“The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present.” – Paul Saffo ||
Hello everyone, and happy Four Year Cycle Day! February 29th has sort of magical feel to it, doesn’t it?
If you’ve missed the past couple of days, you’ll notice a change in the format – the usual intro and disclaimers are now at the bottom. Cleaner, no?
IN THIS NEWSLETTER:
BTC suspense builds
US PCE: strong consumption vs a slowdown in economic growth
Bitcoin and the unsolvable debt problem
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WHAT I’M WATCHING:
BTC suspense builds
After an exhilarating couple of days, we now seem to be settling into the “new normal” of BTC over $60,000, something that seemed far away just a month ago. Indeed, barring a sharp correction later today, BTC is set to record a February jump of over 40%, its steepest monthly increase since December 2020.
Of course, we could get that sharp correction, that is the way of crypto markets, but the rarefied air of new all-time highs is no longer so far out of reach.
(BTC year-to-date, via TradingView)
Let’s talk about that possible correction, though.
First of all, it would be good news.
A sharp climb without a pullback creates false expectations and stirs up retail FOMO and a leverage build-up, both of which usually end in tears. It’s too early in the cycle for a frothy market just yet. A regular reminder that crypto assets are volatile and very far from up-only tends to inject healthy doses of disappointment for “weak hands” and determination for longer-term players.
Second, any correction is likely to be seen as a buying opportunity by those worried that they had missed the run. A drop would soon find a robust floor as new investors take positions.
Meanwhile, leverage continues to climb, and it appears to be largely originating from US-based institutions, going by the increase in BTC futures open interest on the CME (well past its previous all-time high) vs that on Binance (almost there but not quite).
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