Let's get the boring parts out of the way first. Bitcoin is floating in the $30k range right now. For the last few days we've been bouncing between mid $28k’s and mid $30k’s. I don't see this changing anytime soon. Obviously it could break out at any time, in any direction, but every time we get below $28k it is met with a ton of volume which shows me that when the price gets to that point, the bulls come back in charge. Hopefully that trend will continue in the future.
That being said every time the bitcoin price gets above that (like right now in the $30k’s) volume is relatively nonexistent, which doesn't give me a lot of optimism that we're going to break out north of $31k anytime soon.
As far as all the on-chain metrics are concerned, for the most part nothing has changed. Almost all of the indicators are still pointing at Bitcoin being in a generational buying opportunity right now. The one thing I would like to make note of is the bitcoin balance on exchanges. During that last dump, last week we actually reversed our trend of Bitcoin leaving exchanges into a Bitcoin going on to exchanges situation. I think that was largely fueled by extreme fear in the markets as well as the Luna Guard Foundation having to liquidate a couple billion dollars worth of Bitcoin. Since then, that trend has reversed and the amount of Bitcoin on exchanges is going back down. I expect that trend to continue to pick back up kind of where it left off last week.
The legacy markets looked a little bit better today. The S&P500 was up about 2% up to 4088. The Dow up about 1.34%. The Nasdaq up 2.76%. The Russell 2000 up 3.19%. Also worth noting the 10 year bond rate went up 3.16% to 2.968.
With the state of our economy being the way it is and the dollar gaining strength over these last several days, it seems unlikely that this stock market rally will continue. I still believe that there is room for another 10% to 15% in the stock market to sell off before we hit a stock market bottom. Unfortunately, I don't think we're going to see a Bitcoin and a crypto market bottom really establish itself until the stock market bottom comes in. Most likely the crypto bottom will actually come in before the stock market bottom, but won't be able to have a lot of confidence that the crypto bottom is in until we see it in the stock market as well.
The risk on asset prices going down goes hand in hand with the dollar strength going up as people are are trying to minimize their risk and move to the safe haven that they view the US dollar as. The global economic slowdown doesn't seem like it's going to end anytime soon. As we speak, China has 32 cities on Covid lockdown right now. There's no way that's not going to have an impact on the global economic situation. It also doesn't help that India just banned wheat exports. India isn't a huge wheat exporter like Ukraine or Russia, and I realized that they're concerned with their own population running out of food and wealthier countries buying wheat out from underneath their own population. But, with the global shortages already going on there's no way that this is going to help the wheat markets.
Aside from the 32 cities on lockdown, the Yuan is really struggling. It's lost 7% of its value against the dollar in the last month. Some of that is because as a dollar has gained strength. But, also China has seen pretty significant outflows of Chinese bonds because people are afraid of keeping their money invested in China with the current situation. Some of that data that came out recently included:
Industrial production down 2.9%
Retail sales down 11%
Electricity consumption down 1%
Oil demand down to 6.7%
Unemployment rate increased to 6.7 (highest in the five years)
Automotive sales decreased by more than 30%
With the 2nd largest economy looking like it's not out of the woods yet and it still has a way to go, it's not much of a stretch to connect that to the global economy struggling for a while.
Back over here in the states the S&P500 has lost $7T for this downturn. The index is down 18% since the beginning of the year. The silver lining on that is that every time the market has had more than a 15% drop, it has been followed by a twelve month bull run. Now, that doesn't mean that the bull run is starting tomorrow. It's very likely not and I'll get more into that in a minute. But, whenever this cycle concludes, hopefully past performance will repeat itself again.
A recent survey indicated that Americans are generally cutting back on spending. Of The survey responses:
53% -Dining out less
39% -Cut back on driving
35% -Cancel monthly subscriptions
32% -Buy generic brands over name brands
29% -Cancel vacations or travel plans.
All in all (as I've said before) I don't think that the markets will shift until the Fed starts to pivot its position, which I don't think is going to happen anytime in the very near future. I think it's likely that we'll see another 50 basis point hike in June and again in July. After that I think it's actually likely for the Fed to turn a little bit more dovish for a couple of reasons.
The velocity of money is slowing. People are cutting back and they're saving more.
The credit market is going to start to contract if it hasn't already, which it probably has.
Inflation is disproportionately hurting the masses. By that I mean middle income America and lower income America. Especially lower income America.
Rich people generally own assets and asset prices go up during inflation. So, even if you're not keeping up with the devaluation of the dollar you're still doing okay. Generally middle class families try to save & try to have a nest egg. Their nest egg is being eaten away due to the debasement of the US dollar and the increase in costs of goods and services.
However, those families in the lowest tax brackets are getting hurt the worst. These families are generally living paycheck to paycheck and they spend the vast majority of their income on consumable goods like food and shelter and electricity. Those expenses are what's going up the worst and those families have the least flexibility to do anything about it.
Even though it sounds crazy at first thought, I've started coming around to the idea that as we enter an election cycle the Fed is going to get a lot of political pressure to pivot dovish. But, also if inflation doesn't turn around very quickly (which it doesn't look like it's going to) the administration is going to get pressure to hand out more stimulus checks. I'm not sure what their “monster in the closet” excuse for bringing stimulus checks back is going to be, and it might just be as simple as the fact that families are hurting. However, traditional spending bills are probably not getting through Congress. We saw what happened with the Build Back Better program (not to mention that these bills are very often filled with earmarks and pork belly crap).
Potentially a direct payment stimulus program could bypass some of that if not all of that, and go directly to the people who need it. That money would also go directly into the economy. If this were to happen around the same time that the Fed pivots (sending a positive message to the markets), this could be a big cause for a market turnaround.
Back to Bitcoin, I wouldn't be surprised if we continue to float in this $28k to $31k range up until then. We might not. I kind of hope that we do though. I don't think that there will be enough bull momentum to keep us above that range and unless we can break north of $32,500 and bounce back off of that with heavy resistance going south (and use that as a new line of support), I just don't think that the momentum is gonna stay bullish. Not in this market.
When we look to the downside. We very possibly could break back down south of that $28,200 mark. That has been acting as a very strong line of support. So far we have broken through it a couple of times and then very quickly bounced back north of it. That does give me some optimism. However, every time we're north of $28k, volume is relatively minimal.
If we were to break south of $28,200 then the next line of resistance to watch is $26,750. The one below that would be the $24,000 realized price number, and the one below that would be the $22,000 (it's a little bit north of $22,000) 200 week moving average. So those are the price levels that I'm keeping an eye on right now.
In other news, the UK is set to legalize stablecoins. Now, if you haven't been living underneath a rock then you're probably saying “didn't UST just collapse?” Yes, it did. Actually so did a couple of other stablecoins. However, the UK is only legalizing “fully backed” stablecoins, so they don't have that same risk profile that an algorithmic stablecoin such as UST on the Luna Network has
Another thing worth mentioning is that the president of El Salvador has said that 44 countries are coming to El Salvador on Monday (almost a week from today) to discuss Bitcoin and how El Salvador has integrated bitcoin into their economy. Of those 44 countries, 32 will be represented by their central banks and 12 will be represented by financial authorities. Nearly all of the countries that will be attending are what we would consider to be developing countries, but they include countries such as Kenya, Nigeria, Egypt, Pakistan, Madagascar, and a bunch others.
It's unlikely that all 44 countries are going to go ahead and adopt a Bitcoin standard, but the mere fact that 44 countries are going to El Salvador (a place that nobody was going to a couple years ago) says a lot about what Bitcoin is doing for their economy. We currently only have 2 countries who officially adopted bitcoin as national legal tender. How many of these 44 countries have intentions of doing the same thing?
The last bit of news I wanted to touch on quickly was with the Russia-Ukraine situation. If you remember (according to Russian propaganda), that war was only supposed to last a week. Maybe two weeks. Now it's looking like it's going to be our version of Iraq. The whole reason Russia invaded Ukraine was because Ukraine was getting too close to the west and they were flirting with the idea of joining NATO. Russia has made it clear that they will be intolerant of a country on their border being a NATO country. I realized that there are already NATO countries on the Russian border, but not any with significant economic or military might.
But now there's yet, another reason why Russia might escalate this war. Finland and Sweden both announced bids to join NATO on Sunday. Although Sweden is not bordering Russia, Finland has a huge Russian border and those two countries dwarf Latvia and Estonia (in basically every metric).
I do have another travel deal for you! I have a round trip, nonstop flight from New York city (JFK) to Panama City for $272. You can get a similar flight from Las Vegas (it's not nonstop) and from Denver from $276 or $282 respectively. That flight's usually between $650-$700. Those flights are between August and November of this year and January and March of next year. They fly on Delta and United. You can find those on Google flights; just type it in and they'll come up.
That's it for today. Cheers y'all and as always have a great day.
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