0xKyle's Weekly Market Narratives #9
Studying 2019 Echo Bubbles. 20 March - 26 March, 2023
DISCLAIMER: The information contained in this newsletter is for informational purposes only and should not be considered financial or investment advice. Any opinions expressed in this newsletter are solely mine.
Welcome to the ninth week of weekly market narratives, the substack gets you up to speed with the narratives I’m looking at. Sorry that I’m late this week - I’ve been super busy with school! Anyways, I added some additional content this week that I’ve learnt over the past months, to make up for the lack of content (haven’t had the time to track markets as closely).
$BTC 7D: +14.5% | $ETH 7D: +4.6%
I would like to start with a review of where we are today. If you remember, last week I said this:
CPI came and went, and we got that breakout that we’ve all been waiting for. Prices slowly pushed back, but as things stand, we’ve broken out of the month-long range of 25k for BTC.
Also, look at my first point - all over my TL I have bears arguing that “this is not QE, this is a backstop” - people are arguing over the semantics of what the Fed is saying.
My advice is this: Don’t get too caught up with semantics. They’re politicians at heart, and the first job of any good politician is always to allay the emotional fears of the people. I remain extremely bullish entering this week, and with FOMC coming up, I think we’re primed to see 30k for BTC.
The reasoning is simple - the Fed is between a rock and a hard place. There is a hole in the ship (as evidenced by the banks breaking), and raising rates while backstopping is the same as making the hole in the ship bigger, while desperately trying to flush the water out.
It is counter-productive, and for that reason, I made the point that “they will want to make it LOOK LIKE they’re still “hawkish inflation”, but in actual fact, they’re going to be injecting liquidity”.
On the TA side, HTF looks really good all the way till 34k. Lastly, for a while now I’ve been talking about the “organic narrative” of BTC due to what’s happening. As a narrative trader, I can tell you that these things should not be faded. Look at the 7D performance of BTC compared to ETH - +14.5% BTC versus +4.6% ETH.
BTC’s raison d'être + FOMC + HTF levels all lead me to believe that it is more EV to be positioned to the upside for BTC in the coming weeks/months.
BTC Leads The Way
An important caveat of what I’ve said above is that BTC leading the way != dominance in alts. We’ve entered a different regime now where BTC simply has outperformed most alts. Just look at the past 7D - out of the top 100 alts by mcap , only 8 have performed better than BTC.
This is clearly different from a normal alt szn - but this also means that it’s the perfect time for you to pick up some alts in front-running the liquidity trickle-down effect that’ll happen once the ETHBTC chart starts bouncing back.
I also think that the next closest to BTC is STX - and that it is the “black sheep” amongst the alts that will outperform BTC purely because it’s the closest related.
A is for Arbitrum
The clear injection of liquidity from the most hyped airdrop will see arbitrum coins go astronomical - as seen in how $GRAIL has very nicely bounced back to it’s ATHs recently. I do think that an under-the-radar coin that may see a bounce with $ARBI is $OP, as people chase the next best thing.
But otherwise, I think the r/r of front-running ARBI coins is very much priced in, although I am of the opinion that more can still be squeezed out.
Personally, I’m going to be focused purely on trading $ARB, and nothing else.
China… AI…. again…
I really don’t think I have to go through this rotation. CFX gud coin, although I am quite tired of this narrative. I have no opinion of the token and whatever is going on over there, as I’m more focused in trading the majors these few days.
With GPT-4 being released, it caused another huge spark in AI related tokens. I think that throughout this year we will see constant attention on the AI space, so it might be wise to always pick a bag up when it inevitably crashes in preparation for the next update from our AI overlords.
Don’t Forget V4!
With the markets picking up again, it is wise to revisit certain catalysts in earlier parts of the year that haven’t occurred. The two that come to mind are SYN and dYdX - I particularly like dYdX’s range, and have been trading that on the D1 timeframe.
BNB’s performance a week back was startling - in the midst of the USDC collapse, BNB’s strength held. With CZ’s 1B fund backing it, I think that buying BNB now is a really good trade with a long time-frame horizon.
With the entire banking sector under questioning, we might see a resurgence in DeFi as people start to rotate from BTC to DeFi under the guise of “being the new banking sector”. The thing is - I don’t really like a lot of DeFi coins (e.g UNI / SUSHI / CRV) and might be opting to choose the newer, shinier DeFi coins (BTRFLY / FXS). But having a bias might prove to be a mistake, so I’ll just hold back on this trade.
Liquid Staking Takes A Backseat
With fewer and fewer people talking about the upcoming upgrade, I think it marks a good point to start accumulating LDO. With LDO at the bottom of the range, I think it’s pretty good r/r to start accumulating this in preparation of the mid-April upgrade.
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March In Review
I’m adding this section because today is the day I’m doing my review of the past few months.
As a perpetual student of the markets, and as my readers, you should know that I do not know everything. In fact, I don’t consider myself as a good trader at all. I think that I have a lot to work on, and my underperformance this month compared to the majors just hammers that point home.
So here are my takeaways:
1. Setting Price Targets
I think one of the gravest mistakes I’ve made is not setting price targets in my trading journal when I make trades. While I do write down the thesis, what ends up happening is that when the trade goes well I end up becoming a long term bagholder.
Example: Longed pre-CPI expecting breakout. Breaks out on CPI, and I decided that it has become “my long term bag” instead of sticking to the plan to close on CPI volatility. Round tripped my profits.
Setting arbitrary price targets does help with that, and I’m also adding a “sell indicator” section to remind myself that trades taken on the same timeframe should be sold on the same timeframe.
With that in mind, I’ve also been studying the 2019 echo bubble - and I think that some price targets that I have in mind to mark the pico top will be 35-40k $BTC. While I don’t think you should take these numbers to heart, I think that there’s some merit in setting an arbitrary price where you review what market sentiment is, and I think 35-40k is justifiable because it’s a 125% increase from the pico bottom of BTC in 2023.
For reference, 2019 BTC saw a 224% increase from the trough, but I’ve discounted it by 100%. 2019 TOTAL saw a 3x increase from 100B to 300B → but in 2023, a similar size increase in TOTAL will push us to around those prices in BTC (purely from a technical perspective in chart fractals), so I think it’s fair.
2. Leverage Trading
I’m doing something different from March - May: I’m going to stop using leverage / perps, and purely spot trade. I think that I’ve been waaay more successful when I spot trade due to the psychological effects of not being able to see your P&L + self-control.
As CBS said, to ride out the longer term timeframe trades, it’s best to use spot so that you don’t get shaken out by the volatility.
3. Spot Bids
I tend to gloss over the need for getting a good price because of my HTF trades, so I prioritise getting a position rather than waiting for price to reach my target. But I think the issue with that is that I’m leaving money on the table, so I shall try to start using LTF to set spot bids for my HTF positions.