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Crypto Market Outlook

Many of you in this group are my friends and people I've known and informally advised for a long time, so I'm putting this out even though it makes me uncomfortable to say this.

I started my crypto journey before the 2017 bull market, and have seen all the cycles firsthand. The scary block size wars, the ICO bubble, the "whitepaper" bubble, the privacy coin debates, the airdrops, the many mining scams, liquidity farming, algorithmic stablecoins, NFTs, IDOs, yield staking, the pump and dumps, you name it. I co-wrote (to my knowledge) the very first crypto newsletter for a retail audience, before Charlie Shreem's Crypto IQ newsletter and Teeka Tiwari's Palm Beach Confidential.

Over years of doing this, I've developed a nose for the markets. The beauty of crypto is that cycles occur much more rapidly than in the broader financial markets. It is a game of liquidity and narratives. Cryptos are like commodities - they trend. Once a narrative catches on, the virtuous cycle feeds on itself and accelerates, culminating in a parabolic blow-off top.

Today, bitcoin broke above $60k and promptly went up all the way to $64.5k before settling down. A parabolic move on top of a parabolic move. The volume surge broke Coinbase (COIN). I was monitoring the market on Kraken Pro and saw Kraken futures go post-only. KuCoin had a technical error. Only Binance continued to operate smoothly.

In the TradFi world, the bitcoin miners and MicroStrategy (MSTR) have all gone parabolic.

Nearly all the cryptos on my watchlist have gone parabolic, even Ethereum (ETH). Memecoin Pepe was up over 40% at one point today.

In absolute dollar terms, most cryptos haven't recovered to their 2021 peak. ETH is still far below its $4800 peak. Bitcoin is slightly below its $69k peak. But sentiment is off the charts bullish. Crypto fear and greed index is at 82, or extreme greed. Trading volumes are back at November 2021 levels. Futures volume is off-the-charts. A boomer trader who has been in markets for four decades and employs a conservative trading style is sporting laser eyes. Every second post on Twitter is about bitcoin.

Everyone who believed in the Bitcoin ETF and bought in has made an insane amount of money really quickly. That's true in every bull market, but this cycle has been a lot quicker than any of the others I've lived through. We've gone from $24.9k bitcoin on 11 September 2023 to $64.5k today, with hardly any measurable pullback. Altcoins have lagged, but they have also been brought along for the ride.

Easy money has made everyone forget how quickly this market can turn. Bitcoin can easily drop 25% in a day. Solana, Cardano, Polygon and Uniswap got wrecked in the June 2023 crash. It took a mere 5 days for Luna to vaporize $4 billion in value.

Risk happens fast, and it happens when people least expect it.

I don't think there's any asset that goes up forever. 

I don't see how bitcoin can maintain its current momentum.

I see too much leverage in the crypto ecosystem, and past cycles have taught me how quickly that can turn the markets.

We've had a good run. It's time to exit.

I've cleared out most of my crypto portfolio, leaving only the bonded Ethereum, Solana and Polygon holdings. I'm short bitcoin futures to hedge the decline in value of my staked assets. I've exited bitcoin and all my other altcoins (except Paxgold, which counts as cash equivalent). 

I didn't wake up today morning planning to do this. I reacted on seeing how things moved over the past 3 hours.

I'm not a top caller. To steal a phrase my friend often uses, I like to follow the trend to the end until it bends. But the sentiment extreme, exchanges going down, parabolic charts, the PR shenanigans and market manipulation that jump started the bitcoin run... all leave me feeling very uneasy. Maybe this continues - who the heck knows?

My chips are off the table. I plan to encash and exit the casino while there's still liquidity to be had.

Overall, in the last 24 hours, about $700M worth of crypto positions have been liquidated - long and short. Traders will now de-lever to meet their volatility parameters. This is how the selling starts, and then cascades.

Translation: "It's already gone parabolic but don't worry guys, it'll go even more parabolic and blow past $69k without pausing".

Beats me why analysts feel the need to hedge. You're not doing your job if you're afraid to call it like you see it. It's a parabolic blow off top. There, I said it.

"Normal functioning markets"

Good Trading!


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