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In July 2021 the S&P Cryptocurrency Broad Digital Market (BDM) Index (Ticker: SPCBDM) launched with the objective of being a broad investable digital asset universe benchmark. The index launched on July 13th, 2021, and has a 10-year history based on the index methodology on the launch date.
Courtesy of S&P Dow Jones Indices, spglobal.com
The index had a notable peak in May 2021 of 5,547 and then dropped significantly until July 2021. On November 9th, it set a new high of 6,215.99 and was sliding down to November 2022 with new lows at 1,331.38. In December 2022, the market failed to fail further and during February 2023 there was a minor retest followed by higher highs. The March 2023 dip was met by buyers.
You can see the recent price action below in the YTD chart. The index rejected lower prices on March 9th, 2023 and has continued to move higher. The red levels are natural places to take partial profits. Let’s see if anyone sells into strength here or if price is accepted higher.
Courtesy of S&P Dow Jones Indices, spglobal.com
Market Summary
a) Market Type
Bitcoin (BTC) hit a new all-time high of $68,789.63 on November 10th, 2021, but has had a sharp downturn all the way down to $15,555 on November 9th, 2022.
We spent the last month with a “Strong Bull Normal” SQN reading. What does this mean? Statistically consistent and persistent BTC buying.
Note how volatility drifted to the lower end of “normal” during the last month.
So far, 2023 has provided stellar performance, with BTC up 80.9%. ETH has caught up with BTC in the most recent month, further suggesting “risk on” in crypto.
Courtesy of Coin360.com
b) Super Trader Bitcoin System
The objective of the system is to outperform a bitcoin buy-to-hold while sleeping easy.
The system entered a new long position on March 16th, 2023, at $24,829 with an initial stop at $20,187. The current trailing stop is $27,140 locking in a 0.5R gain.
The $30k resistance level was reached on April 11th, 2023. The next level of interest, if BTC doesn’t roll over here, is $34,600.
Does your trading plan include a “pay the man” step at reasonably objectives?
Courtesy of TradingView.com
c) Discussion: Central Badger Digital Currencies (CBDC)
The animal I most admire in the world is the Honey Badger. Why? Honey badgers are the pinnacle of anti-fragility. (Photo courtesy of Reddit)
Despite their name, they are closer to a Wolverine, crossed with a rattlesnake, than a badger. In my hometown, they are called “Ratels” because when you corner a Honey Badger by accident it makes a ferocious high pitch rattling sound. Cue: exit stage left.
They are also the reason why I am not a bee farmer at the moment. Unsurprisingly, the Honey Badger loves honey and disregards any artificial restrictions imposed on the hives.
The Honey Badgers love honey so much they have a full-time honey detection system working tirelessly with them—a bird called the Honeyguide.
The partnership agreement reads as follows:
I, Honeyguide, do undertake pointing out the maximum amount of beehives within the immediate 20 square mile radius in exchange for a bee larvae buffet.
I, Honey Badger, do undertake to inflict maximum damage on the aforementioned beehives and on anything/anyone intending to obstruct the pursuit of honey.
The Honey Badger doesn’t operate in isolation though. He meets and greets foes of varying sizes and ferocity during his pursuit of honey.
Its scorecard is very impressive:
Death from highly poisonous snake bites: Never, sleep it off.
Death via a high volume of bee stings: Never, shake it off.
Death via attack by much larger predators, including lions and pythons: Rarely, walk it off.
What makes the Honey Badger so tough?
The belief of animals in general is that thick skin makes you tough.
The Honey Badger shows us how to perfect this formula. It possesses a thick rubbery skin (thicker than buffalo skin!) worn extremely oversized. When the king of the jungle thinks he’s got the badger by the scruff of his neck, the badger simply slips its body to the other side of his oversized skin and avoids any serious injury to vital organs. Then, it turns a dance of death into an unexpected counterattack.
This annoying ability to wriggle and jiggle, combined with a list-topping bite force, makes Honey Badgers a low-priority lunch for experienced predators.
The Honey Badger Holy Grail for a long life = 1x thick skin loosely fitting + 1x ferocious bite.
Central Badger Digital Currencies (CBDC)
Now, you may or may not have noticed but Badger HQ intends to mess around with the formula which has kept Honey Badgers safe from the beginning of time.
The Central Badger is proposing a new formula: Thin Tights + No Teeth.
Thin Tights
The Central Badger proposes to measure everything – and I mean absolutely everything – that all the little badgers do in public and in private, by changing the currency of honey to digital honey.
Digital honey doesn’t get your paws sticky and your face messy or provide you with any life-enhancing enzymes but it does look wonderful!
The Central Badger, who now knows the exact body dimensions for every little honey badger, will do away with traditional oversized thick skins. Instead, it will provide the thinnest tailor-made tights you can imagine. That old, oversized, loose-fitting skin of privacy and anonymity has been far too overrated.
The Central Badger also promises to not misuse digital honey. Rather, it will make digital honey safe for all the honey badgers and even provide additional protection. How? You ask? China’s Central Badger has been helpful in sharing that its digital honey has programming installed to run a “Social credit” system on the data.
Let’s see how that will work.
If China’s Central Badger doesn’t like what certain honey badgers do with their digital honey, it will throttle their internet. If the Central Badger decides certain young badgers are buying too many video games, it will deduct some of the family’s digital honey. If it feels some badgers are criticizing the Central Badger, it will simply deduct a digital honey penalty. If the Central Badger intensely dislikes a particular badger for whatever reason, it will simply freeze his digital honey and let nature takes its course.
Rest assured, however. Everyone everywhere will hear soothing promises in the near future. They will sound similar and go something like this: “The Central Badger of our country is different than the Central Badgers of all the other countries past and present. There’s one thing our Central Badger knows: what is best for all our honey badgers.
No Teeth
The Central Badger proposes the RESTRICT Act to keep you safe from bad honey recipes on TikTok. Because the Central Badger will be able to keep all the honey badgers safe, they will no longer require teeth for biting back.
The Central Badger proposes the RESTRICT Act to keep you safe from bad honey recipes on TikTok. Because the Central Badger will be able to keep all the honey badgers safe, they will no longer require teeth for biting back.Yes, this act gives the Central Badgers the ability to randomly block open protocols such as Ubuntu and BTC.
Yes, it limits the ability of any affected badger to challenge the actions taken.
Yes, it disallows free speech.
Yes, it could be used even if there’s no “foreign adversary”.
BUT, aren’t these a small price we are willing to let our honey badgers pay for safety and security?
Ask yourself: When have the Central Badgers ever gotten anything wrong and let you down? They will tell you: Never!
The Future:
Digital Currencies are code. Code gets programmed by coders. Code always has weaknesses and glitches. Code can be hacked.
If Central Bank Digital Currencies become the norm, all of your financial data will be known in real time to the Central Planners. The Central Planners have the power to deactivate your currency – your money – at will.
CBDC will centralize power in a way it has never ever been centralized in the history of mankind.
Let me repeat that: CBDC WILL CENTRALIZE POWER IN A WAY IT HAS NEVER EVER BEEN CENTRALIZED IN THE HISTORY OF MANKIND.
Centralized power has never led to increased rights and increased freedom.
Ask yourself: What could the Central Planners do?
What if the central planners decide that since you went to Hawaii last summer, your currency won’t be able to buy tickets this summer?
What if central planners decided that your money can’t pay for a Financial Times subscription anymore because their editors are corrupting your mind?
What if the central planners decide that, after Christmas, everyone should lose a few pounds and through a program, limit the amount of food you can buy for you and your family?
What if elections are run on manifestos promising the redistribution of funds? And as soon as the election results are confirmed, the central planners automatically implement the debits and credits of the promises?
What if the central planners decide you don’t get to buy food until you’ve received the vaccination that they were lobbied for?
What if a lobbying group convinces the central planners that every digital US dollar wallet should automatically buy one of their products or services annually?
What if Artificial Intelligence hacks the Central Bank Digital Currency?
What if another nation hacks the Central Bank Digital Currency?
What if the central planners decide absolute power would be best so they carry out a coup simply by programming political opponents out of the system?
What if introducing the Central Bank Digital Currency was the coup?
In Summary:
Centralizing anything is a sure way to make it fragile.
- Fragile things break.
- History repeats. The tools may get fancier but human nature is unchanged.
- Don’t let anyone – especially a central planner – tell you a CBDC is going to make you safer. That is anti-Honeybadgerism.
d) News Map
Context is all important and to add some context around recent news events we will focus our attention on the five main types of players and the games they play in the crypto space.
We are leaning on a key Tharp Think principle here: “The map is not the territory. The better my map represents the territory, the better I will function in the world.”
We are not trying to explain the extremely complex non-linear open crypto system but rather we are looking for a useful lens to identify what may be important changes affecting the ecosystem and, ultimately, supply and demand.
What is “useful” for a trader? Tools that help make money.
On our map the main players and games are:
The HODLers:
These are mostly retail speculators with no trading systems or buy-and-holds with no stoploss. The early adopter HODLers have done quite well and with many who are still whales today. Many whales pivoted into other categories. The late adopters haven’t fared quite so well, they may be whales but their average BTC cost is underwater. For HODLers, 1 unit of risk (1R) represents their total capital committed—it’s basically an all-in bet. HODLers have no cash flow day to day without selling/staking the holdings.
The Traders:
These are large speculators such as hedge funds as well as the systematized disciplined retail traders. Their cash flow is dependent on the gains/losses in the underlying positions on positive expectancy systems. The common denominator amongst traders is a position sizing approach to capital allocation as well as a risk to reward approach at a trading strategy level (usually a minimum of 2:1 risk reward). For this reason, private equity and venture capital is also included in the Trader category as they have definite entries and exits as well as strict position sizing rules.
Business, Big and Small:
This includes the major commercial players who design blockchain infrastructure, have already adopted blockchain or are actively in the process of integrating blockchain and its related products and opportunities into their business models. Their cash flow originates from their usual business activity. Blockchain offers operational efficiencies improving cash flow and customer experiences.
For the small business, blockchain offers the opportunity to level the playing field (or should we say “paying” field) to unlock cash flow.
The Market & Makers:
This represents the market makers, brokers & exchanges (both traditional and DeFi), banks and asset managers. Cash flow is ongoing from volume in its various shapes of trading, spreads, commissions, assets under management and even order flow payments.
The Sheriff & Co.:
This represents governments as well as any free market interventions in its various shapes, sizes and forms. The profit of all other players is their tax base and therefore cashflow plus or minus the impact of a couple of trillion, depending on the state of the printing presses.
Now that we have our main players categorized, let’s look at some noteworthy news items by category:
HODLers:
- MicroStrategy announced that between March 24th and April 4th it added 1,045 coins, at an average price of $28,016. The historical average purchase price of its 140,000 coins sits at $29,803. It’s just reached break even.
Traders:
- The ETH Shapella upgrade was completed this month. Up to this point,15% of ETH in circulation has been staked, but may now be withdrawn at a rate of 0.4% per day. Will this result in 250 days (100% / 0.4%) of ETH selling?
- Spot BTC trading volume continues to remain very low despite the run up.
- The bankruptcy filings of BlockFi and Celsius have revealed that the Himalayan Kingdom of Bhutan had some cryptocurrency positions.
Market Makers:
- The CFTC charged Binance and its founder, Changpeng Zhao, with willful evasion of Federal law and operating an illegal digital asset derivatives exchange.
- FTX is considering a reboot. Now that is snowmanship, Colonel!
- Binance lost its Australian license. G’bye mate. G’bye.
- FTX requested political parties return donations made by the firm and threatened to take legal action if the donations weren’t returned. And there I was thinking political donations were unconditional.
Business, Big and Small:
- France is rolling out the red carpet in a bid to attract coders and tech skills looking for a new home after a US crackdown. They are in competition with Hong Kong for the spoils.
- Bank of America reported an intensifying effort by BTC holders to move their holdings to personal wallets. The mere fact that a big bank is mentioning this illustrates how far crypto adoption has progressed.
The Sheriff & Co.:
- The Silk Road prosecution of Zhong has concluded. Mr. Zhong was charged with “wire fraud” after he discovered a glitch in 2012 by double-clicking on the Silk Road website. The double click led to a double withdrawal not restricted by the 0 balance in his account. Mr. Zhong created new accounts and within a couple of hours stole 50,000 BTC on the back of the glitch…worth $600k then and $1.5B today.
- The FedNow payment system is going live in July. The perks will include instant real time payments (sounds very crypto-like). Is this the groundwork for Executive Order 14067, signed in March 2022 for a US Central Bank Digital Currency?
e) Market in Pictures
The Market SQN picture has strengthened, following a minor dip last month. Overall, we see 75 coins in the bullish territory, versus 45 last month. So this is what summer feels like.
Overall Commentary
This is a free newsletter for the VTI community. It’s not about making any recommendations for what to buy or sell. Instead, it’s about understanding how money is made in cryptoassets.
Until next time,
God bless