March of 2020 (pre-covid crash & around time of last $BTC halving) : hype was ~ATH, no one would have thought to call for a ~$4k price just 2 days after.
The unthinkable happened, world markets experienced a liquidity event, & that impacted the crypto market.
/3.
No amount of TA could have predicted this -
Markets tend to move together, and crypto in 2021 is no different - many of the same holders of crypto (funds, retail, c.o's) also hold equities.
Because of this, bringing a world / macro view into the equation is critical.
/4.
Moving into Q3, liquidity will become tight across global markets (contrary to popularly thought), at a time when leverage debt is @ ATH.
Global Debt to GDP is also highest on record
Acting as a net on sustained inflation, resulting in a shorter term deflationary tailwind.
/5.
We can start to see this in many areas:
- Reverse repo facility passing $1T
- Chinese tech stocks, massive R.E. etfs (chart)
- Eviction moratoria ending, increasing housing supply net net, placing downward pressure on values
- Cessation of stimulus programs (neg for incomes)
/6.
Any one of these factors taken alone should give one pause, but let's dig a bit further into the first item - Reverse Repo.
(Banks use rev. repo in order to avoid penalization / avoid becoming a systemic risk to global financial system post '08, by size of their accounts)
/7.
Just passing $1T for the first time ever, this facility is acting in complete contrast to ' QE ', by trapping / sucking bank reserves away.
Chillingly, top analyst on the repo market Zoltan Pozsar had predicted this weeks earlier, & predicts further utilization up to $2T+.
/8.
What does it mean?
More drain on bank reserves = More deflation - at a time when liquidity is already becoming tight.
/9.
There are also a few potential ' Black Swans ' that could negatively affect sentiment (globally & crypto-specific) going forward in the short-term :
Sentiment (& anything that could impact it) is important to pay attention to -
All it takes is one significant hit to sentiment to positively or negatively influence group psychology.
/11.
Group psychology right now of many in the crypto market - from an objective observer point-of-view is clear :
- Many are ' All in '
- Many believe remainder of 2021 must only be a bull market (4-year cycle theory)
- Many are very hopeful
- Hype & Excitement is very high
/12.
While history has upheld the 4-year cycle to-date, we (as the crypto market) are also as connected as ever to other global markets, as our maturity & liquidity has increased substantially.
/13.
To quantify this in real-terms, all one needs to do is turn to the ' Buffet Indicator '
Market Value to GDP ratio recently reached 235%, never before in history has the market been this stretched from its historical trend line.
/14.
Regardless of whether or not you think the crypto market will continue a bull trend through year end, it's important to have a hedge.
Easiest way to do this is simply to keep some cash on side (25-50%).
So no matter what happens, you can feed yourself / family, pay debts
/15.
Rather than remain myopic to the crypto sandbox -
It is important to keep macro risks in mind.
Formulate any risk strategy with an overlay of the current psychological landscape, as well as a view to global macro market risk.
It's always a good idea to have a hedge.
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Along with the phase out of Enhanced UI benefits / PUA, we have a number of factors on the opposite side of the equation that will increase expenses / debt payments for millions.
Confidence in the alts has been shaken due to a major acute volatility event experienced in the majors ( $BTC / $ETH / etc), causing a cascade affecting the entire market.
/2. If this volatility -is- to be short-lived (e.g so far is showing that dump has been very swift & abrupt), then it may also be wise to assume that a floor could also be found relatively soon (ala similar events : March 2020, Sept '17, etc).
/3. How to play it ?
Look at what was starting to outperform -before- the dump / loss of confidence, which led to the health of the alt market deteriorating.
If you have some sort of misplaced notion that I (or others) can somehow predict short time-frame market drops following preceding market manipulation events - instead of wasting your time telling me or others 'They are wrong', consider this :
/2. I also failed to predict that China would ban $BTC in 2017, or that a 'COVID liquidation evt.' last year would drag down $BTC & the broader market with it.
/3. I also don't easily change my macro long-term stance on something in light of a short-term liquidation event, a pull-back, or because things simply don't immediately / consistently follow a 45deg. angle up & to the right.