Weekly Update September 12th

Welcome to our Weekly newsletter!

So I’ve spent the whole morning going through a lot of data… And I mean a lot. Then went to lay down and think for a bit to devise a plan. This will be a long… detailed report and I’ll outline exactly what I’m looking to do so stick with me.

First thing I want to put on the table – You should be 20% allocated into spot BTC at this stage if you’re a ‘’long-term investor’’. This should be viewed as standard for building a long-term position under the 200 weekly MA. Just me personally but it also helps me psychologically when the market pumps like mad – At least I have some exposure right? Keeps the FOMO in check.

ON CHAIN – The first thing I want to look at.

Starting with my most important metric – New addresses – Remember I want to see this moving up / out of a downtrend to confirm a longer-term rally is sustainable. Right now we’re at a very interesting juncture where we look like we COULD be seeing a potential breakout. We don’t have it yet but getting close. I suspect we will know where we stand with this metric next week / coming days.  

Interestingly I went through a load of new address data on a basket of large-cap Alts and also ETH… There’s a divergence here with Alts and ETH and BTC – BTC looking on the verge of an interesting move in new address data but alts and eth are still looking dead.

SUMMARY – BTC is on the verge of doing something interesting but ALTS and ETH still looking dead when we think about market interest levels. I’m open to BTC leading the market here given where dominance is at (range lows on the weekly) so I’ll wait for that BTC confirmation and then ill look for a healthy follow-through into the Alts

MARKET MECHANICS

BTC – Open interest – At RECORD levels and we can also see here there’s a lot of short OI… Looking back at previous times we’ve gone red on the long-short ratio we have seen some downward price action.

Legacy Market Options flows – So I’ve shared the shocking chart several times outlining the sheer crazy level of options hedging from ‘’smart money’’ a couple of weeks back – Here it is again… And you need to keep this chart in mind because it gives context to what’s currently happening.

When we look at the options flows from last week the total value of Puts (Bets on the market going down) at the start of last week we’re at 900Bn – By the end of the week, this moved to 300Bn so a decline of nearly half – WHEN THE PUT VALUES DECLINE this results in the Market maker BUYING FUTURES.

From this info, we can confidently summarise that much of the stock market’s current rally is a result of PUTS GETTING LIQUIDATED and the market maker having to buy underlying. NOT organic buying activity.

SUMMARY – Short squeeze on Legacy markets and BTC

HEAT MAPS

Where things get interesting

Binance Heat Map – So we have hit the target I was expecting – Liquidating the shorts that were in play around August. We now have a large number of shorts building just above the current price so this could fuel the market a little higher but as far as Binance is concerned the majority of the liquidity grabbing move is complete.

FTX – Little to no shorts left to be liquidated but we have a small long build below at around 21k – 20.6k.

Deribit – Where things get even more interesting – On this exchange we still have a significant number of shorts that could be liquidated – Highlighted below we have the wave starting around 27.7k – 40k. The majority of the legacy short positions level off around 35k. Above 35k, it's new exposure that was added on the recent upside action.

SUMMARY – Squeeze looks exhausted in the Short term. But if we start to see some strong natural buying coming into the market then I think we see a push to 27k – 40k liquidating the Deribit shorts… But as pointed out above we still need more evidence of natural buying.

SOCIALS

I went through 5 YT videos today from several content creators and all of them are bullish to neutral – No real bearish video’s highlighting this could be a trap. Almost all of them said they have long positions in play and to look out for tomorrow’s CPI

SUMMARY – YT creators / Influencers are bullish here

MACRO EVENTS / MARKET MECHANIC EVENTS

CPI – Inflation data out tomorrow – A decent reading could help keep markets elevated.

HUGE OPEX on the 16th – Could cause some serious market volatility

FOMC – 21/09 – Again could be a catalyst for major volatility

MY VIEW / PLAN

So far all I see is a squeeze on Legacy / BTC with minimal evidence of natural buying so it concerns me just how sustainable this rally is. If this behaviour changes, I’ll shout from the rooftops as I think the next logical move is a liquidation of the 27k – 40k levels on Deribit but this needs to be backed up with evidence of heavy spot buying.

While SPX remains above 4000 I think short-term swing plays on Alts play well – Just got to keep stops tight and respect what I mentioned above.

Things should become much much clearer after CPI, OPEX and FOMC on the 21st… Its literally a week away so why would I FOMO my whole net worth here? The prudent play would be to wait for these events to pass and then start to make longer-term moves.

Retail interest is at record lows on ALTS / BTC and ETH – this is confirmed by the search data and address data. These metrics won't drastically change within a week and even if you entered in a month you would still be ahead of 90% of the market so there’s no need to FOMO. 

The Merge is coming… THIS WEEK!

We’ve covered it before and we’ll cover it again! Finally, we will see Ethereum transition from Proof-of-Work to Proof-of-Stake with The Merge set to go ahead on or around September 15th. This is the biggest event in Ethereum's history and will mark a significant milestone in the blockchain's roadmap. Expect some volatility and excitement regardless of whether the transition goes smoothly. Buy the news & sell the merge? Or are we just going to get bullish… either way keep your eyes out for it this week!

LUNC pumps hard from a weak narrative

Flashbacks to the sweet sweet bull market were etched back into our memories after the disastrous LUNA Classic (LUNC) once again found itself pumping hard last week. LUNC had gone parabolic over the previous few weeks, rising over 500% to its peak, meaning the network briefly reached a value of $4bn once again. All of this came off the back of a governance proposal which would charge all on-chain transactions a flat 1.2% fee. The narrative was that LUNC would become deflationary and serve as the fuel for the token's speculative price rise. However, when broken down and based on current usage this would at worst amount to a daily burn of around $60k, a mere drop in the ocean for a multi-billion dollar project. As shorts have since piled up and the price retraced - the pump was overexcited or manipulating actors pushing a narrative with no real substance.

Google Cloud partners with Axie Infinity

Sky Mavis has announced that they have entered into a ‘multi-year collaboration’ with Google Cloud to bolster the security of the Ronin network. Google Cloud will run and oversee a validator node on the Ronin Network, contributing to the security and governance while also monitoring validator uptimes. Aleksander Larsen, Co-founder and COO at Sky Mavis said “Google Cloud, which sits at the intersection of being a recognized contributor to the developer community and having deep technical expertise in blockchain infrastructure and running validators, was naturally one of the top choices…welcoming them now as Ronin’s latest and 18th validator is a big deal for us, especially as we push toward our initial goal of having 21 independent validators securing the network”. A pretty huge and exciting development for the future of Sky Mavis and Axie Infinity. 

Binance to drop USDC trading pairs

Binance to remove $USDC as a tradable asset on its platform beginning September 29, 2022. Binance announced the move to enhance liquidity and capital efficiency for users. Binance will introduce a BUSD Auto-Conversion for users existing balances and new deposits of the stablecoins USDC, USDP and TUSD at a 1:1 ratio. Though the change will not affect the user's choice of deposit and withdrawal, users can still withdraw into their stablecoin of choice should they choose to. This means that a wide number of trading pairs such as BTC/USDC will cease trading from September 29th 2022

Cardano Vasil Hard Fork

Another Layer 1 Blockchain is undergoing major changes to the network, with Cardano undergoing its Vasil Hard Fork update on 22nd September 2022. The Vasil Hard Fork itself focuses on improving connectivity and overall network stability for the Cardano network. The update will come roughly 1 week after The Merge on Ethereum after also being delayed from Summer 2022. The updates are designed to make Cardano easier to build on and improve the network's smart contract language’s (Plutus) usage and capacity. What will this mean for the ADA token price? We don’t know for sure but such significant upgrades have previously correlated with surges in asset prices - however, with wider macroeconomic conditions and relatively unstable markets, this is by no means a guarantee. One thing is for certain it should be positive for the Cardano network and lead to cheaper fees, better privacy and scalability.

10 Tips To Improve Your Trading

If you are reading these lines after noticing the catchy headline, you are already in the right state of mind. Let me guess, you would like to get better and you believe there is always room for improvement, just that attitude could be an extra tip for you right at the introduction: Have the right mindset. Be positive, believe in yourself, don't be afraid of hard work and be flexible to adapt and overcome.So let’s start with those 10 tips:

• Never stop learning. Learning is an essential aspect of trading, and trading is dynamic. So, don’t stop the quest to learn even if you already become a successful trader, because things in trading change all the time. A trading journal would be of great help on this, taking detailed notes.

  • Have a retrospective on everything. Review your trades, emotions, decisions, sources, strategies, and results… and summarise what went right or wrong. Identifying and realising is the 1st step to learning and improving.

  • Make things better, look for perfection. Try out different things and reassess again and again until you nail it. Don’t forget there is always room for improvement

• Don’t be a hero. Be humble and very very clever, and control your ego and emotions. Have your opinions and follow your lead.

  • Take profit when you can, not when you have to.

  • Trust the research (do your own), not opinions.

  • Don’t catch falling knives, follow your plan.

  • Too emotional?; Take a break and zoom out a little.

  • Don’t lose hope, stay put.

  • Be patient, bear market is the best time to position yourself.

  • Have the discipline to follow the above.

• Manage your portfolio. Markets are dynamic and your portfolio should be too. Be ready to actively manage your portfolio to be balanced and diversify across different types of assets and different risks. Bull and Bear market conditions should have different portfolio distributions. Here is an idea of assets distribution:

  • Bull market: Med risk > High risk > Low risk

  • Bear market: Low risk > Med risk > High risk

• Mind your risk. Be aware that everything has a risk, even: “Blue chips”, “Stable” coins, etc… Most of the time, this is what separates successful traders:

  • Find your risk tolerance, and be comfortable

  • Assess R/R at all times

  • Take profits, cut losses

  • Too good to be true, not true.

  • Don’t fall for scams and manage your security.

• Follow the macro trend. For now, until the mass adoption arrives, the major use case of crypto is still to be an investment vehicle, therefore it ties closely to the macro. 

  • Check and follow the macro.

  • Make your own analysis and compare.

  • Ride when it’s looking good, de-risk when it’s not.

• Write down your rules. Train your mind to automate your rules. Until then have notes close to your working station and always look at them before you trade. These are some of mine:

  • DON’T FOMO!

  • Entry, SL and TP

  • MEASURE RISK!

  • Zoom out

• Be part of a group. Discussing, sharing and learning are very helpful in improving. There is quite a difference between saying something to yourself and others, the same when augmenting a point or showing out research. Just the ability to share requires a certain degree of confidence in what you share, and then you get feedback for free that can be used to strengthen a valid point. 

Personally, one of the greatest things I’ve done in crypto is not that I took an x100 trade, but being part of a like-minded group of people where we learn, grow and have fun together; where we also find support and help each other when it’s needed.I invite you to join our group, it’s free and we would love to have you there! (click here) 

• Stay active. Even at this time when macro isn’t looking the best, and trading might be challenging, it’s good to keep practising even for the sake of improvement and being ready and better prepared when things turn. Taking a break from trading is not a bad idea either, but in that case, use your time to learn or build something.

  • Most successful web3 entrepreneurs today were built during 2018–2019.

  • Best lead devs/educators today were learning web3 during 2018–2019.

  • New millionaires made in the last bull market had it all planned during the bear market.

• Clean your wallet(s). If you have more than 5 wallets and something like 30 or more projects across multiple chains, cut it down. You are wasting your time, focus is key. Go ahead and do the same with your physical one, yes the one where you put credit cards, and money. I bet you would find a lot of stuff in there that is not useful and makes you lose time when looking for the one thing you need; this is no different. Being organised in general is a great quality to have, apply that to your investments.

  • You will be able to act faster.

  • You have a deeper understanding of your investment.

  • You can be aware of all project developments and news.

  • You get to live a more quality life

• Find a stable income. Doesn’t matter if it comes from crypto, stocks, trading or outside the investment landscape, a stable income gives you the ammo and provides you with a safe haven and therefore a very needed tranquillity and peace of mind. To me, it is very important and helps me a great deal to trade without letting emotions involve. If you don’t want to be in a 9-5 job or want to be a full-time investor/trader in crypto, there are some ways to get that income flowing, all you need is to want it and commit. Here there are some ideas where you could work and still be related to the crypto trading world:

  • Writer

  • Researcher

  • Dev

  • Mod

  • Build a project

Conclusion:

Trading is not easy, most good things out there aren’t anyway. Those are some tips that helped me a lot (and continue to help nowadays). As I said in the intro, the best tip is to have the right mindset, once you have that anything is possible! 

Hope you found this one useful, if so, please go ahead and share it with your friends! See you in the next one!