Real GDP Continues Moderate Growth

The United States' real Gross Domestic Product (GDP), on an annualized basis, grew by 2.8% in 2024 compared to the previous year. This result underscores that the economy remains, for now, far from a recessionary scenario, despite ongoing uncertainties in the global macroeconomic environment.

Annual growth in real GDP boosts confidence and drives job creation, tax revenues, and investment. On the flip side, when real GDP is declining, investors begin to question the government’s fiscal sustainability, demanding higher returns to compensate for increased risk—putting upward pressure on interest rates.

This environment of uncertainty and reduced liquidity tends to negatively impact risk assets such as stocks and cryptocurrencies, as capital typically flows toward safer investments.

The main real GDP growth forecasts for 2025 are 1.8% according to the IMF and 1.7% according to Fitch Ratings, with expected inflation at 4.3%. Based on Fitch Ratings’ projection, nominal GDP growth will be 6%, reflecting economic activity that is expected to remain strong despite inflationary challenges.

Confirmation of a possible recession (if the annual real GDP growth for 2025 turns out negative) will only be possible in April 2026, when the full data for the year is released.

Inflation Below 3% with a Stable Trend

The Consumer Price Index (CPI) for May came in at 2.3%, keeping inflation on a sideways path below the 3% threshold. In April, following the recent implementation of Donald Trump’s tariff policy, real-time inflation data continued to show declines, although this trend has yet to be fully reflected in the government’s lagging indicators.

However, in the past few days, real-time inflation has started to rise. Could this be the result of tariffs impacting the supply chain?

Although real-time inflation accelerated in May, it’s important to remember that the impact of tariffs is typically a one-time event. When a tariff is imposed, it immediately raises the import cost of that good, which then gets passed on to consumer prices. However, this effect happens only once — meaning prices jump to a new level but don’t keep rising indefinitely just because of the tariff. This differs from sustained inflation, which requires ongoing price increases.

As long as there isn’t a significant distortion caused by aggressive monetary expansion, the disinflationary trend is likely to resume in the short to medium term — especially since the Federal Reserve (Fed) has not yet ended quantitative tightening (QT) and continues to keep interest rates (Fed Funds rate) elevated. These factors are expected to keep consumer confidence and risk appetite subdued.

Tariffs can contribute to a renewed upward pressure on inflation as measured by the CPI. However, the inflationary impact will heavily depend on the extent of economic deterioration. Without a major distortion from aggressive monetary expansion, the current disinflationary environment is likely to persist in the near to mid-term, mainly because the Fed hasn’t yet stopped QT and still maintains high interest rates.

The recent rise in real-time inflation, combined with uncertainty around the end of quantitative tightening, prolongs the window of uncertainty. Within this window, the most favorable scenario for risk assets (stocks, crypto, etc.) would be if the inflation caused by tariffs proves to be a one-off effect, without persistence.

Then, when the Fed eventually reverses its monetary policy, the inflationary impact of that shift will also heavily depend on how much the economy has weakened by that point — because the weaker the economy, the more capacity it has to absorb inflation, and the less worried investors would be going forward.

Long-Term Treasuries with Elevated Yields: Two Competing Narratives

The 10-year Treasury yield remains around 4.30%, showing resilience against a decline, and two narratives are gaining traction:

• Geopolitical Pressure: China may be selling U.S. Treasuries in response to U.S. tariff policies, increasing risk perceptions and pushing yields higher.

• Unwinding of Basis Trades: The closing out of arbitrage positions in the Treasury market could be temporarily preventing yields from falling.

It’s likely that Treasury yields aren’t dropping because of the unwinding of basis trade positions. In other words, this doesn’t seem related to the narrative that China is dumping bonds as retaliation against the U.S., nor to the argument that the market is pricing in a debt default.

The second theory, related to basis trades, appears to better reflect the current situation. If confirmed, this could signal a medium-term trend of falling real interest rates, which lowers the cost of capital, increases the present value of future cash flows, and encourages a search for higher returns in assets like stocks, private credit, and even cryptocurrencies. You can learn more about this here:

Fed Nearing End of QT, Hints at “Stealth QE”

There are signs that the Fed is close to ending quantitative tightening (QT) by the end of the third quarter, with the possibility of then initiating a “stealth QE.” In short, to absorb the supply of Treasury securities, the Fed may pause QT and restart its quantitative easing (QE) program, while also granting a Supplementary Leverage Ratio (SLR) exemption for banks.

With QE, the Fed can print money and buy government bonds, expanding credit availability. The SLR exemption allows commercial banks to acquire these securities with virtually unlimited leverage, which also increases the overall credit in the economy.

The Fed and the banking system have the power to create money out of thin air, and both restarting QE and granting the SLR exemption are decisions solely under the Fed’s control. This increase in liquidity and credit tends to boost demand for risk assets, supporting their performance.

Labor Market Shows Stability

One possible explanation could be the increase in bank credit available to businesses and retailers, which stimulates the economy and helps maintain employment levels in the short term.

Many see the Fed at a crossroads between curbing unemployment and controlling inflation. However, as previously noted, inflation seems to be the lesser concern at the moment, which could soon open the door for stimulus — effectively lowering the risk of a sharp rise in unemployment.

Final Thoughts:

Given this, the current outlook presents two possibilities: a moderate recession that will be recognized only in hindsight, or a delay in the recessionary cycle — the so-called "soft landing."

The general assumption is that GDP in 2025 will show positive growth, with inflation and unemployment kept under control. The combination of these factors makes the possibility of a soft landing quite relevant.

In a soft landing scenario with stable macroeconomic fundamentals, risk assets tend to perform well in the short to medium term, especially if the market believes that the worst of monetary tightening is behind us and that central banks may eventually ease monetary policy.

Relevant News:

Macroeconomy:

• Elon Musk says he will lead Tesla for at least another five years

• US President Trump: Russia Wants a “Large Scale” Trade Deal

Cryptocurrencies:

• PayPal to offer 3.7% yield on stablecoin balances

• Nexo makes return to US, with Trump Jr. attending exclusive event

• Argentina President Shuts Down Libra Crypto Scandal Investigation

• US Senate moves forward with GENIUS stablecoin bill

Reflection:

One of the most common events in the financial market is hearing or watching analysts discuss the various types of changes in the indicators or fundamentals of a particular asset.

However, an indicator that is rarely remembered and valued in the cryptocurrency market is the statistical history.

Through the statistical history, it is possible to analyze how an asset or index behaved in a particular phase or market context, providing important insights into the pattern of its future behavior.

Statistical data serves as an additional ingredient in the analysis body. However, a pattern that occurred in the past does not guarantee it will repeat in the future, but on some occasions, history may rhyme.

Below, check out a combination of historical patterns in Bitcoin that I recently mapped out:

Would it be surprising if Bitcoin closed Q3 (third quarter) of 2024 between $78,000 and $87,500?

Statistically, since 2013, there have been 6 instances where Q1 closed positively.

It was observed that in the following Q2 after this event, there were three instances of negative closings (2013, 2021, and 2024) and three instances of positive closings (2017, 2019, and 2023).

In 2024, Bitcoin experienced a positive Q1 (+68.68%) and a negative Q2 (-11.92%). Note that this phenomenon only occurred in the years 2013 and 2021.

Observe that Q3 of 2013 resulted in (+40.6%) and Q3 of 2021 (+25.01%).

Following this logic and maintaining the average percentage proportions, BTC could add gains that would place the price between $78,000 and $87,500 by the end of Q3 2024 (September).

Final Thoughts:

Bitcoin has been in a correction phase since March 13, 2024, which means it will soon complete 4 months.

This correction is already one of the longest down periods in an uptrend for the asset.

Statistics indicate that it wouldn’t be surprising for Bitcoin to achieve good returns by the end of Q3 (September), as the data suggests a higher probability of the asset reaching new all-time highs.

Finally, be aware that this is not enough for decision-making. For me, the statistics are positive, and I hope the party continues. Subscribe to follow this market with me.

Relevant News:

Macroeconomy:

• Biden tells Hill Democrats he is staying in the race

• Market Awaits Federal Reserve Chair Powell's Testimony

Cryptocurrencies:

• Circle is First Global Stablecoin Issuer to Comply with MiCA, EU’s Landmark Crypto Law

• Donald Trump to Spark a Bitcoin Rally in the Second Half of the Year if Elected

• Mt. Gox Begins Repayments in Bitcoin and Bitcoin Cash

• VanEck Officially Files S-1 for Spot Ethereum ETF

Reflection:

Today’s topic is technical: I will briefly explain the concept of “decentralized sequencers,” a new technology that has the potential to become a major narrative in the cryptocurrency market in the coming months.

Basic concept needed: Layer 2 blockchains (e.g., Arbitrum or Optimism) are scalability solutions that enable transactions to occur off the Layer 1 blockchain (e.g., Ethereum), where they are batched and compressed (rollups) before being sent back and permanently stored on the main blockchain (Layer 1).

The benefit of this scalability mechanism is straightforward: it mitigates congestion on the main network and provides greater speed, cost reduction, and efficiency for the entire ecosystem.

The key point is that every Layer 2 blockchain must have at least one sequencer responsible for ordering the transactions to be stored on the Layer 1 blockchain.

This is precisely where a specific deficiency lies, as 99% of Layer 2 networks have only a single central sequencer, making the entire network processing susceptible to a single point of failure.

With this in mind, it’s understandable why developers should naturally seek to decentralize sequencers.

We are just getting started, your mind is going to be blown!

To give you an initial reference for your studies, I will reveal the project that is leading this narrative.

Centralized Sequencer:

As I wrote in the reflection, the centralized sequencer acts as a single entity responsible for ordering transactions before they are batched and sent to the main blockchain.

This model is common in Layer 2 solutions to increase transaction speed and reduce costs, avoiding the complex consensus mechanisms required in decentralized systems.

See the following image for how a typical transaction settlement process develops in the Optimistic Rollup:

Problems with a Single Sequencer:

• Single Point of Failure:

In a single-sequencer system, transactions will not be executed on the network if the sequencer stops, leading to activity failure.

For example, a failure in Arbitrum's sequencer on January 9, 2022, caused the network to be inoperative for about 10 hours.

Although users can send transactions directly to Ethereum, bypassing the sequencer in some Layer 2s, there are inconveniences such as a 24-hour delay for Arbitrum and a 12-hour delay for most OP Stack Layer 2s.

Old crypto enthusiasts will remember that this was unacceptable! Moreover, if the network is down and users simultaneously transfer assets to Ethereum, Ethereum gas fees will skyrocket.

In contrast, if a sequencer fails in a decentralized system, other available sequencers can operate, increasing network resilience.

• Censorship Resistance

A single sequencer can deliberately exclude certain types of transactions or transactions from specific users from the transaction batch.

On the other hand, a decentralized sequencer system increases censorship resistance. If one sequencer censors certain transactions, others can add the censored transactions.

• Malicious Acts by Sequencers

They provide receipts to users after executing transactions, indicating the user's updated state. In this process, sequencers might falsely claim that they have altered the user's state without actually executing and including the transaction in the batch.

Decentralized Sequencer:

In contrast, decentralized sequencers distribute the task of transaction ordering across multiple nodes.

This not only adheres to the decentralized nature of blockchain but also enhances security. This approach aligns with the decentralized spirit of blockchain.

If the sole sequencer in a single system behaves maliciously, there is no way to punish them. It's important to note that such malicious behavior by a sequencer will be exposed, and no user will trust that network anymore; the likelihood of such behavior is very low because the sequencer would lose its source of income.

In a decentralized sequencer system, sequencers that act maliciously can be punished by other sequencers operating the network. This limits the possibility of malicious behavior by sequencers.

For these reasons, the prevailing opinion in the blockchain industry is that it is necessary to transition from a single sequencer system to a decentralized sequencer system.

Metis - The First Decentralized Sequencer:

On March 14, 2024, Metis became the first Ethereum Layer 2 solution to decentralize its sequencer. This was a significant milestone and a revolutionary change for the entire cryptocurrency industry.

There are some very interesting catalysts that will complete this historic upgrade. These include:

• Sequencer Rewards: Sequencer nodes will earn METIS tokens by processing transactions and contributing to block production. More participation means greater security against malicious attacks. It’s a win-win situation!

• 20% Mining Reward: In the initial phase of the decentralized sequencer launch, all sequencer nodes will enjoy a 20% mining reward rate.

• Front-end: Users will be able to closely monitor the decentralized operations of the sequencer through a custom front-end designed by Metis.

• Community Engagement: Active participation increases community recognition, opening doors for future collaborations and partnerships. To maximize engagement, there will be a series of initiatives designed to reward active users and stress test the network during the gradual decentralization of the sequencer.

Final Thoughts:

Metis is an Ethereum layer 2 that is leading in decentralization and appears to be the closest to what Vitalik Buterin currently envisions as ideal.

Something that might surprise many is that Natalia Ameline, one of the co-founders of the project, is also Buterin’s mother. This is an interesting fact that inevitably brings greater visibility to the project.

All layer 2 networks are centralized, as they have only one sequencer responsible for ordering transactions to be saved on layer 1.

This is not new; it is a problem widely known by developers even before building an L2, and it is also a consensus among them that it is not feasible to start an L2 by decentralizing the sequencer.

Since the beginning of the project, the Metis team has maintained a focus on decentralization above the average, which is why they are leading the sector.

There is significant narrative potential here because their innovations have introduced a new way to generate revenue through decentralized sequencer pools.

In other words, it is an innovation that helps increase decentralization, network security, and revenue generation and sharing with the community.

Decentralizing the sequencer is an inevitable premise. Imagine this expanding across the entire L2 ecosystem—it is something huge and perpetual!

In summary, Metis might currently be one of the most decentralized L2s and is also capable of pursuing advances in privacy at the protocol level.

By mitigating the risk of a single point of failure, more complex and sensitive sectors in DeFi might prefer to build on or connect with Metis.

There are also other projects developing solutions to decentralize the sequencer, such as Astria, Espresso, Fairblock, Radius, Madara, Taiko, Anoma, among others.

Finally, you can take advantage of the fact that the narrative hasn't heated up yet and delve deeper into research on decentralized sequencers to gain your own insights and conclusions.

Bonus: Since 2023, the team has also been developing a new technology (hybrid rollups), which combines optimistic rollups with zero-knowledge proofs (zkPs), and it is already in an advanced stage of development.

Relevant News:

Macroeconomy:

• US GDP revised upwards for January-March quarter

• Trump claims ‘big victory’ over Biden despite lying in debate

• Soaring U.S. debt poses risks to global economy, IMF warns

Cryptocurrencies:

• Mt. Gox trustee to start Bitcoin, Bitcoin Cash repayments in July

• Coinbase Sues the SEC And FDIC

• VanEck Files for Spot Solana ETF

• SEC Sues Consensys, Calls MetaMask an Unregistered Securities Broker

• 21Shares Officially Files for Spot Solana ETF

• Kraken’s Jesse Powell donates $1M in crypto to Trump campaign

• BlackRock: Bitcoin Is A Hedge Against Geopolitical Uncertainty

• Spot Ethereum ETF launch delayed by SEC comments

Disclaimer:

THIS IS NOT A SPONSORED POST!

This is a newsletter where I publish my unbiased analyses and considerations that should not be taken as advice or recommendations. I do not provide financial recommendations for buying, selling, or holding assets, and I do not promise quick wealth. You should conduct your own analysis and decision-making. I believe that knowledge is the key to the financial market, and I am committed to sharing insights that can help you see the market from different angles.

If you're not already following this newsletter, consider subscribing. Every week, I share my analyses, experiences, and the most relevant news of the week. Let's investigate the fundamentals, charts, and gather the most valuable insights from the financial market!

Reflection:

A long time ago, on the banks of the majestic Mississippi River, lived an old fisherman known for his unparalleled skill in predicting storms.

He didn't use sophisticated instruments like the meteorologists in the big city, but everyone was amazed by his knowledge and accuracy; his secret lay in careful observation of nature.

One day, while walking along the banks of the Mississippi, the old fisherman noticed a subtle change in the air. The wind was blowing differently, the leaves were dancing in a peculiar way, and the birds seemed restless.

These signs, completely visible yet ignored by many, were the hidden indicators he could appreciate and decipher.

From the top of a hill, the old fisherman watched the clouds slowly forming on the horizon. They were dark clouds, charged with electricity and promises of change.

He knew that if these clouds gathered enough, a powerful storm would descend upon the riverside region.

Just as the old fisherman read the signs of nature to anticipate a storm, cryptocurrency market investors have their own indicators.

They observe trading volumes, price behavior, investor sentiment, and chart patterns like someone reading the clouds in the sky.

Each sign, no matter how small, can be a harbinger of a significant event, such as a new all-time high in Bitcoin's price.

Moral of the story: Few people act like the old fisherman, which is why they fail to see and interpret the signs of what might be coming.

Today I will provide you with 4 indicators you can use to identify the approach of Bitcoin's new all-time high.

1 - Bitcoin: AASI (Active Address Sentiment Indicator)

The indicator compares the 28-day price change (%) with the 28-day change in active Bitcoin addresses (%). The gray lines on the chart show the change in active addresses.

At the outer limits of these gray lines are standard deviation bands:

• Dotted red line = upper limit.

• Dotted green line = lower limit.

• The orange line represents the 28-day price change (%).

When the orange line reaches the upper limit (dotted red line), it indicates that the short-term market sentiment is overheating because the rate of price increase is surpassing the rate of increase in active addresses.

MrGekko’s Tip: When this happens, the winds are stronger! Note that since 2021, the orange line has not exceeded the 100% target (left corner).

2 - Bitcoin: Net Unrealized Profit/Loss (NUPL)

This indicator is derived from Market Value and Realized Value, which can be defined as:

• Market Value: The current price of Bitcoin multiplied by the number of coins in circulation. This is similar to market value in traditional markets, i.e., the stock price multiplied by the number of shares.

• Realized Value: Instead of calculating the current price of Bitcoin, Realized Value considers the price of each Bitcoin when it was last moved, i.e., the last time it was sent from one wallet to another. It then adds up all these individual prices and calculates an average of them. Next, it multiplies this average price by the total number of coins in circulation.

By subtracting the realized value from the market value, we calculate the unrealized profits/losses.

MrGekko’s Tip: When this happens, the birds get restless! Market capitalization increases much more rapidly than profit realization, indicating that the market is overheated. You could say this is due to investor greed (red zone).

3 - Bitcoin: Addresses with Balance > 1,000 BTC

This indicator shows the number of unique addresses containing at least 1,000 BTC (orange line).

It can be used in conjunction with other address balance charts to understand whether adoption is generally increasing or decreasing for Bitcoin over time, and also whether usage is increasing or decreasing among groups with specific balances.

MrGekko’s Tip: The large and imposing bulls of the forest get scared when they see the birds stirring and seek refuge! The big market bulls don't go unnoticed; note that when the top was approaching in previous cycles, they were descending the mountain.

4 - Bitcoin: MVRV Z-Score

It is an indicator that uses blockchain analysis to identify periods when Bitcoin is extremely overvalued or undervalued relative to its "fair value."

It uses three metrics:

• Market Value (black line): The current price of Bitcoin multiplied by the number of coins in circulation. This is akin to market capitalization in traditional markets, i.e., the stock price multiplied by the number of shares.

• Realized Value (blue line): Instead of calculating the current price of Bitcoin, the Realized Value considers the price of each Bitcoin when it was last moved, meaning the last time it was sent from one wallet to another. It then sums all these individual prices and calculates an average. It then multiplies this average price by the total number of coins in circulation.

• Z-Score (orange line): A standard deviation test that reveals the extremes of data between the market value and the realized value.

By doing this, it eliminates the short-term market sentiment present in the market value metric. Therefore, it can be seen as a more “true” measure of Bitcoin's long-term value, whose market value moves above and below depending on market sentiment at the time.

MrGekko's Tip: It's the moment when the first drops of the storm start to fall! On the score to the right, note that the first warning signal appears from the halfway point (level 5).

Final Thoughts:

Don’t look for miracle indicators, they don’t exist. In the current market phase, many investors are already becoming desperate and speculating about an end of the cycle that doesn’t make sense.

Learn to value widely known or easily accessible indicators because, most of the time, it’s the simple things that work. The search for miracles makes most people believe in complex indicators, as if there were hidden secrets to hitting the top.

In the analogy of the bulletin, the fisherman identifies the arrival of rain through a sequence of events and not just by an isolated fact.

In other words, when gathering good indicators, acquire the ability to define an objective idea based on probabilities and don’t wait for the storm to come to you, leave before it destroys you.

Relevant News:

• Nvidia Surpasses Microsoft as World’s Most Valuable Company

• SEC drops Ethereum investigation to avoid ‘embarrassing’ court case

• Kraken-CertiK saga turns murky as part of exploited funds go ‘missing’

• German government moves $195 million worth of Bitcoin to exchanges

• MicroStrategy Buys Another 11,931 Bitcoin Worth $786M

• Standard Chartered to Launch Spot Bitcoin & Ethereum Trading Desk

• Mt. Gox trustee to start Bitcoin, Bitcoin Cash repayments in July

Disclaimer:

This is a newsletter where I publish my unbiased analyses and considerations that should not be taken as advice or recommendations. I do not provide financial recommendations for buying, selling, or holding assets, and I do not promise quick wealth. You should conduct your own analysis and decision-making. I believe that knowledge is the key to the financial market, and I am committed to sharing insights that can help you see the market from different angles.

If you're not already following this newsletter, consider subscribing. Every week, I share my analyses, experiences, and the most relevant news of the week. Let's investigate the fundamentals, charts, and gather the most valuable insights from the financial market!

This is edition number 07 of my newsletter! Here, I organize and share my insights on the market, technical analysis, education, experiences, reflections, and the most relevant news of the period.

Reflection:

It's amazing how Bitcoin is behaving in the face of global tensions this October, isn't it?

It's a shame what's happening in the East; it truly is one of the most heartbreaking tragedies of recent times.

It's important not to lose our sensitivity, not to dehumanize, the ability to recognize barbarism, brutality regardless of the side, and not consider it normal is an evolutionary achievement of civilization. Let's take a moment to reflect!

We should continue the evolution of our species in society; let's do our part. I'm eager to share observations I've made about Bitcoin and the market during the week.

Stay with me until the end!

In this week's analysis, I will address:

• Short-term behavior of the dollar index (DXY);

• Upward trend on the Bitcoin dominance chart;

• Fibonacci retracement levels on Bitcoin.

Dollar Index (DXY)

If you haven't seen it yet, I suggest you check out the long-term analysis of the dollar index in the newsletter 03.

• In the short term, the index shows a potential peak (B) around 107,000 points.

• On the daily chart, there is a distribution, with Fibonacci retracement levels being respected.

• It's important to pay attention to this setup, as if time confirms a distribution, its negative effect could intensify the downtrend in the dollar index over larger timeframes and scope.

Bitcoin Dominance Chart

• Recently, Bitcoin dominance broke its previous peak (around 52%) in the year 2023.

• Since then, the price of Bitcoin has started a new uptrend and surpassed $32,000.00, which had also been the highest price of the year.

• Please take a look at the current resistance (1) on the chart. Notice that resistance (2) is close to 60%.

Bitcoin

Levels above $35,000 dollars have been reached, but currently, the asset has encountered resistance in this area and is undergoing a correction. It's important to keep an eye on the green support zone.

Pay attention to the Fibonacci retracement levels:

• 0.382 ($35.991.47).

• 0.5 ($42.337.39).

• 0.618 ($48.683.32).

• 0.786 ($57.718.19).

Final Thoughts:

The breaking of this year's high, both in Bitcoin's price and dominance, may be signaling the beginning of a new paradigm in the cryptocurrency market.

If dominance continues to rise, it's likely that the price will also go up, as an increase in Bitcoin dominance indicates that it is in higher demand compared to other cryptocurrencies, receiving more capital inflow.

This is a typical pattern in the capital flow cycle in the crypto market, observed in the early and intermediate stages of a bull market. However, caution is advised, as there is significant support at $32,000 that could be tested at any time.

On the other hand, the US dollar index continues to show signs of weakness, which can be a positive factor for liquidity to flow into equities and consequently into Bitcoin.

The narrative of the ETF as a justification for this rise remains strong, with rumors of approval earlier than expected by the market. I'll address this topic soon; subscribe to stay updated.

Relevant News:

Macroeconomy:

• BRICS: Chinese Yuan Surpasses Euro, Becomes Second Main SWIFT Currency

• Biden asks Congress for $106 billion for Ukraine, Israel, U.S. border

• Elon Musk’s X aims to revolutionize finance as a central hub

Cryptocurrencies:

• Tether Aims to Publish Reserve Data in Real-Time in Coming Years: Report

• EtherHiding: Why hackers may prefer Binance’s BNB Smart Chain

• Binance Futures Launches BSV Perpetual Contracts!

• Bitcoin core developer steps back from Lightning Network over ‘hard dilemma’

• Ledger hardware wallet rolls out cloud-based private key recovery tool

• Crypto market sentiment at highest point since BTC’s $69K all-time high

• Coinbase disputes SEC’s crypto authority in final bid to toss regulator’s suit

Disclaimer:

This is a newsletter where I publish my unbiased analyses and considerations that should not be taken as advice or recommendations. I do not provide financial recommendations for buying, selling, or holding assets, and I do not promise quick wealth. You should conduct your own analysis and decision-making. I believe that knowledge is the key to the financial market, and I am committed to sharing insights that can help you see the market from different angles. If you're not already following this newsletter, consider subscribing. Every week, I share my analyses, experiences, and the most relevant news of the week. Let's investigate the fundamentals, charts, and gather the most valuable insights from the financial market!

This is edition number 06 of my newsletter! Here, I organize and share my insights on the market, technical analysis, education, experiences, reflections, and the most relevant news of the period.

Reflection:

This week, I was recalling a brief study I conducted last year on the United States' economy in the 1970s.

For those who don't remember, Richard Nixon formally resigned the presidency on the morning of August 9, 1974, with Gerald Ford being sworn in almost immediately afterward.

The American economy was in the midst of one of the worst economic crises in U.S. history, marked by high unemployment and inflation rising to 12.3% that year after the 1973 oil crisis. Therefore, the Ford administration considered the situation one of its priorities.

In October 1974, in response to the rising inflation, Ford went before the American public and asked them to "Whip Inflation Now" ("WIN").

The president wanted to kickstart a movement to raise awareness about the dangers of inflation, which the government believed was a greater threat to the economy than the high unemployment, which was also a concern.

A series of proposals for public and private measures aimed at directly affecting supply and demand were announced. The suggested actions for citizens included carpooling, refusing thermostats, and starting their own gardens.

The "WIN" buttons immediately became objects of ridicule; skeptics turned them upside down, explaining that "NIM" stood for "No Immediate Miracles," "Nonstop Inflation Merry-go-round," or "Need Immediate Money."

In general, the economy struggled during the Ford administration. Public debt, unemployment, and inflation increased, consumer confidence dropped, and domestic manufacturing declined significantly, primarily due to the strengthening of Asian economies.

In 1976, Ford faced a swine flu pandemic (the H1N1 variant began infecting humans in the early 1970s). Years later, Jimmy Carter's presidency had an economic history of roughly two equal periods.

The first two years were marked by the recovery from the 1973-75 recession, which had drastically reduced investments to the lowest level since the 1970 recession and raised unemployment to 9%.

The other two years were characterized by high inflation, high-interest rates, oil shortages, and slow economic growth.

Stagflation is an economic situation in which a country experiences a combination of economic stagnation and high inflation at the same time.

This is unusual because typically inflation occurs when the economy is growing, and stagnation occurs when the economy is weak. However, in the 1970s, the United States experienced a notable period of stagflation.

The sudden gasoline shortage in the summer of 1979 laid bare the problem and symbolized the crisis for the general public, causing a drop in the president's popularity.

S&P500 Index between 1973-1981

In this week's analysis, I will address:

• Reading and perspectives on the Consumer Price Index (CPI).

• Oil as one of the main drivers of inflation or deflation.

• The social and political impact through gasoline prices.

Inflation

• On Thursday, October 12, a positive change of 0.4% in September was announced, compared to August 2023.

• In the annualized inflation, the result was 3.7% in September, edging up from the previous reading of 3.6%.

• Note that both recent readings came in slightly above market expectations. In theory, this could be a signal that further interest rate hikes may be necessary.

• The primary goal and narrative of the Federal Reserve is to bring inflation back to the 2% level.

  U.S. Consumer Price Index (CPI) YoY - Investing.com

  

OIL

• In my post number 01, I presented this same oil chart when the price was approximately $93.70 per barrel.

• Since that time, the most important energy commodity in the world has corrected by more than 13% and is currently showing signs of recovery.

• In September, I gathered evidence that the region would be a selling zone, as a few weeks earlier, Saudi Arabia had announced oil production cuts, which fueled rumors that the barrel could be traded at around $100.

• By the way, it was a quite similar dynamic to the peak of $131.50 in March 2022. In advance, there were also announcements of cuts and rumors that the barrel would be traded at around $300 due to the effects of the Russia-Ukraine war.

• Stay alert, speculation is everywhere and often overshadows the fundamentals in various situations.

  

Gasoline

• Gasoline, as one of the most important petroleum derivatives, has a strong correlation with its movements.

• It is an extremely necessary commodity for the population, businesses, services, and more.

• During the gasoline crisis in 1979, despite the global oil supply decreasing by only about 4%, widespread panic resulted in a sharp price increase, more than doubling to $39.50 per barrel in the following 12 months, leading to long lines at gas stations.

• That period was a significant example of how a shock in the supply and price of such an essential commodity can harm a government's popularity.

• Currently, the gasoline futures market is trading at around $2.18 per gallon.

  

Final Thoughts:

The inflation rate has undergone its second consecutive increase, surpassing market expectations.

For many, it's already a sign that the overall disinflation that has been in place since Q3 2022 is now being suppressed by inflationary forces, including the recovery of oil prices in 2023.

This expectation reinforces a popular opinion that the Federal Reserve will have to proceed with its monetary tightening schedule to control inflation.

On another note, some argue that the Fed has already done its job, and soon, the disinflationary effect should intensify once again.

Keeping an eye on the trend of oil can help you broaden your perspective on this situation.

Without expressing any political or commercial intent, it's certain that no party seeking reelection would want to face an electoral period with skyrocketing gasoline prices.

I'd like to hear your thoughts on this matter. Are we now approaching a scenario similar to that of the 1970s?

Leave a comment below! Thank you, and I'll see you next time!

Relevant News:

Macroeconomy:

• RFK Jr. Drops Democratic Bid to Run for President as Independent

• Oil prices rise following Hamas attack on Israel

• US consumer price inflation rose more than expected in September

• EU launches probe into Elon Musk’s X over Israel-Hamas war content

Cryptocurrencies:

• BIS launches ‘Project Atlas’ to monitor and collect DeFi data

• The Creator Of Cardano Has Slammed Vitalik Buterin

• Israel Says Binance Helped Seize Hamas’s Crypto Wallets

• Tether's Supply on Exchanges Reaches Highest Level Since March

• JPMorgan Debuts Tokenized BlackRock Shares as Collateral with Barclays

• Trezor launches new hardware wallets and its own metal recovery seed backup

• Edward Snowden Believes Bitcoin ETFs Are Taming BTC (Bitcoin Amsterdam LIVE)

• USDR stablecoin depegs to $0.53, but team vows to provide solutions

Disclaimer:

This is a newsletter where I publish my unbiased analyses and considerations that should not be taken as advice or recommendations. I do not provide financial recommendations for buying, selling, or holding assets, and I do not promise quick wealth. You should conduct your own analysis and decision-making. I believe that knowledge is the key to the financial market, and I am committed to sharing insights that can help you see the market from different angles. If you're not already following this newsletter, consider subscribing. Every week, I share my analyses, experiences, and the most relevant news of the week. Let's investigate the fundamentals, charts, and gather the most valuable insights from the financial market!

This is issue number 05 of my newsletter! Here, I organize and share my insights on the market, technical analysis, education, experiences, reflections, and the most relevant news of the period.

Looking back...

If you missed edition 04, I presented a chart containing the monthly gains and losses history of Bitcoin since 2013.

Historically, it has been observed that October tends to be one of the best months in the asset's performance. To extract more information about this, visit my previous post by clicking here.

I've noticed that some people are either eager or skeptical about this, probably because Bitcoin rose more than 5% in the first two days of the month, revisiting the $28,000 mark and then correcting again.

What many don't pay attention to is that most of the historical gains in October are concentrated in the last 2/3 of the month.I believe this phenomenon is explained by the immediate nature of human behavior.

Contrarian intuition is the strongest and driving force in the market, so it's healthy when expectations are dissipated first, efficiently capturing the liquidity of the impatient.

Another thing that happens quite often is the hindsight bias combined with the devaluation of simple information. In other words, if we have an excellent October closing, people will look back and claim it was obvious, mentally punishing themselves for staying out.

Obviously, there are no guarantees that things will happen this way; I'm just sharing what I've observed during my experiences.

In this week's analysis, I will address:

• Bitcoin ETFs are becoming increasingly likely.

• EUR/USD is trading at a critical support.

• Gold may be indicating something very important.

Bitcoin ETFs

In August, Michael Novogratz, CEO of Galaxy Digital, during a company earnings conference call, said: "I don't think it's a consensus that we'll probably have a tradable ETF by early December. I don't think people understand how important this is. Invesco has been our partner in this, we want to win, but so does Cathie Wood, as well as BlackRock, Fidelity, and others. There are seven or eight incredible competitors, and I think we'll launch the same bet."

Novogratz's Galaxy Digital is one of the many contenders for a spot Bitcoin ETF, to which they applied again in June, in partnership with the $1.5 trillion asset manager Invesco - the fourth-largest ETF issuer in the United States.

Of course, Novogratz has once again engaged in a major speculation, as this topic has been discussed quite intensively since 2018. However, it's undeniable that some actions and rumors have gained more credibility in recent months.

Institutions are lining up for BTC/ETH spot ETFs. Over 9 major players have requested Bitcoin spot ETFs, including Blackrock, Ark, Wisdom Tree, Fidelity, Franklin Templeton, Valkyrie, and Bitwise, to name a few.

October 17, 2023, will be the second deadline for an SEC mention regarding the applications from VanEck, Wisdomtree, and Fidelity.

What to Keep an Eye On?

• The lack of regulatory clarity is one of the aspects that deter many key players from the cryptocurrency market. Therefore, the approval of a Bitcoin ETF will be a significant step toward overcoming this barrier.

• The year 2024 is approaching, and there will be a presidential election in the United States, along with the Bitcoin halving.

• An election year can be quite volatile. The market recognizes that during election periods, the incumbent president aims for re-election, making it a year more prone to fiscal irresponsibilities to achieve this goal.

• Based on this, the market may be pricing in interest rate cuts over this period. Keep in mind that the market seeks to discount the future.

• Other stimuli such as debt repurchases may occur. China and other countries are no longer buying American debt securities, and it's becoming increasingly challenging for banks that are in deficit. Due to the dynamics of the current financial system:

  • As interest rates rise, long-term bonds held by banks that the Federal Reserve "forced" them to buy in the past to finance the growing and unsustainable U.S. debt end up losing value.

  • This forces the banks to sell to cover the guarantees with their creditors/customers, further contributing to the devaluation of the bonds, and a domino effect occurs.

  • The situation accelerates when withdrawals begin, exposing banks that are insolvent or close to it, forcing them to liquidate securities or declare bankruptcy.

  • The market responds with significant systemic drops, and the global collapse follows, requiring immediate intervention from the Fed with stimuli once again (buying back debt, printing 'Brrrrr,' etc.) to prevent it from reaching this point and to keep the financial system afloat, which resembles more of a 'Weekend at Bernie's' scenario:

    

• Watch the movie: https://www.gekkowallstreet.com/2023/10/weekend-at-bernies-online-download.html

• If the first ETF is approved, the others will probably also be for legal reasons.

• There is evidence that the halving no longer has the impact on the price of Bitcoin it once did, but its psychological effect is still quite strong.

• The combination of all these events could bring more publicity to the market and strongly affect the supply and demand relationship, in other words, the price.

Other observations

EUR/USD

• Currently, the EUR/USD parity is trading at a very important support level.

• In this chart, an appreciation means that the dollar is getting weaker relative to the euro.

• If this crucial support is lost, the trend would be for the euro to become stronger than the dollar.

• The ideal scenario for increased liquidity in risk markets is for the support to hold, as today, dollar appreciation would mean global risk protection.

• Therefore, it's important to analyze this parity to understand the movements of the Dollar Index (DXY) and its potential implications for equities.

GOLD

• Gold has been on a downtrend since May 2023. Currently, it's also trading at a significant support level.

• As a store of value, an increase in the value of gold can indicate that the environment is becoming riskier.

• In theory, holding the support or breaking it can signify an intensifying risk appetite.

• Gold can also serve as a crucial liquidity indicator for the markets.

Final Thoughts:

The market's decision-making turning points are becoming more pronounced. October is still in its early stages and could mark the resurgence of the Bitcoin journey.

The end of the year promises to be exciting, and 2024 is approaching with high expectations. Keep following my newsletter to receive the best insights and stay updated.

Relevant News:

Macroeconomy:

• US Supreme Court rebuffs lawyers punished after 'woeful' suit backing Trump

• The Pentagon warns Congress it is running low on money to replace weapons sent to Ukraine

• Oil prices fall, defying suggestions of a $100 barrel

• 10-year Treasury yield hits 4.80%, a 16-year high

• Kevin McCarthy removed as House speaker in historic vote: Highlights

Cryptocurrencies:

• Lawsuit accuses Binance and CEO of unfairly triggering collapse of competitor FTX

• Honda Races To Grab Consumers With Crypto Payment Expansion

• Bitcoin Reserve on Central Crypto Exchanges Hits 5-Year Low!

• Friend.tech SIM-swap scourge continues as scammer nets $385K in Ether

• Solana's TVL Surges to Highest Level Since the Start of 2023

• Polygon Co-Founder Jaynti Kanani Steps Down

• Judge rejects SEC’s motion to file an appeal against Ripple ruling

• Tokenized U.S. Treasuries Arrive on Coinbase’s Base with Backed’s RWA Token Issuance

• THORSwap Pauses Platform After Series of FTX Hack-Linked Trades

• Binance Announces The Launch of Its Social Platform to Create A More Inclusive Community For Crypto Enthusiasts

Disclaimer:

This is a newsletter where I publish my unbiased analyses and considerations that should not be taken as advice or recommendations. I do not provide financial recommendations for buying, selling, or holding assets, and I do not promise quick wealth. You should conduct your own analysis and decision-making. I believe that knowledge is the key to the financial market, and I am committed to sharing insights that can help you see the market from different angles. If you're not already following this newsletter, consider subscribing. Every week, I share my analyses, experiences, and the most relevant news of the week. Let's investigate the fundamentals, charts, and gather the most valuable insights from the financial market!

This is issue number 04 of my newsletter! Here, I organize and share my insights on the market, technical analysis, education, experiences, reflections, and the most relevant news of the period.

I really enjoy it when I make discoveries that have the power to immediately change my life. Becoming aware of something revolutionary is one of the most intense pleasures there are.

For example, have you ever heard of the hero's journey? If not, today's reflection is one of those where you enter as one person and come out as another at the end. So, it's at your own risk to continue this story here with me.

Having properly assessed the risks, let's begin!

The hero's journey, also known as the monomyth or the "hero of a thousand faces," is a narrative concept developed by the mythologist and writer Joseph Campbell in his book "The Hero with a Thousand Faces," published in 1949.

This structure is widely used as a foundation in literary and cinematic works. The scheme is divided into three parts as follows:

1. Departure: The hero (protagonist) aspires to begin their journey.

2. Initiation: The development of the hero's journey, their adventures, and discoveries along the path they tread.

3. Return: The narrative's moment (or script) where the hero returns to the starting point with the powers and knowledge they gained on their journey.

This concept describes a recurring pattern in many mythological, religious, and literary stories worldwide, describing the transformational journey of a hero throughout their adventure.

Throughout our lives, we will receive various calls. One of them is Bitcoin and the cryptographic world, which have many similarities to the hero's journey.

This structure consists of stages that may vary in details from one story to another, but generally include the following main elements:

Relate your story to Bitcoin and the hero's journey:

You begin in the ordinary world, and at some point, you receive the call to adventure, which originates from a sense of purpose, problem, curiosity, or other factors. At this stage, various objections arise that push you away from it. Nevertheless, the call still persists within you.

One day, someone unexpectedly appears and teaches you various things about the subject, which in your perception makes perfect sense. This character is then seen as a mentor who awakens in you the need to accept the call.

In the next phase, the crossing of the threshold occurs. It's the moment when you leave the familiar behind and head into the unknown, the break from ordinary life and the definitive embarkation on the adventure.

There's no turning back; the feeling indicates that you must go all the way. You are now the hero of the story!

The journey isn't easy; tests, allies, and enemies emerge. The hero is exposed to situations where his strength is put to the test, stripped of all his vanities and certainties built by his ego.

All the skills acquired in his life are of no use ahead; he must rediscover his abilities and regain self-confidence.

As daunting as this journey may be, the moment the hero crosses the threshold and aligns his will with his calling, destiny and luck land upon him. The right circumstances and lessons aid the hero when he needs them most.

No hero's journey is solitary. People who have walked the same path appear. It's time to trust, open up, share your mission, and stay attentive to the signs because destiny's hand is by the hero's side.

At some point in this phase, the hero realizes that all the strength he needs lies dormant within him. He must delve deep and reclaim that power, whose symbol represents his virtues and the most meaningful things in his life.

Finally, the time comes to confront the core of the problem, the big enemy or hidden force. To the hero's astonishment, the villain knows everything about him, knows the dark details of his life and emotions, using it to weaken him.

The hero must confront repressed realities he hasn't yet learned to deal with. The truth hurts, but it also sets him free. He must be reborn even stronger and overcome all obstacles that now seem smaller than before.

In the end, the hero wins the final battle, passes the ultimate test, and, consequently, receives a great reward, preparing to return to the starting point, ordinary life.

However, the hero is no longer the same person. He knows both worlds, unraveled their mysteries, and won his battles. Now, he returns triumphant to change the simple life he led in the past.

Upon returning to everyday life, when he least expects it, a new call for a greater and more grand adventure arises. The hero then realizes that the previous adventure was just a step on the ladder, a preparation for an even greater purpose.

This is the life of a hero, with which many cryptocurrency investors can identify.

In today's newsletter, I will cover:

• Bitcoin statistics for the month of October.

• In-depth analysis of the total market capitalization chart of altcoins.

• The significance of understanding Bitcoin's movement as a cyclical journey.

• The most relevant news of the week.

Bitcoin

• In the table below, since the year 2013, Bitcoin has shown a negative trend in the month of September. However, in 2023, this phenomenon was different, with an increase of 3.99% in its value.

• Conversely, October tends to be one of the best months of the year; in the last 10 years, eight of them were positive.

• In 2015 (+2.52%) and 2016 (+5.94%), were the only years when Bitcoin had a positive trend in September. On both of these occasions, Bitcoin also achieved excellent returns in October and the following months, closing the year with incredible highs.

• In the 1st edition, I highlighted that the historical seasonality of October, November, and December, both in the traditional market and in Bitcoin, could be gearing up for promising returns ahead.

• Therefore, it's important to keep an eye out for a potential continuation of the upward trend in the asset. Only time will tell whether this will happen or not.

• If new highs are reached in 2023, it might be an indication of a change in phase in its "investor hero's journey."

• It's important to emphasize that Bitcoin likely won't follow the same pattern as from 2013 to 2017. What matters to us is the direction.

• To learn more, check out this October statistics post on my website: https://www.gekkowallstreet.com/2023/10/bitcoin-earnings-history-in-october.html

To better understand my perspective, you should visit previous posts and continue following them in sequence. Subscribe to stay updated.

Bitcoin ETFs

The deadlines for approvals or rejections of Bitcoin ETF applications are once again approaching for the SEC, as per the calendar published by Bloomberg on August 28, 2023.

In the next issue, I’ll discuss ETFs. Stay tuned for the journey.

Relevant News:

Macroeconomy:

• China: Billionaire Chairman of Evergrande Arrested

• ChatGPT can now browse the internet, no longer limited to info from 2021

• 300 million jobs could be affected by latest wave of AI, says Goldman Sachs

• US inflation outlook brightens as underlying price pressures subside

• Janet Yellen Says Government Shutdown Could Bring a Recession

Cryptocurrencies:

• Federal Reserve Says Stablecoins Could Become a Source of Financial Instability

• Justin Sun launches ‘SAFU’ fund after HTX $8m hack

• Crypto influencer Ben Armstrong arrested trying to confront former business partner

• Binance's CZ Could Face Criminal Charges: WSJ

• Crypto exchange Kraken plans move into US stock trading: Report

• Gary Gensler Says Bitcoin is Not a Security, Refuses to Say It’s a Commodity

• Coinbase Secures Perpetual Futures License For Non-US Clients

• SEC delays spot Bitcoin ETF decision for BlackRock, Invesco and Bitwise

• Google Cloud is now a validator on the Polygon network

• Circle weighs in on SEC vs. Binance case, argues stablecoins are not securities

Disclaimer: This is a newsletter where I publish my unbiased analyses and thoughts that should not be taken as advice or recommendation. I do not provide financial recommendations for buying, selling, or holding assets, and I do not promise quick wealth. You should conduct your own analysis and decision-making. I believe that knowledge is the key to the financial market, and I am committed to sharing insights that may help you see the market from different angles. If you're not already following this newsletter, consider subscribing. Every week, I share my analyses, experiences, and the most relevant news of the week. Let's investigate the fundamentals, charts, and gain the most valuable insights from the financial market!

This is edition number 03 of my newsletter! Here, I organize and share my insights on the market, technical analysis, education, experiences, reflections, and the most relevant news of the period.

In this week's analysis, I will address:

• A deeper dive into the S&P500 index and some probabilities until the end of 2023.

• What the S&P500 volatility index (VIX) may be indicating in terms of risk.

• Current liquidity conditions through the analysis of the Dollar Index (DXY) and the Federal Reserve's Overnight Reverse Repurchase Agreements (RRP) account.

• Bitcoin's behavior after the FOMC meeting, which decided to keep interest rates within the range of 5.25% to 5.50%.

S&P500 Index

• In the 1st edition, I provided some seasonal statistics that highlight good odds for the S&P 500 to reach its All-Time-High (ATH) by December 2023 or at least move in that direction in the coming months.

• Historically, September is a month known for significant declines or low volatility. This time is no different, even though there are still a few days left in the month.

• If the most optimistic scenario unfolds, it is expected that the index will find support between the green region and the bottom of the long-term uptrend channel in blue.

• After consolidating, a bullish resurgence could occur in the aggregate for the last 3 months of the year, heading towards the white line (historical peak).

• In this analysis I posted on TradingView on August 29th, you can get a better view and understand how this bearish structure has evolved since then: https://www.tradingview.com/chart/SPX/nadGqxcW-S-P500-in-the-short-term-is-bearish/

VIX MONTHLY

• VIX is the ticker symbol and popular name for the CBOE Volatility Index of the Chicago Board Options Exchange, which measures the expectation of market volatility based on S&P 500 index options. It's calculated and real-time disclosed by the CBOE and is often referred to as the "fear index" or "fear gauge."

• The highest spikes in volatility occur during periods of significant financial market stress. For instance, observe how VIX behaved at the beginning of 2020 during the COVID-19 health crisis.

• Between March and April of 2023, there was a break in the uptrend line that had been intact since 2018. In recent months, the index seems to be attempting a return to this trend line.

• If this return occurs, the most optimistic scenario would be a rejection at this level to keep VIX in a sideways or downward trend.

Dollar Index (DXY)

• The DXY is one of the most important indicators of liquidity, as the US dollar is the most widely used commercial currency.

• When economic uncertainty rises, people sell risky assets and turn primarily to the dollar as a safe asset.

• Between the middle of 2021 and most of 2022, the momentum from the bottom to the top of the long-term channel clearly illustrated this risk aversion dynamic.

• From then on, a decline began, and liquidity started flowing back into the market.

• Apparently, the index reached a turning point at (B). Currently, there are many people expecting the index to continue rising, which would harm risk assets like stocks and cryptocurrencies.

• This negativity could be one of the significant factors for the downward trend in the index to intensify.

• Therefore, one of the scenarios I am keeping an eye on is the one in the image below, of a hypothetical ABC correction. The focus should be on the direction of the movement and not on targets or timelines.

  

Overnight Reverse Repurchase Agreements (RRP)

• Also known as "reverse repo," RRPs remove reserves from the system. Banks lend money to the Fed and receive securities as collateral for the loan, plus interest. If the Federal Funds Rate (the target range for the interest rate set by the Fed) falls too low, banks can use RRP to get a better rate for their money.

• From June 2022 to the present, we can observe that there has been a withdrawal from the Fed's account. Nearly 1 trillion dollars have returned to the system during this period.

Bitcoin

• In this scenario, Bitcoin continues its consolidation, awaiting a stronger signal of risk appetite, primarily coming from the American indices.

• It's important to emphasize that Bitcoin probably won't follow the same pattern as from 2013 to 2017.

• Don't count on it. What matters to us is the direction. There are many other tools that are more efficient at identifying the stages of a bull cycle than fractals. Keep following my newsletter regularly so you don't miss any of them.

Final Thoughts:

Certainly, the market is at a crucial juncture. In recent months, overnight Reverse Repurchase Operations (RRP) withdrawals may be significantly contributing to the recovery of the traditional market.

It's important to note that this relationship isn't directly proportional, as there is a delay between the withdrawals and the impact on the S&P500 index, among others.

Looking ahead to the next few weeks, if these RRP withdrawals continue and the dollar index also faces resistance around the 106,000 points mark, the probability of an uptrend in risk assets will increase.

Therefore, the prospect of a scenario with increased liquidity and risk appetite would become more reasonable for the last quarter of the year. However, it's crucial to keep an eye on the monthly closing of the S&P500 to respond to adverse scenarios.

This is my analysis for today.

Be sure to subscribe to receive the upcoming edition number 04 soon.

Some topics I will address include:

• Another round of analysis on Bitcoin ETF applications coming up, according to the SEC.

• Bitcoin and historical statistics to watch for the rest of the year.

• An expanded view on the total market capitalization of altcoins.

• Investor sentiment analysis.

Relevant News:

Macro Economy:

• Joe Biden addresses UN on international AI regulation: ‘It’s going to take all of us’

• ChatGPT can now speak, listen and see images

• S&P 500, Nasdaq notch biggest weekly losses since March

• Dollar hits 10-month high as US yields spike, yen recovers from dip

Cryptocurrencies:

• TON Foundation Partners Chainbase and Tencent Cloud to Foster Blockchain Development in Asia-Pacific

• Terra Classic community elects to cease USTC minting

• MicroStrategy buys $147M worth of Bitcoin, now holds 158K BTC

• Bitcoin Recognized as a Digital Currency in Shanghai

• Huobi Global hacked for $7.9M: Report

• Bitcoin held by Coinbase rivals Satoshi Nakamoto’s in size

• Mixin Network hack drains $200M from mainnet assets

Disclaimer: This is a newsletter where I publish my unbiased analyses and thoughts that should not be taken as advice or recommendation. I do not provide financial recommendations for buying, selling, or holding assets, and I do not promise quick wealth. You should conduct your own analysis and decision-making. I believe that knowledge is the key to the financial market, and I am committed to sharing insights that may help you see the market from different angles. If you're not already following this newsletter, consider subscribing. Every week, I share my analyses, experiences, and the most relevant news of the week. Let's investigate the fundamentals, charts, and gain the most valuable insights from the financial market!

This is issue number 02 of my newsletter! This is where I organize and share my insights on the market, technical analysis, education, experiences, reflections, and the most relevant news of the period.

Reflection

One thing that always catches my attention: how people get apprehensive as the Federal Open Market Committee (FOMC) meeting of the Federal Reserve (Fed) approaches. Obviously, it's understandable, as we are in a restrictive scenario where the fastest interest rate hikes in the United States economy have occurred.

On the last Wednesday, September 20, 2023, the FOMC officially chose to pause interest rate hikes for the second consecutive meeting. As a result, the rate remains in the range of 5.25% to 5.50%. In edition 01, I reported that the market was already pricing in the continuation of the pause at around a 95% probability.

One of the main points I want to highlight in this edition is exactly one of the biases of human behavior that I feel has hindered me for a long time: The bias of thinking that you're wrong or that someone is deceiving you.

This type of behavior is quite common in the thoughts of those who don't exactly understand what they're dealing with, especially in individuals with a median IQ (Intelligence Quotient), which represents the largest portion of the world's population, and I include myself in this group.

If you've been dealing with cryptocurrencies for a longer time and tend to be an active user on Twitter, you've probably already come across this meme:

It may sound like a joke, but what I'm about to explain to you about this can change your perception of the market and some aspects of everyday life forever.

To continue, I need you to focus on three key points of this chart:

1 - The central character represents the level of 68% of people with an average IQ;

2 - The character on the left represents a lower percentage with low IQ;

3 - The character on the right represents a percentage equal to that of the left, or vice versa, but with a high IQ.

Relating this data to an investment decision, we can assess that the most likely scenarios would be:

• 68% of individuals would gather various information but become extremely indecisive to the point of not making any decision. What they fail to realize is that the act of not making a decision is already a decision in itself.

• Right-leaning individuals with higher IQs would naturally possess the ability to make more logical and rational decisions, free from emotional influences from their surroundings.

• Surprisingly, left-leaning individuals with lower IQs would make decisions similar to those on the right, who are more intelligence-endowed.

The bias of believing that you are wrong or that someone is deceiving you causes most people to value excessive complexity. For them, it is unacceptable for something to be a bit simpler. See the example I've constructed below:

Most likely, if you had the opportunity to ask these people directly why they believed that the rates would have to increase by another 0.50%, they wouldn't be able to provide a well-founded answer, or perhaps, not even know what to argue.

Meanwhile, the market itself, through the CME FedWatch Tool, which is the most well-known in sentiment analysis in this regard, was already indicating that the highest probability would be a pause.

Of course, there is always the reverse possibility, but we are discussing statistics and probabilities here. In only one instance throughout the timeline of the monetary tightening that began on March 16, 2022, did the CME FedWatch probabilities remain correct until days before the FOMC decision.

Only on June 15, 2022, was there a difference, a day when rates increased by 0.25% more than expected, as you can see in the table below:

Fed Interest Rate Decision - Investing.com

My goal was not to assert that CME FedWatch is an infallible tool, but to demonstrate that within the parameters I mentioned, historical data is better reflecting reality than anything else. In other words, simple information that many are overlooking, meeting after meeting of the FOMC.

The truth is that market manipulation does happen all the time. However, we have no control over it. It's essential to learn to focus on things that are truly controllable, which is yourself. To mitigate the negative effects of this, we need to be capable of gathering quality insights from various angles.

If the majority of them are pointing in the same direction, it might be best to believe in this perspective, even if you think you might be wrong.

If your homework has been done, there's no reason for regrets. Any future mistakes should be seen as learning and improvement for the next opportunity to refine your method.

In the future, I'll talk more about this. You can get ahead and take a look at this post on my website where I mentioned the 6 essential steps for a successful investment journey: https://www.gekkowallstreet.com/2023/09/navigating-with-confidence-6-essential.html.

Becoming capable of making confident decisions on your own is not an easy task. It will require a lot of study and practice; it's the only way to learn.

You will make mistakes along this journey, so it's crucial to have good risk management to survive in the market. Your biggest challenge will be learning to assess what constitutes quality insights, as the reality of the system we live in is deceptive.

A concept I carry with me is that the reality I perceive will never be exactly as it truly is. My goal is to try to get closer to this reality through my experience and the people I've learned to trust.

The right path leaves traces; it might be like closing your eyes and trying to follow a distant sound. You can sense where the sound is likely coming from and determine the direction you need to walk towards. If you've mapped the region, you'll have listed with you the dangers or shortcuts you might encounter along the way.

Now, do a quick exercise. Overlay this IQ chart and recall the decisions and indecisions you've had in the financial market or in your life. After reflection, leave a comment at the end with your conclusion; I'd like to know.

Be sure to subscribe to receive the upcoming issue number 03 next week.

Here are the topics I will cover:

• A deeper dive into the S&P500 index and some probabilities through the end of 2023.

• What the S&P500 Volatility Index (VIX) might be indicating regarding risk.

• Current liquidity conditions through analysis of the Dollar Index (DXY) and the Fed's Overnight Reverse Repurchase Agreements (RRP) account.

• Bitcoin's behavior after the FOMC meeting, which decided to keep interest rates in the range of 5.25% to 5.50%.

Subscribe now

Relevant News

Macro Economy:

• Federal Reserve Pauses Interest Rate Hikes

• House Committee Passes Bill to Ban FED from Creating a CBDC

• US Democrats speak up for CBDC global leadership, Republicans fear ‘dark side’

• First Human Patient to be Implanted with Neuralink Brain Chip

Cryptocurrencies:

• Citigroup Launches Digital Token and Private Blockchain System

• SEC Fails to Win Immediate Inspection of Binance US Software

• Hong Kong to tighten crypto regulation in wake of JPEX fraud case

• Japan’s Largest Investment Bank Nomura Launches Bitcoin Adoption Fund

• Toncoin Enters Top 10 Cryptocurrencies Following Telegram Crypto Wallet Launch

• Infamously Hacked Crypto Exchange Mt. Gox Delays Repayment Deadline by a Year

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Disclaimer: This is a newsletter, and I want to emphasize that I do not provide financial buying or selling recommendations, and I do not promise quick wealth. You should conduct your own analysis and decision-making. I believe that knowledge is the key to the financial market, and I am committed to sharing insights that can assist you on this journey. If you're not already following this newsletter, please consider subscribing. Every week, I share my analyses, experiences, and also the most relevant news of the week. Let's delve into the fundamentals, charts, and obtain the most valuable insights from the financial market!

This is issue number 01 of my newsletter! This is where I organize and share my insights on the market, technical analysis, education, experiences, reflections, and the most relevant news of the period.

Reflection

One of the great advantages of dedicating yourself full-time to the market is the availability to be actively or passively monitoring the changes in this space every day.

I remember as if it were yesterday how euphoric the cryptocurrency market was on April 14, 2021. For me, it was notably a day distinct from the previous ones because at that moment, Coinbase was going public on the American stock market.

The feeling I had on that day was exactly this: "This is too good to be true!" It's such a comfortable atmosphere that it really becomes difficult to believe in any scenario other than a continued rise and that good feeling.

You start to feel like you're halfway there, not at the end; this thing is reaching a new level. Memories of the previous cycle lead you to reinforce that this is exactly what is happening. In 2017, we had a bull market at the beginning of the year and another one at the end. The year 2021 seemed to be following the same protocol.

From April to July 2021, Bitcoin corrected by more than 56% and then began a retracement until it reached $69,000 in November of that year. During this new phase, the environment didn't seem to have the same fundamentals; the speculation around NFTs, meme coins, and other riskier assets were evidence of that. Capital wasn't flowing systematically; it was something concentrated and dysfunctional.

However, Bitcoin's move to a new all-time high seemed to endorse and make sense of that thing. Time today shows us once again that comfort and recency bias (the tendency for individuals to give more weight to recent events or information while disregarding older or historical information) are among the most dangerous elements in this space.

In this week's analysis, I will address:

1. Some straightforward technical concepts in the Bitcoin chart, which are unknown to a significant portion of the cryptocurrency market participants.

2. How people's psychology still remains anchored in pessimistic narratives and inaccurate assessments.

3. Oil continues to rise, and the Consumer Price Index (CPI), the primary inflation indicator in the USA, is on the rise again.

4. Over 95% of the market prices in a pause in the FED meeting on September 20th.

Bitcoin

• Bitcoin seems to be on the verge of completing its bullish market's impulsive wave 1 consolidation, after an extensive bear market that extended from April 2021 to December 2022 (about 630 days).

• This technical pattern still confuses many. An expanded irregular correction tests supply with a higher high (B) and then retraces in 5 waves (C).

• This is one of the reasons why many traders are still calling for a drop to $12,000, believing that the real peak of Bitcoin was at (B), assuming the bear cycle hasn't concluded.

• The $12,000 crew is also heavily biased towards recency, comparing the current period to 2019/2020 (COVID-19 crash), expecting a similar movement. Much of this negativity stems from the hypothesis of a recession in the United States.

• The truth is that the current cycle is much more similar to the period from 2013 to 2017. Right now, Bitcoin is consolidating support in the green box, which may or may not hold.

• The historical seasonality of October, November, and December, both in the traditional market and in Bitcoin, may be setting up for good returns. It's no surprise that September is the worst month for risk markets, whether marked by significant drops or low volatility. You can check out my links below for more information:

  • https://www.gekkowallstreet.com/2023/09/s-500-from-may-2023-to-may-2024-gains.html.

  • https://www.gekkowallstreet.com/2023/09/new-highs-in-s-500-seem-inevitable.html.

• It's important to emphasize that Bitcoin will likely not follow the same pattern as it did from 2013 to 2017. Don't rely on that. What matters to us is the direction. There are many other tools that are more efficient at identifying the stages of a bull cycle than fractals. Keep following our newsletter regularly so you don't miss any of them.

Inflation

On March 16, 2022, the Federal Reserve (FED) began its schedule of interest rate hikes to curb inflation, raising its rate for the last time by 0.25 percentage points in July 2023. After a pause in June, it maintained a range between 5.25-5.5%, the highest level in 22 years.

The Consumer Price Index (CPI), used as the primary inflation indicator in the United States, regained strength in August, accelerating compared to the previous month. In the release on September 13, the CPI increased by 0.6% on a monthly basis (MoM) and rose by 3.7% on an annual basis (YoY) — in line with market estimates of 0.6% and 3.6%, respectively.

Source: Investing.com - Monthly CPI (MoM)

Oil

The fluctuation in oil prices is one of the key factors affecting inflation data. On Friday, September 15th, Brent crude oil closed the week at $93.70 per barrel, reaching the highest levels seen in 2023.

Fed Interest Rate

Even with these considered poor data, the market is pricing in a 98% chance of a pause in the Federal Reserve's FEDFUNDS (benchmark interest rates) hike on September 20th.

Source: CME FedWatch - September 16, 2023

Final thoughts:

Tops and bottoms are always marked by extremes. As I briefly illustrated in the introduction, extreme optimism marked the peak of Bitcoin in April 2021. We found the same extreme and opposite sentiment in the $15,000 region after the crash justified by the FTX exchange fraud.

It's essential to understand that the movements of an asset occur through reactionary forces. In a moment like the last few months of 2022, where Bitcoin was already significantly undervalued, the buying demand was able to surpass the selling supply, initiating a trend reversal.

Analyzing rationally, it didn't make sense to sell Bitcoin during this period. The fundamentals of Bitcoin haven't changed, and the asset's development has never been contingent on the FTX case on November 8, 2022. Even though centralized exchanges have become important players in the ecosystem, the fact is that they are not essential and, in reality, go against the fundamental principles of Bitcoin's decentralization.

Those who were able to set aside fear bought Bitcoin cheaply and with reinforced fundamentals because the failure of FTX further highlighted its necessity.

Therefore, wave I is the result of absorbing a significant capital management inefficiency. The notable features of this wave are the maintenance of an atmosphere of apprehension and disbelief in the trend's continuity. The recent trauma from before still lingers in the emotions of many.

Finally, the market is maintaining some optimism that additional increases in the FEDFUNDS may not be necessary until the last meeting of the year on December 13, 2023. As of now, the probabilities for maintaining a pause until that date are a little over 60%. However, it's necessary to emphasize that the economy is quite dynamic, and new data will be released by then, potentially completely altering the market's interpretation.

Despite the uncertainties, there are good signs that we may be on the verge of starting a new phase in this market, and I confess I am eager to share everything with you. If you enjoyed my first edition, you can't imagine what I'm preparing for the next one.

Don't forget to subscribe to follow me on this journey.

Thank you!

Relevant News

Macro Economy:

• CPI: U.S. Annual Inflation Accelerates to 3.7% in August.

• Oil just hit its highest level of the year.

• Over 95% of the market is pricing in a Fed pause on September 20th.

Cryptocurrencies:

• FTX obtains judicial approval to liquidate $3.4 billion in crypto assets.

• Coinbase confirms CEO Brian Armstrong: Coinbase will integrate the Lightning Network.

• Huobi Exchange changes its name to HTX.

• Two more top executives depart from Binance.US amidst SEC actions and layoffs.

• Miners using clean energy for Bitcoin now exceed 50%.

• Polygon releases proposals for the 2.0 upgrade and new POL token.

• Optimism-powered BNB Smart Chain, opBNB, goes live on the mainnet.

• Telegram integrates the TON cryptocurrency wallet, and the token price rises by 7%.

Disclaimer: This is a newsletter, and I want to emphasize that I do not provide financial buying or selling recommendations, and I do not promise quick wealth. You should conduct your own analysis and decision-making. I believe that knowledge is the key to the financial market, and I am committed to sharing insights that can assist you on this journey. If you're not already following this newsletter, please consider subscribing. Every week, I share my analyses, experiences, and also the most relevant news of the week. Let's delve into the fundamentals, charts, and obtain the most valuable insights from the financial market!

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