tl;dr
The Fed is a disappointment. Expectations for an all-embracing altseason are going to be dashed.
Market Snap
Market Wrap
Kevin Warsh has gone native already hurting the price of BTC.
Occasional Series – Shockingly ahead of its time
https://www.youtube.com/watch?v=5ptUMe9eqYE
Occasional Series – The Red Cross
The Red Cross, a charity doncha know, has put out some advice that during this expected heatwave in the UK, people should turn off their central heating systems to help keep your house cooler than if the heating is kept on.
Bless.
Curious Cryptos’ Commentary – The Fed
Kevin Warsh, the new Chair of the Fed, has been drinking the same Kool-Aid as all other central bankers, which is mightily disappointing. Though the Fed kept rates on hold, the accompanying statement was hawkish, causing an immediate dip in the price of BTC, which remains highly sensitive to investors’ perceptions of liquidity expectations in the future.
It is true that Trump’s hugely ill-advised venture that has reinforced the Mullahs’ status as one of the arch enemies of global freedom and liberty, to the detriment of us all, has resulted in higher oil prices than would otherwise have been the case. This feeds through into current inflation figures both directly in the form of fuel prices paid at the pumps, and through increasing input costs for all businesses, who naturally try to recoup those costs from their customers.
But here’s the thing. An increase in the oil price is deflationary nine to twelve months hence. As is either an increase in interest rates, or increased expectations of such an outcome. Pretending to battle a deflationary force with another deflationary force makes no sense to anyone of a sensible disposition. Additionally, because of the way that inflation is calculated, in a year’s time the current oil price increase arithmetically drops out of the calculation of interest rates. Central bankers claiming that an increase in interest rates to combat an increase in oil prices has worked because of this arithmetic guarantee are being disingenuous at best.
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The only central banker of note who ever understood this is Ben S. Bernanke, who was Chair of the Fed from February 2006 to January 2014
Well worth a read, with this conclusion:
“Substantively, our results suggest that an important part of the effect of oil price shocks on the economy results not from the change in oil prices, per se, but from the resulting tightening of monetary policy.”
Curious Cryptos’ Commentary – Altseason
Anyone who spends time that they probably shouldn’t in any number of variously distributed crypto spaces (I am looking at myself now) will experience enthusiasm for the portended forthcoming altseason.
I have my doubts.
It is indubitably true that in past altseasons face-melting gains largely across the board were experienced by nearly everyone. These paper gains were driven by excessive retail frenzy and capitalised upon by the coin issuers themselves. There is a very long list of alts which have crashed and burned, some to zero, some very close to zero, none of which will ever recover. I suspect a lot of retail investors did not have the discipline to bank those paper gains and are probably still hanging on to what is left in the forlorn hope that old gains will return.
This is how it works for many retail investors.
Some influencer shills a shiny new alt, having been given an allocation by the issuer to do so. Entirely immoral, probably illegal, but this was a strong feature of the last altseason.
Retail buys it, sees it going up every day, and gets very excited about those unrealised gains, which stay unrealised.
If it drops, the thought process is entirely wrong. “Damn, I should have sold before. I can’t sell now, because it is worth less than before. I will wait for it to go up again.”
If it does, the thought process is again entirely wrong. “Thank God I didn’t sell after the drop. Now it’s back, I am going to hold on for even more gains”.
I hope you see what is wrong with that picture – the process is repeated until there is no recovery and all the value is lost.
The key lesson for anyone investing in alts (and by that, I mean anything other than BTC and maybe ETH) must set sell targets which do not change, and which are structured in such a way as to recoup the initial investment after selling a proportion of the amount bought. Cold-headed reality, not emotion, is the only way to make money from alts.
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I am also doubtful that there will be an all-encompassing altseason ever again. There are too many coins now, and too many people got burnt in the past. The supply overhang of current alts – venture unlocks, emissions, token inflation – now exists at a scale we did not see in 2017 nor 2021.
Carefully constructing your alt portfolio with key coins of high quality – I know mine, but as we do not provide financial advice, I cannot tell you in detail my opinions and decisions unless it is for disclosure purposes when talking about specific cryptos – is the most important task, followed by setting those sell targets. Being aware that capital rotates between niches such as AI, memecoins, DePin, and so on is key to understanding that we will continue to see multiple, short, violent micro-seasons, reinforcing the point you must set sell targets, and leave those orders open on your exchanges of choice.
All those getting excited about a general altseason once the current four-year cycle (which I now accept is not dead) for BTC is over will likely be left behind.