SEC Slip-Up Hints At Fresh Financial Fears

Oops. Last week the SEC accidentally published internal commentary along with a speech by Chair Gary Gensler.

Here’s one of the comments which was mistakenly included:

I strongly recommend that a sentence be placed here (or somewhere [sic] in the first part of the speech) to reassure markets that you are not making the speech because you think there is an imminent crisis.

Wait... what?

Well you didn't think the reason for the FED pivot was actually the official reason, did you? It's very obvious that the recent decision to lower rates by 50 basis points had nothing to do with the job market or inflation. So what are they actually hiding here? There's a lot to unpack and it's all highly speculative.

Back in June, Daily Reckoning’s Jim Rickards warned that the banking crisis may still have legs.

Investors are relaxed because they believe the banking crisis is over. That’s a huge mistake. History shows that major financial crises unfold in stages and have a quiet period between the initial stage and the critical stage.

It's true that banks by-in-large have not corrected the problem that caused those three [crypto] banks to go under all those months ago. The FED offered everyone a temporary backstop, but that temporary backstop was an even worse deal than normal and was only there to provide liquidity on the short term in case of emergency.

Is a complete bank meltdown even bad for crypto?

I believe the panic of it would cause V-shaped panic poop & scoop situation, glancing at that Silicon Valley Bank post shows that it collapsed on March 10th, I wrote the post on March 11th and BTC dipped to $20k. Over the next week we spiked to $28k which pretty much definitively signaled the end of the 2022 bear market.

And we have to consider that all the banks that went under were crypto banks and crypto still thrived in the wake of that emergency situation. Random non-crypto banks going under seems even more bullish if I'm being honest.

Unrealized losses stand at $512 billion as reported by the FDIC, down from a peak of around $655 billion. The data has improved a bit, but bank balance sheets remain stressed at historic levels.

This is also a big reason why the yield curve has been inverted for so long. Why is the 10-year lower than the 1 year and the 1 month yield? Because the market has absolutely no faith in the economy. The wisdom of the crowd is telling us we are in for hard times. Coincidentally enough that's also why a lot of people get into crypto in the first place.

GOLD

The yellow pet-rock is still soaring at all time highs. Gold bugs and especially Peter Schiff are happy campers; so happy in fact that he rarely even talks about Bitcoin anymore and just focuses more on how absolutely fucked the economy is and why gold is the best hedge against it.

Personally I do not believe that gold and crypto are in competition in the slightest. They help each other and synergize together. Gold being the old school physical asset and crypto being the new kid on the block that needs to prove himself. If anything Bitcoin is not going to cannibalize gold but rather the real estate market. Real estate as an investment has always been a wholly toxic proposition. Lucky for us that market is quite a bit larger than gold's market cap. I can tell you right now when crypto goes x100 I'll be buying a little gold just in case shit really hits the fan. Maybe a greenhouse too while I'm at it.

How's the TA look?

I transferred some BTC to the exchange today and have decided to start day trading again. I drew a new line on my chart (the dotted yellow one). It's the first line I've drawn since April. On the short term I'm convinced we're going to hard bounce off $61k and that will be a good place to go x4 long.

The catch?

Doing the math on that x4 long position shows a liquidation at $46k. A dip that low would get very close to the dashed light-green capitulation line. I do believe that the only way we are going that low is if we get an economic crisis panic dump. But also moves like that seem to be common when I bet against them. I have a tendency to pull the trigger early when I should have just waited for a better entry point. These things happen, so I'm keeping my bets to a minimum as I dip my toes back in.

At the same time a complete economic meltdown is not something we can bet on. It just kind of happens out of nowhere and catching wind of it before shit hits the fan can be quite difficult. Even if the FED cut rates 50 basis points every month it would still take 10 months to get back to zero. The economy has a nasty habit of not recovering until after the FED has stopped cutting... but then again none of this really applies to crypto as we head into the 2025 bull market year of the cycle. The 4-year cycle has proven time and time again that it has a stronger current than the macro market cycle. I call this the crypto heartbeat.

Conclusion

Are we due for one final capitulation event? Maybe, but it will also come at a completely random time and also likely recover instantly. The stock market might not fair so well but Bitcoin will be fine. There are simply too many bullish signals for it to be overwhelmed at this point. The beatings will continue until morale improves.