self-destructive tendencies. By posting the good, bad, and ugly, traders can hold themselves accountable and avoid deceiving themselves.