Bitcoin is consolidating at around $28,000 with a backdrop of healthy crypto market conditions as open interest plummets below levels not seen since May 2022. But with the Fed’s FOMC meeting due tomorrow, bouts of volatility are bound to come around!
In this issue:
- Bitcoin analysis
- First Republic Bank
- Latest happenings
- Listening material
- Bitcoin/Dollar exchanges hands at $28,000 just above the 50-daily EMA. For all intents and purposes, BTC/USD is in no-mans land, as short-term conviction in either direction fades and prices chop sideways or bleed. This is evidenced on the weekly time-frame, where price chops at resistance as the market figures out where it wants to go next.
- For intraday traders, these ranging conditions are fine. For swing traders looking for the next area to buy, there may be a better opportunity on the horizon ($24,000 — $25,000). For those accumulating Bitcoin on a medium to long-term time horizon, the market conditions could not be better.
- Since FTX imploded in Nov. cryptocurrency markets have been on a prolonged deleveraging spiral. This can be mapped on the chart with institutional banking insolvencies. The deleveraging event was in part fuelled by the steepest rise in costs of capital (rates) ever. Consequently, Global futures and perpetuals contracts have fallen to levels not seen since May 2022. That was the faithful month when TerraLuna blew up, and began the events that would eventually culminate in FTX’s meltdown.
- When open interest falls relative to the market cap, that infers perpetuals are reducing risky bets that could otherwise move markets significantly if liquidated. But since monetary unit creation (fiat) is on a secular up-only trend, global open interest will continue to make ‘higher lows’ until the fiat regime collapses. That said, the current environment is ideal for long term buyers who waited for a chance to buy without having the futures/perpetuals sword of Damocles hanging over their heads.
- Meanwhile, the Fed fund’s rate is expected to be revised upwards tomorrow (8:00PM CET). The market is pricing in a 0.25% rate hike with a 95% probability. Typically these events come with increased volatility. Of the nine past meetings, BTC/USD remained flat twice, and dropped seven times. US banks are collapsing at a rapid rate and the Fed’s crisis is getting worse. This event could provide a good opportunity to buy panic selling and fear.
- That said, prices below $30,300 are effectively chop fests, so high conviction short term trades are not compelling beyond intraday plays.
First Republic Bank implodes
First Republic bank (FRB)is the 14-th largest in the US, which had about $212 billion in (toxic) assets — about the same size as Silicon Valley Bank prior to its failure.
FRB’s downfall is most probably a delayed reaction to the same March crisis which took down Silicon Valley Bank (SVB). Its stock collapsed over 50% on April 25th as it lost over $100 billion in customer deposits. FRB shares ended up closing at $3.41, an 80% weekly drawdown.
The long and short of it is that FRB got caught in psychological contagion following the collapse of its even riskier counterpart. That happened in March, and FRB’s stock collapsed only when it was obliged to reveal just how badly it had been hit.
On Monday, we then learned that JP Morgan would takeover the bank, and guarantee the now $229 billion in total “assets”. This made SVB the second-largest banking failure in history, and places the spotlight on whether JPM can actually back these claims if depositors withdraw funds en masse.
But not to worry, a Treasury department spokesperson reassured markets that all is well:
The banking system remains sound and resilient, and Americans should feel confident in the safety of their deposits and the ability of the banking system to fulfill its essential function of providing credit to businesses and families
In case you weren’t keeping count, these banks went under in the last 60 days alone:
These assurances mean nothing. In fact, they simply arouse more suspicion. They don’t have your money. It was probably never there to begin with.
The house of cards is collapsing. Outside money is the place to be: self-custodied Bitcoin and Litecoin.
- Bitcoin to Reclaim Crypto Spotlight: 400-year old Bank Berenberg. What about Litecoin?
- Scaramucci Recounts Final Moments with SBF as FTX Exchange Fell Apart.
- Stanley Druckenmiller Bets Against the “Weaponised” US Dollar.
- ECB Enters the Final Stage For Capital Controls via CBDC.
- Google Cites “safe and responsible” approach to Artificial Intelligence.
- Litecoin founder Charlie Lee talks about MimbleWimble Extension Blocks (MWEB) privacy and fungibility upgrade.
The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Tuesday. I am not perfect and this is not a science — nor is this newsletter analysis a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.
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