Newsletter #29 One of those weeks where decades happen!
"There are decades where nothing happens; and there are weeks where decades happen"--Vladimir Ilyich Lenin.
To call what happened last week in crypto, bat sh*t crazy would be an understatement.
I outlined the below in the mid-week Market Update note
From here on out, the way I would play this is, to scale out of positions on any small relief bounces to get better exit prices as the trend and momentum are broken for the time being or to get out if the disaster stop kicks in.
If the current price stays where they are at the weekly close, you can go ahead and presume the model would signal a Sell and get into 100% cash
We did get some relief bounces which I tweeted about.
Model has exited All positions and sitting on 100% CASH
Here's how the model performed with the recent longs
$TWT 115% (Had the model not exited and held on, the position would be over 175% now)
$LAZIO 34% (at one point it was up over 85%)
$MATIC 28% (at one point it was up over 50%)
$PORTO up 6% (at one point it was up over 40%)
$CHZ 6%
$SANTOS -18%
$ATOM up -2%
$LDO -18%
$PYR up -8%
$BTC -2%
$ETH 1%
$AERGO -20%
$BAR -16%
$CITY -13%
$JUV -16%
$PSG -15%
$ALGO -13%
$AR -18%
$INJ -18%
$OCEAN -26%
$RNDR -13%
$API3 -19%
$FXS - 17%
Thanks to gains $TWT $LAZIO $MATC the overall blow was softened. The biggest loser was $OCEAN with a -26% exit.
The down move has been so sharp that some of them could see some more relief rally in the coming days. But since the model is optimized for risk management it doesn't wait and signals the exit when the trend, momentum & price structures are broken.
Model will go long again on a confirmed uptrend even if it means it needs to get in at higher prices.
PS: There's nothing wrong with $TWT, in fact, it's on a strong uptrend and can go to perform from here on too. Model exits all positions when it detects a bearish regime. It's an added risk management feature of the model.
Model did very well to exit $SOL even before the whole FTX news broke and the carnage began as mentioned in last week's update. SOL is down -67% since then.
But hope is not a strategy, we need to respond to the situation. So far there's no major break in structure but the model has made a few exits.
$SOL is one of them. Model went long Solana last week and models position was up 28% at one point. FTX/Sams's closeness to SOL has had an impact. SOL gave up almost all its gains and closed flat for the week. Model has exited the position completely for now with a 6% gain. Not ideal but managing risk takes priority.
In my view, the FTX fiasco is probably a blessing in disguise for $SOL. From here on out, Solana has a chance to prove itself without the overhang of Sam/FTX's shadows and influence. When the uptrend resumes in SOL model will go long like its done before.
So where do we go from here?
For those who have been the victims of the FTX collapse, I feel really bad, take some time off and heal from this. Try and avoid revenge trading. Talk to folks around you and remind yourself, THIS TOO SHALL PASS.
If you are fortunate enough to NOT be directly impacted, then be really grateful, and focus on the upcoming opportunity this capitulation has given you. Markets tend to move on really fast. It's best you do too.
What happened was really bad and can never be forgiven but the silver lining is, it happened when crypto is relatively small and at the tail end of the bear market when much of the damage to prices was already done.
In the coming days, I will be writing 2 posts.
1. Why I believe Crypto is here to stay.
2. How to make it in the next cycle.
Also, I will be updating when the model goes long again but below is something I have been stating for many weeks before we had the breakout. My view is still the same
Bitcoin and Ethereum are entering the value zone, if we do get a market-wide sell off then it would be a great time and price to accumulate these assets for those who believe in this space. The above logic applies to ALL cryptos/stocks that you believe will survive the next 5 years.
So I will buy either on a complete NUKE aka BTC in the range of 14k-17k if we get one or on a Long signal by the model.
I would be using this opportunity to DCA into long-term holdings. $BTC & $ETH feature in them but I have also laid out a long-term investment thesis on crypto stocks. You can check them out here - HUT8 and Galaxy Digital. I also like Riot Blockchain (similar thesis to HUT8) and Coinbase.
Coming to Macro
Couple of weeks ago I updated that the Model turned bearish on US Dollar (DXY).
The call has done really well. DXY is down over -4% since. In the Forex world, such moves are considered huge.
If the FTX debacle had not happened Crypto price action would've loved this scenario.
TL;DR - Model is sitting on 100% CASH
Below are the Models signals on BTC, ETH, and Solana from 2020 to date. I have been publishing this every week since I went public in May and will continue to do so.
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