Stormrake - Insights #Kamala

Make Bitcoin Great Again! (It already is.)

Tue, 05 Nov 2024 18:03:47 +1100

Policy, Polls and Politics...this week is sure to be a BIG one! Between the upcoming US Elections and the Federal Reserve monetary policy meeting soon after, it’s going to be an action-packed week to say the least. Whether you’re rooting for the Democrats, Republicans or just spectating with a bucket of popcorn in-hand for sheer entertainment purposes observing the spectacle that is sure to play out over the next few days, it’s undeniable to underestimate the impact this election will have on the broader traditional markets and Cryptocurrency alike. Compounding another potential FED rate cut on top of all this by the later part of the week means there will surely be a lot of volatility in the markets. Let’s take a look at how we can navigate these enigmatic waters, primarily starting with Bitcoin as it’s done some interesting price action since our last analysis.

I’m pleased to announce that the wait is over – the BTC Bull Flag is finally complete! Through the last nine months we’ve managed to birth quite the technical play. Coming out of this prolonged accumulation phase, we’ve seen Bitcoin quickly soar back up to a whopping $73,600 USD, giving us a monster rally equating to a near $7,000 gain for the month of October. This has consequently popped us out of the top of the Bull Flag accumulation pattern we’ve been eyeing and writing about since earlier this year – to the Bulls; congratulations, your patience has been rewarded.

A clearer view of the above chart can be found here: https://www.tradingview.com/x/Up4AwQhW/

As you can also see, the current price after breaking out and since retraced on the daily

timeframe back down the $67,000 - $68,000 range. This is actually a positive and healthy sign as it allows for stable growth later by ensuring that price currently retests the breakout here; meaning that price by progressing slowly and ensuring all price supports are being tested along the way up now, this will in-fact help mitigate the risks of wild and spontaneous volatile swings back down to these current levels once continue to keep climbing higher in subsequent months. Whilst Cryptocurrency will always be volatile compared to traditional asset classes, the healthier price growth you have, the more stable the gains will be later on down the road in any bull market cycle. Now with fresh new All Time High horizons in sight, the next more immediate potential take profit target I’m personally eyeing would be an eye-watering $102,147 USD. We can determine this number using Fibonacci extensions and applying it to the previous market cycle in order to ascertain future levels for this current cycle. This first stop along the way at approximately $100K makes sense from a psychological perspective given that it’s a strong take profit target that many would’ve had in their minds for those who’ve been long standing market participants well before this current cycle.

A clearer view of the above chart can be found here: https://www.tradingview.com/x/jDhO4ypm/

This would make for nice headlines, further lending credibility to bystanders that Bitcoin and the broader Cryptocurrency industry is here to stay, and that those without allocation already probably shouldn’t wait any longer to diversify into a tokenized digital asset based long-term strategy.

Historically, while October has always been a volatile month for Cryptocurrency with this year being no exception and now with the US Elections around the corner over the next few days, we’d likely expect to see significantly more volatility coming into the markets and bolster liquidity so that the momentum can remain in the following months hereafter. With that being said, all of the focus now will be on who actually wins the Election – because that will make or break the market right? What if I told you that in the end it doesn’t even matter?

Most market participants who were around at the time will remember that in the wake of the 2016 US Elections, the surprising Trump win did in-fact help pave the way for a strong focus on market growth as it gave optimism and hope to that market that the economy would once again become “great”. This led to historic growth in traditional assets and Cryptocurrency alike during the vast majority of 2017, where for our industry the notion of an ICO was birthed and Bitcoin from January of that year climbed all the way from a mere $966 - all the way to a staggering $20,000 All Time High price by December that very same year. This equated to a mind-blowing 1,928% increase in valuation for Bitcoin and saw the first significant rise and true creation of the “Altcoin” market as those who felt like they already missed the boat with Bitcoin also felt they could proverbially “get a second chance” for the elusive moonshot opportunity. Given the last few years of disastrous economic policy under the Biden Administration for US residents, it’s not far-fetched to think that many will vote for Trump again regardless of individual political beliefs as people tend to vote with their wallet; and if that wallet’s hurting, they’re likely to accept something they previously thought as less-than-ideal in order to circumvent and appease the issue. This sort of capitulatory thinking is why I believe people will be driven to the polls like never seen before in this Election cycle and with Trump currently being the favorite for obvious reasons, I wouldn’t be surprised to see that aforementioned market optimism come back with a fiery appetite for more growth once again.

Interestingly enough however, if we look at previous cycles we will see that in the long-run, the current day politics don’t ultimately dictate the overall direction and outcome that our industry is heading in. Whether it’s a Democrat or Republican who takes the White House and whomever is sitting in that chair in the Oval office is subject to much other much larger governing agencies, interests and policy-making institutions that the US finds itself beholden too. All the while, Bitcoin with its inherit diminishing supply pool via Halving cycles every four years baked into its code demonstrates that scarcity of any asset class will “trump” all in the long run when you have perpetual inflation and prolonged currency expansion programs such as “Quantitative Easing” being propagated by Central Banks globally. By overlaying previous US Election cycles over a long-term Bitcoin Chart; it’s clear to see there’s only one direction we’ve been heading overall – and that’s up.

Whilst history may not always repeat, it sure does rhyme. Just like how when Bitcoin in the previous 2020-2021 market cycle was ready to break the $20,000 All Time High barrier, we also had further monetary policy easing from the FED, just like we currently have now, therefore likely aiding continued growth in assets and price appreciation. As we come to the later part of the week, by early Friday morning AEST we will have confirmation from the FED on the next round of Monetary Policy, deciding whether they cut rates by a further 25 basis points or leave them on hold. Currently the market is pricing in a forecasted 0.25% reduction off the Federal Funds Rate, coming off the back of the 50 basis-point cut in September this year.

Not only will we have the US making an interest rate decision, but today we also had our very own RBA make an interest rate decision deciding to leave the Cash Rate unchanged at 4.35% for the time being. This indicates that while the US economy has been somewhat more successful in reducing CPI inflation in the short term, the Australian economy still has some in-roads to make before it can start cutting rates safely without inducing a premature 2nd wave of the cost-of-living crisis currently weighing on our fellow Aussies.

While everyone is waiting with bated breath on how the US Election will turn out; whether Kamala Harris manages to claw back her way from the brink of some unfortunate recent PR disasters or if Donald Trump once again seizes the day in triumph, it will surely be a spectacle – not only to see how the US responds to their newly elect, but how the market will respond as well. Volatility is sure to be rife, plaguing both Bulls and Bears whom are intra-day trading until we have the final results. Alas, it’s prudent to remind ourselves that a charismatic politician won’t make or break the Cryptocurrency industry, that instead always comes back to the recklessness of Government fiscal and monetary Policy; being the very reason Bitcoin was created in the first place. Therefore, while I’d like to emphatically profess “Make Bitcoin Great Again!” The reality is that it always has been. It’s provided an unparalleled store of wealth for market participants for well over a decade. If you see that the Government aren’t going to save you, then you’ll likely also see that you need to do that yourself through achieving financial freedom. That’s when real greatness ensues. Here at Stormrake, we’ll help you navigate this Election cycle, and help you keep making your portfolio great (again!) as we’ve already done so for many!

Written by James Ryan

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The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.

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The Rake Review: July 2024

Thu, 01 Aug 2024 16:02:14 +1000

"Then you win."

Safe to say July has been a notable month for Cryptocurrency and global events. Bitcoin went through a major sell off before politics took centre stage and assisted with a recovery. It was expected that a change in political sentiment would be positive for Bitcoin, but no one could have expected how these events would have unfolded.

It’s Been Ignored, Laughed at, Fought Against, but is the Final Era of Bitcoins History Finally Here?

Just over a year ago, we put out a Rake Review covering the growing concerns surrounding government actions to deliberately restrict everything to do with cryptocurrency. SEC lawsuits were flying left and right, everything other than BTC was being labelled a security, banks were removing AUD rails to crypto exchanges and major financial institutions were bad mouthing Bitcoin.

As of today, we have won. A mere 16 months later, Bitcoin and Ethereum have had spot ETFs launched with BItcoin seeing record breaking inflows within the first 24 hours of trading. Institutions such as Blackrock who’s CEO Larry Fink was a renowned Bitcoin dismisser has flipped his tone and admitted he was wrong about the asset. Bitcoin is now at the point where it is being politicised to garner more votes and support.

Bitcoin 2024 saw invites to both Donald Trump and Kamala Harris to speak. Trump a new endorser of BTC, whilst Harris has been considered the opposite with the Democrats spending the last four years battling Bitcoin and Crypto. Since taking over for Biden, Harris herself has yet to give her stance on Bitcoin and Crypto.

At Bitcoin 2024, Trump has announced his plans for Bitcoin and Crypto if he were to be elected; he intends to make the US the crypto capital of the world, create a strategic Bitcoin reserve, fire Gary Gensler, end Operation Choke point 2.0 and bring Bitcoin mining back to the US.

For those who are unfamiliar with some of the propositions above. Gary Gensler, a Democrat and the current SEC Chairman has been the one leading the fight against cryptocurrency, whilst Operation Choke Point 2.0 is a concerted, government-backed effort to discourage traditional finance institutions from servicing the crypto industry.

All these propositions by Trump are extremely bullish for Bitcoin and crypto. As a result of this, Trump has received support from the majority of the crypto space. Similarly, Independent nominee Robert F Kennedy has endorsed Bitcoin and announced that he will sign an executive order for the US to buy 550 Bitcoin per day to build a reserve of 4 million BTC, if elected president. However, it is statistically improbable for RFK to win the election, the support for Bitcoin is positive. The Democratic Party is pushing Harris to ‘reset’ her crypto stance in an attempt to garner more support from crypto users.

Politicians or their advisors are realising that most Bitcoiners are "single-issue voters" who will vote solely based on the candidates crypto stance.

Overall, it is an outstanding change in sentiment from the government, one that can only be viewed as a positive for the longevity of Bitcoin. As the ones who were fighting Bitcoin the hardest, are now the ones who are offering Bitcoin products and supporting it.

The price doesn't reflect the enormous change of political sentiment yet, however we think there is a large chance that the next 6 months may well fix that. So, now may be the best time to take advantage of prices not reflecting the positive news.

June’s timeline of key events and impact on BTC with prices:

July has been an incredibly volatile month for Bitcoin and cryptocurrency. Here is a simplified timeline of the events that had a great impact on BTC price.

July 1-8:

Mt Gox, German Government and US DOJ begin mass selling of Bitcoin (BTC falls from $63.9k to $53.5K - approximately a 15% pullback).

July 12:

Germany run out of BTC (12 July, $57k).

Assassination attempt on Donald Trump (12 July). The Trump Pump starts a BTC rally, 15% in 5 days ($57k to $66k).

July 17:

Bitcoin reaches $66k as a result of the Trump Pump.

July 15-22:

Mass ETF Inflows, BTC reaches $68.5k.

July 22-24:

Grayscale move almost $3 B worth of BTC to exchange (8% decrease from $68.5k to $63.5k).

July 24:

Ethereum ETF is launched, with almost $1.1 billion in volume traded, but only a net inflow of $100m due to Grayscale outflows (ETH falls 11% in a day from $3500 to $3080).

July 26-27:

The anticipation and rumours begin of Donald Trump endorsing Bitcoin at BTC 2024. BTC increase 10% from $63.5k to $69.4k.

July 28:

Trump speaks at BTC 2024, laying out his bullish plan for Bitcoin if he is to become President again. BTC reclaims $70k for a brief period of time before retracing back to the current levels of $66k.

Market Update

Here is the fast five of what you need to know about the market in July 2024:

Bitcoin increased 3.3% in July.
The Ethereum ETF launched at the end of the month yet fell ~6% in July.
No new coins in the top 10, XRP and DOGE moved up in the rankings this month moving from 8th to 6th and 10th to 9th respectively.
A volatile month for the total crypto market cap;ending the month 1.5% up after being down 15% and up 8% at times throughout July.
The total net flow of BTC ETFs was + $124.1 million USD.

Video of the month

Donald Trump's Official Keynote; Bitcoin 2024

In the news

US Elections: Trump shot, Biden catches COVID and pulls out, Harris takes over.

This race for the US Presidency may be one of the most controversial, eventful and entertaining elections of all time. Donald Trump survived an assassination attempt. The last assassination attempt on a US President was 1981, 43 years ago. Joe Biden caught COVID and pulled out of the race. Vice President Kamala Harris become the likely Democratic Presidential Candidate. Many conspiracies were born as a result of these events.

Ethereum ETF Launched:

After receiving SEC approval months ago, the Spot Ethereum ETF has launched. The short term impact was not favourable for the price of Ethereum. ETH is currently 20% lower than when it was approved. The launch was met with great volatility before retracing 11%. This is due to the people buying the rumour and selling the news paired with major outflows from Grayscale. Is this a pattern we will see when more crypto ETFs are launched? Extreme volatility followed by a short term pullback of the asset or is it due to Grayscale outflows.

Grayscale Movements (Bitcoin and Ethereum)

Grayscale outflows continue to hinder Bitcoin and we are beginning to see the same effect on Ethereum as a result of the Spot Ethereum ETF. Grayscale BTC outflows were a catalyst for Bitcoin reaching $53.5k. Whilst the Grayscale ETH outflows was the major catalyst of ETH retracing 11% on its launch day.

July saw a total of $354 million in net outflows

Grayscale’s ETHE net outflows totalling $1.7 Billion of outflows since July 24.

Education

Understanding Grayscale: Their Impact on Bitcoin and Ethereum

You may have heard the term grayscale, we’ve mentioned it in many of our reports. For those unfamiliar with grayscale and what they do and who they are. Here is an educational piece that will help you gain an understanding of why they are so important and can dictate Bitcoin and Ethereum's price.

Who are Grayscale?

Grayscale Investments is a digital currency asset manager and a subsidiary of the Digital Currency Group. Established in 2013, Grayscale has become one of the largest and most influential players in the cryptocurrency investment space, for good and bad reasons.

Grayscale’s Cryptocurrency Trusts:

One of Grayscale's most significant contributions to the cryptocurrency market is their series of investment products known as trusts. These trusts have been around for much longer than the recent spot ETFs launched this year. GBTC launched in 2013 and ETHE launched in 2017.

The full list of Grayscale’s cryptocurrency trusts can be found below:

The full list can be found here: (https://www.morningstar.com/asset-management-companies/grayscale-BN00000J3G/etfs)

Grayscale’s Challenges and Restrictions:

Grayscale faced several significant challenges and restrictions that impacted investors' ability to sell and redeem their holdings. The major obstacle was the hostile regulatory environment that the crypto space faced for many years.

Regulatory Hurdles:

The primary challenge for Grayscale was the regulatory environment. Regulatory bodies, such as the U.S. Securities and Exchange Commission (SEC), were initially hesitant to approve cryptocurrency ETFs due to concerns over 'market manipulation, security, and investor protection'. Without regulatory approval for ETFs, Grayscale's investment products remained structured as trusts. This lack of regulatory clarity and approval prevented Grayscale from converting their trusts into ETFs, which meant investors were not able to redeem/sell their GBTC or ETHE shares until the SEC approved ETFs.

How Grayscale Trusts Differ from Other Spot Bitcoin ETFs:

Grayscale Trusts, like the Grayscale Bitcoin Trust (GBTC), are structured as closed-end funds. They do not continuously issue or redeem shares for underlying assets, often resulting in shares trading at a premium or discount to the net asset value (NAV). In contrast, Bitcoin ETFs like IBIT are open-ended, allowing for the continuous creation and redemption of shares. This mechanism keeps the ETF's market price closely aligned with the NAV, providing greater price transparency and reducing significant premiums or discounts.

Grayscale Trusts also have a six-month lock-up period for newly issued shares, limiting immediate trading and reducing liquidity. Additionally, they generally have higher management fees compared to Bitcoin ETFs. On the other hand, Bitcoin ETFs like IBIT offer daily liquidity and lower expense ratios. They can be traded throughout the day on public stock exchanges, making them more accessible and affordable for a wider range of investors. These differences in structure and operational efficiency make Bitcoin ETFs a more attractive investment option compared to Grayscale Trusts.

Grayscale Finally able to sell:

The official launch of the Spot Bitcoin and Ethereum ETFs have allowed Grayscale investors to convert GBTC and ETHE into ETF products. This has allowed investors who were not able to sell their GBTC/ETHE for many years to finally dispose of these assets.

Since the launch of both Spot ETFs, we have seen consistent outflows from GBTC as those investors are finally able to sell their GBTC. Many of these investors are realising gains from investments made years ago. This same effect has been seen on ETHE with the recent launch of Spot Ethereum ETFs.

These mass outflows has been the main hindrance and anchor to Bitcoin and now Ethereum, when major outflows occur, prices of these assets fall.

Grayscale has played a crucial role in the cryptocurrency market by providing early investment products like the Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE). Whilst these products were an early opportunity for investors to gain exposure, these investors were soon stuck and not able to sell their holdings.

The approval and launch of spot Bitcoin and Ethereum ETFs marked a turning point, allowing Grayscale to convert their trusts into more accessible ETF products. This change enabled investors to finally sell their long-held shares, resulting in significant outflows and impacting the prices of Bitcoin and Ethereum. As the market continues to evolve, Grayscale's influence on cryptocurrency investment remains significant but we are not far from the end of that influence.

Written by Alexandar Artis

Memes of the month

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The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.