Crypto hoodwinked by goblins
118: Preview of the upcoming week in markets
Quite the last several days in the United States and abroad. US midterms puttered on with Nevada and Arizona taking their sweet time counting votes. Dems may hold the Senate and could take the house too at this point. Bit strange the outcome given the media and other outlet’s screams for a “Red Wave”. Seems odd.
A major terror attack in Turkey kicked off Sunday morning.
The Russians appear to be relaxing.
Stocks are pumping off meager improvement on inflation.
Crypto is having a reckoning in the wake of FTX.
Anyways a little late here on the market update so threw together a quick overview of items to be up to speed on before the week starts.
Markets
Let’s start with the obvious today. Crypto was hit was a massive black swan and the market sell off that has ensued is nothing short of violent — a good deal of trust was vaporized along with billions in client funds that were being used to bet on incredibly
As the repercussions of last week’s bankruptcy and crypto market meltdown by FTX continue to play out, the details seem too absurd to be true.
Turns out we were deceived by grad A level goblins based out of there James Bond villain office in The Bahamas.
We learned of an apprentice goblin to Sam Bankman, Caroline Ellison who is apparently a 28yr old "genius" that ran the risk management at FTX + was the CEO of Alameda Research — the quantitative trading firm founded by Sam Bankman-Fried that used client funds to gamble on illiquid shitcoins.
The team apparently engaged in orgies and stimulant fueled ragers in the office and in nearby homes the employees owned.
In a circulating video below she talks about how having stop losses is bad risk management. Her and Sam were former traders at Jane Street before moving to FTX.
Truly deranged stuff and ludicrous that this was the person responsible for everyone’s money.
Now look - we know this time is painful for people involved in the space, especially those that bought a bit too late but the good news is these events ideally burn down the existing infrastructure so new improved versions can come to be. Like a forest fire clearing the soil to make way for new life.
We never recommended anybody utilize 3AC, Voyager, Celsius, FTX, or other centralized ponzis during the last several years. We stick to the basics and unfortunately for many new investors to crypto this cycle, they got caught up in the noise and scams.
Last week we talked about our thoughts on the current landscape of crypto given this massive event. In short it will likely set back adoption in the short term. We still believe core holdings like Bitcoin, Ethereum, Chainlink, Polygon, etc. will end up being excellent investments in the coming years.
Bottom line is many investors, traders, and retail degens who got involved in crypto needed to have a longer term viewpoint and some perspective.
Many tried to day trade their profits and lost it all or got caught up in a centralized exchange or lending scheme that were effectively just digital ponzi schemes.
This long term viewpoint got lost on many in the stimulus and money printer fueled bull run we just saw as evidenced by the ponzis, NFT vapor (some elements will remain), scams, leverage blow ups, and more negative events. People got way too greedy way too fast and wanted everything immediately and overnight.
We can say one thing that always rings true for crypto:
Long term holders will be rewarded — that’s my advice coming into my second bear market (this one eve more powerful with current blow ups).
Couple of our recommended follows during the bear market and potential recession. These are accounts that we know are in tune with markets, macro, and their given areas of expertise — they’ll be well positioned to give clues to what could happen next in markets, crypto, and some of the political implications of what’s transpired.
Also included some media and material links.
Highly recommend:
Read The Bitcoin Standard
Follow Pentoshi, Cobie, and BowTiedBull
Read the Bitcoin White Paper again
Follow more people in the space on social media
If you disagree with us and think crypto is dead we’d love to hear more on your thoughts in the comments.
We’d be remiss not to mention some of the super odd “coincidences” that surround the blow up of FTX including the fact the WEF shilled it.
There are more and more theories surfacing by the hour about what actually happened and some go down the conspiracy rabbit hole, although with the facts and evidence leaking I can’t say any of this sounds that crazy.
With everything sketch going on in politics and global affairs it wouldn’t surprise me if the FTX blow up was some large rabbit hole of Fed activity and dark financial ops.
For starters — SBF was a huge Democratic donor — #2 total to be exact coming in right after George Soros. He had many visits to the White House and to Capitol Hill and was even chummy with SEC chair Gary Gensler and other top politicians.
There are now theories surfacing that FTX was simply an international front to launder money to Ukraine and for the Democrats.
Doesn’t really seem that far fetched to be honest.
Other details have emerged from the Bahamas of a former billionaire trader who apparently posted a cryptic warning on twitter before being found washed up on a beach.
Did he know about this impending blow up?
Epstein involved?
Weird stuff going on in the Caribbean.
Could this have been a money laundering scheme gone bad + push to get regulations in place/ or push a CBDC narrative?
Who knows — definitely possible imho based on who was involved. Such a massive and catastrophic event should certainly be analyzed closely in the weeks to come.
FTX had also partnered with Ukraine to process donations to war efforts within days of when Joe Biden started pledging billions of American taxpayer dollars to the country. Food for thought.
Effectively thousands of people just got bankrupted instantly.
And it gets more ludicrous — FTX got a higher ESG score on “Leadership & Governance” than Exxon Mobil.
ESG is law though.
Other market updates include:
Coinbase (COIN) has laid off another 60 employees amid the ongoing downturn for the industry.
Mark Zuckerberg of META released a strange video after firing 11,000 workers last week saying — “I want to say, upfront, that I take full responsibility."
FTX faces several formal criminal misconduct probe by Bahamas authorities, according to Bloomberg.
The Hong Kong-based crypto exchange AAX - has announced it has suspended all operations for at least seven days, due to "system upgrades"
CEO of Crypto.com Kris Marszalek acknowledged this past week that his exchange accidentally sent 320,000 ETH, or around $400 million at the time, to a public address registered to a competitor exchange — Gateio — the funds were returned minus a nice fee but this event fueled the FUD (Fear uncertainty doubt) that has come from FTX. People are on edge and rightfully so.
Galois Capital a hedge fund admitted they have roughly $100M left trapped on FTX — the manager sent a letter to clients apologizing for the incident lmao
A slew of influencers and promoters had to apologize, explain, and walk back claims this week after promoting BlockFi, FTX, and other exchanges.
Kevin O'Leary, who famously bragged about being fine with his FTX investment because SBF’s parents were compliance attorneys, explained his thoughts on the blow up. He thinks that there will absolutely be regulation now and comments that institutional investors won’t invest in crypto again at scale until that regulation is in place.
The FTX saga — while ugly — will end up in the halls of notoriety with Enron, Lehman Brothers, Herbal Life, and other similar ponzi like schemes.
If you’re in crypto right now just remain calm, maybe take a break from impulsive decisions and just keep our three tips in mind. Buckle up, lots of chop to come but also some likely opportunities if we can somehow se the space level out for awhile.
Our faith in digital assets is not shaken.
On the equities side I am looking to capture some momentum last week if we manage to go green Monday. I added more Nvidia (NVDA) and hold some cheap TQQQ 0.00%↑ calls to hopefully print some bands.
More likely outcome I am sure is FTX contagion leading to a pullback in the Nasdaq and other indices first thing in the morning. As more clues leak about the insolvency of the world’s second largest crypto exchange, one things for sure, we don’t know who still could go bust any hour from exposure.
This week some consumer names report including WMT, TGT, and Home Depot.
Will be interesting to see what DXY does and if this nice upward burst is coming to an end soon or if we may get another leg to the run this week.
"Stocks can't bottom until the retail investor gives up"
—NewEdge's Cameron Dawson
“We think that the housing market could get worse, we haven’t seen U.S. home sales dip below 4 million units a year in decades — and the U.S. population has grown.”
—Redfin CEO Glenn Kelman
Sharing these extended thoughts and tips we recommend from our prior Arb Letter on crypto — whether you’re a noob or seasoned vet. Take these tips to heart as we’ve focused on them through the last 5 years in crypto.
Strategy
We’ve always advocated for 3 principle strategy pieces if you’re involved in crypto.
Don’t stray from these and you will be better off than 99% of people in the space.
A.) DCA (Dollar Cost Average)
Buy over an extended time period in pieces ideally on the reddest of days. You won’t get a $50 entry on BTC but you will build an effective long term entry — so for example even with all of the recent selling you might be down 10-20% on your Bitcoin position as opposed to -80% like most people.
If you’re patient you will be up 100%+ or more during strong bull runs — at which point you can choose to sell or hodl. Same goes for other assets in the space.
This is annoying to do regularly but it really is superior to simply plopping your money in at a one time event and then tryin to control emotions and watching it chop.
This is most effective if used for assets you are mega bullish on in the future — not ones you could see yourself wanting to dump within 2 weeks.
B.) Utilize Cold Storage methods
Single handedly the most important tip on this guide and on our substack. Don’t play games with your crypto. Thousands and thousands just watched all the cash they’ve ever had get vaporized on FTX. Same as Celsius and Voyager. You DO NOT want this to happen. Go buy a ledger or Trezor. Learn how to do it — it’s simple and a bit like defusing a bomb with verification codes and PINS.
Don’t share your keys with anyone or put them on the internet or in writing digitally.
Basic security to weather the storm guys. Do it.
C.) Have a 3-5 year time frame
I always laugh when people try to talk shit on where crypto prices go because we are ultimately not concerned within a 2 year time frame.
Sure an argument could be made that you could’ve traded the last bull perfectly and sold the top but if you think Bitcoin is going to $100K+ one day, Ethereum to $6K+ and Chainlink to $200+ why does it matter?
Form your thesis and let it play out. Protect the capital you do not want to lose at all and then just leave it tf alone. The biggest mistake I see new crypto traders and investors make is being much too active. They get their capital eaten up by impulsive trades, fees, gas, or stupid emotional losses.
Keep it simple and go long and strong. For most people this is the best strategy and the one that maximizes your chances of winning.
There’s no telling how long this bear market lasts so make sure in it for the long haul.
Ignore these basic tips at your own risk.
As many just learned with FTX — your life can change overnight.
But don’t feel too bad if you or someone you know was impacted by the FTX blow out — seasoned traders and investors were fooled as well including BlackRock, Sequoia Capital, Third Point, Tiger Global, and Binance.
We haven’t seen the end of crypto but there’s likely more pain ahead.
Global News
The War in Ukraine seems to be at an impasse at the moment - with a notable Russian retreat (or trap) from the city of Kherson. This is a huge morale boost for the Ukrainians to liberate a formally Russian occupied piece of Ukraine state. Ukrainian officials cautioned civilians and others from returning home too soon as the Russians left land mines and traps as they retreated.
Despite the update in Russian movement, the war rages on in certain territories. The ordinance being exchanged surpasses any conflict since Korea as of this week. Russia is firing around a staggering 20,000 artillery rounds per day, a senior U.S. defense official has recently estimated, while Ukraine is firing from around 4,000 to 7,000 rounds daily (CNBC).
The Biden administration seems to be whistling a different tune on the conflict according to murmurs.
During internal conversations about the war in Ukraine, America's top general, Chairman of the Joint Chiefs of Staff Mark Milley, has in recent weeks led a strong push to seek a diplomatic solution as fighting heads toward a winter lull (CNN).
Chris Magnus, The head of U.S. Customs and Border Protection, submitted his resignation to President Joe Biden on Saturday
Mozambique has started exporting liquefied natural gas for the first time, in a move the country’s President Filipe Nyusi has described as historic (BBC)
Massive protests broke out in Mexico against the Mexican president's electoral reform plan set to be introduced soon
A massive explosion rocked a bustling pedestrian walkway street in central Istanbul on Sunday, killing at least six people and leaving at least 50 wounded so far, President Recep Tayyip Erdogan announced. The act is thought to have been committed by a terrorist identified as a woman.
Joe Biden and Chinese leader Xi are expected to meet at the G20 summit this week, although he has mentioned he will not be meeting with Saudi Arabia
ECB President Christine Lagarde will speak this Wednesday
Everyone in a district of 1.8 million people in China’s southern metropolis of Guangzhou was ordered to stay home on Saturday as the country tightens it’s response to Covid with zero tolerance policies, drones, and armored cars (NBC)
We will continue to cover the implications of the FTX blow up for traditional and crypto markets.
For the upcoming week ahead, the Federal Reserve speakers are likely to speak to the now dovish market reaction that began after the October CPI report.
So for now — we are protecting capital at risk, pushing to make more cash flow outside our day job, and looking for some opportunities to pick up newly distressed assets in both equity and crypto markets.
Name of the game is to accumulate.
Next post out on Tuesday. We will cover some of the ways to stay busy during a down time in the markets.
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RE: politics, just goes to show that the media really knows nothing.