Bitcoin and Crypto Market Updates (November 14th)

FTX Rugged Crypto, Now Powell’s Rugging the US labour force.

I’m going to cover legacy first then crypto…

SPX Price Projection

Legacy markets decoupled from the crypto madness last week following a favourable CPI print – For the record… FOR NOW… I think we see declining inflation in the next print also. So I think THE WORST IS BEHIND US on the inflation picture. However, I do still expect to see ebbs and flows in the prints throughout 2023 but not exceeding the peak.

This is great but we have the next phase to deal with – Major pressure on the consumer and earnings.

This month we are seeing MASS LAYOFFS – So far this month we have had more layoffs than Sept and Oct COMBINED and we’re only 14 days into the month.

So what’s next? Recession / Stagflation realisation… As the consumer comes under more pressure we will see the earnings picture unravel – Q4 earnings will be horrific and consumers will capitulate on the stock/housing portfolios.

But before that event, I think we see a final pull-in / Fakeout on the stock side… So my expectations are we see higher SPX – maybe even through to the next Fed meeting on the 14th of December.

I’m eyeing 4150 on SPX – Remaining open-minded about a further push to the 4300 zone but TBC on that. Currently, evidence supports 4150 being the more likely zone we top out at.

Now onto crypto. And what a mess it is.

Bitcoin Price Projection

Needless to say, people were scared last week/weekend – Capitulation levels of fear were certainly in the air… I still think we haven’t seen the end of it and the contagion fears are real but the unknown is timescales on when we are likely to see it.

Outside of any contagion shocks coming to light/exchanges going under I think we see an upside in the ST – following equities. But ultimately I see crypto either falling further due to some further black swans AND/OR a realisation of the above = Simply just no liquidity due to the consumer getting rekt IRL.

I updated my longer-term BTC chart/expectations and I think this FTX event has kicked off the panic/capitulation leg and the macro landscape supports a bleed down into anger and depression. As people try and come to terms with what happened with FTX and now the fact they have no job. True depression and anger. Will be truly sad to see and experience in real-time.

FTX Bankruptcy

The last two weeks in crypto have been one of the most critical, destructive and frankly shocking in the space's history. We witnessed the 2nd largest crypto exchange implode after some incredible revelations around the FTX Exchange.

This moved quickly so here is a timeline of what happened:

FTX Exposed

2nd November - Coindesk Article Exposing FTX & Alameda Balance Sheets- Alameda Research has its balance sheets leaked, showing most of the firm's balance sheet was locked in illiquid FTT tokens (issued by FTX Exchange) - Liabilities were $8 Billion and liquid assets were shown to be nowhere near that.

Binance Sells FTT tokens

6th November - Binance CEO Tweets Cause Chaos - CZ, Binance CEO announces they will be selling $2 Billion in FTT tokens following the “recent revelations which came to light” and liquidating their entire FTT position - Binance sells $500m+ of their FTT tokens on the same day.

Withdrawing from FTX

7th November - FTX/Alameda Responds & FTX Bank Run Begins - FTX users begin withdrawing billions following the news - $1.2B withdrawn between Nov 7 - Nov 8- Alameda CEO, Caroline Ellison tweets saying they will buy all of Binance FTT at $22 - FTX CEO, Samuel Bankman-Fried tweets saying “FTX is fine” and that they have enough to cover all client holdings and do not invest client assets - the tweets have since been deleted.

Is Binance Buying FTX?

8th November - FTX Halt Withdrawals & Binance Acquisition Announced - November 8, 6:37 am - on-chain data shows FTX have stopped processing withdrawals - FTT Token had broken below $22 and the price began to crash further - November 8, 4:03 pm - SBF tweets announcing Binance have signed an LOI to purchase FTX which is confirmed by the Binance CEO on Twitter but “reserving the right to pull out” - Alameda and FTX begin selling off assets such as SOL, BitDAO and others for liquidity. Even breaking none sale agreements in the process.

Binance Fails to Buy FTX

9th November - Binance Deal Falls Through - Binance pulled out of the FTX purchase after due diligence stating that “mishandled customer funds” and “alleged US agency investigations” as the reasons. - FTX CEO, SBF seeks help from other investors and confirms threat of bankruptcy - At least an $8 Billion shortfall was rumoured for FTX to remain solvent.

FTX Reopens

10th November - The Start of The End - FTX CEO, SBF comes out on Twitter to apologise admitting ‘f**king up’ and that his priority was now to do right by users, investors and employees - SBF announced that Alameda Research will be winding down operations - FTX Withdrawals briefly resumed for some local Bahamian users due to local regulatory reasons- Wall Street Journal publishes an article stating that FTX had lent around $10 Billion in customer funds to sister company Alameda Research - TRON Founder, Justin Sun announced they were working on some sort of recovery plan for their assets stuck on FTX - which didn’t materialise.

FTX Files Bankruptcy

11th November - FTX Files for Bankruptcy - FTX announce that FTX, FTX US & Alameda Research as well as over 100 associated companies have filed for Chapter 11 bankruptcy - NFTs on FTX were abused for exit liquidity as local Bahamas residents began listing NFTs for huge sums to cash out liquidity from the platform. $50m was traded before this was stopped.

Has FTX been Hacked?

12th November - FTX Hacked… Apparently - FTX Telegram Admin says that FTX has been hacked- Hundreds of millions of dollars begin moving from FTX wallets - Huge questions around whether it is an inside job or if the exchange has been hacked.

Is Gate.io a Scam?

13th November - CEX Exchange Confidence Shook - Crypto.com and gate.io come under fire for potentially being in a similar situation and not having the appropriate proof-of-reserves. - Crypto.com ‘accidentally’ sent 320,000 ETH to Gate.io which was sent back shortly after - speculation says this was used for proof of reserves - Huge withdrawals from both exchanges ensue. - $400 million of non-circulating FTT begins to move off schedule

How to Recover

Any time that traders or investors are involved in the markets they are exposed to potential losses. It’s normal and part of the game, you probably heard it already “no risk, no reward”.

The case is that those losses should be controlled at all times, or at least be reduced in the best possible manner to cope with the most important principle of them all; PROTECT YOUR CAPITAL.

In previous weeks we have gone through different ways of protecting your digital net worth. Loss protection can come in different forms such as increasing your security to be protected from scams and cyber-attacks; reducing exposure to isolated events or markets diversifying your portfolio or cutting your losses early when you are in a position by implementing a risk management strategy to your trading and investments.

If you implement them it is guaranteed that the big loss you can experience (or have experienced) is very limited in comparison with its real potential damage. All of those aspects are in line with a core principle stated by Warren Buffet, one of the most famous investors in the world, that is all about capital protection:

Losses can come from losing trades, or bad investments. From being a victim of scams or cyberattacks. From sector or platform collapses. Even from global and macro events. As a trader and investor, your capital is your tool to generate an income, and your main work is to do the best of your ability to make the right choices to protect your capital so you can still participate in the market and keep on driving towards your goals.

But, if you already suffered a major loss, I encourage you to soldier on, take the facts behind that loss, look in retrospect, reassess and gain the experience the event can provide for you to become a better market operator after it.

Instead of getting emotional and trying to cover losses in a hurry, enter a revenge trade spiral trying to make it all back risking falling into FOMO and addiction. Take a step back, tackle a breath, clean your mind and follow this plan:

Admit your mistake

If your loss was too big, if it was uncontrolled damage, part of it has been your fault.

You will only learn from your losses if you admit them and you will not start making good profits until you do not own the losses you make. Analysing your decision and the actions that drove you to that big loss is the most important as you will recognize your mistake and will not repeat it in the future. Phyllis Therous said, “Mistakes are the bridge between inexperience and wisdom”, you can't improve before failing.

PRO TIP: Look at your emotions and search for fear, greed, hope, recklessness, impatience, and laziness, …. Most likely the source of your mistake has something to do with the mindset.

Take a rest

Now you have already made a big loss, you should not try to cover it right away. You should stop trading for a while as your ego and emotions will have a significant impact on your trading. Randy McKay, a wizard trader, best explains the situation by saying: “When I get hurt in the market, I get the hell out. It doesn’t matter at all where the market is trading. I just get out, because I believe that once you’re hurt in the market, your decisions are going to be far less objective than they are when you’re doing well. If you stick around when the market is severely against you, sooner or later they are going to carry you out”

PRO TIP: In time you will find an edge in knowing when to step back and stay away from the markets, the same as you will learn how to operate having zero emotions. But for that, your losses have to be controlled in size and frequency.

Get rid of negative emotions

You won't be able to move forward until you stop regretting your loss. It’s important to get rid of negative emotions you came across after that big loss. Take it as a turning point in your trading career to make yourself a more disciplined and experienced trader. Do whatever you love to do apart from trading: sports, hobbies, visiting loved ones and taking that time to enjoy. If you need to take out anger or rage, extreme and high-intensity sports are a great way to liberate stress, the same as meditation.

PRO TIP: The ability to disconnect from the markets is one of the most powerful things you will achieve over time, especially if you are in cryptocurrency markets that are open 24/7. Being able to evade the markets will reflect in all aspects of your life.

Make a plan

Once you are clear of negative thoughts, the next step is to focus back and make a plan to get back where you were before that loss, and go further. You need to define SOPs (Standard Operating Procedures) for your trading and investing and commit yourself to following them religiously in your future trades. Discipline and execution are key factors to your success.

PRO TIP: If you start thinking in terms of probabilities you will see your plans being much easier to come true.

Rebuild your confidence

Before you get back to participating in the markets it’s important to build up your confidence. For that purpose, you should start with baby steps, slow and small. For a while, until you get used to applying and coping with your newly defined SOPs to it. As you will start growing from your baby-step decisions, your confidence will improve over time and soon you will be ready to rock and roll.

PRO TIP: This phase is going to test your patience. Do your best to master it, and deal with frustration. Losing fast and recovering slowly is hard to see and feel, but rushing up could make your loss even bigger. Celebrate all your small victories big time, but control the euphoria as it leads to recklessness and overconfidence. Be patient and take your time to get back on track. Remember, losses are necessary means for improvement and to realise what works and what doesn’t.

CONCLUSION

Don’t let a bad decision or a big loss impact your emotions for too long. Otherwise, you will not be able to build back your trading confidence which will result in a conservative trader that will only lead to losses. Take that big loss as a strong lesson and become a more disciplined trader in the future, and interiorize the core principle “Protect your capital” and act according to that the best you can in every decision.

I hope this helps you to get back on track with the right mindset.

In the CryptoRand group community, we share our experiences to improve and keep pushing for our financial goals. It’s free so I encourage you to come and JOIN US!