🐳 Weekly Edition: Fed Comments Breed Uncertainty For EOY Bitcoin Targets

Bitcoin ends the week at $90k after bouncing back and forth between a 6% range since Monday, wreaking havoc on highly-levered positions as traders reacted to the Fed’s mixed messaging during FOMC Wednesday. While the Federal Reserve did cut rates as the market expected, Chair Jerome Powell was quick to caution that this does not constitute the start of an “aggressive easing cycle.” As we speed towards the end of the year and, importantly, a new tax season, we should expect to see crypto markets in defense mode.

Adding to the potential bearish pressure was a selloff in tech and AI equities, which historically have been highly correlated with Bitcoin’s price action.ETF flows did flip positive this week for both BTC and ETH, however they remain much lower than the frenzy we experienced for most of the year. As ETF buyers have been a major factor in BTC (and therefore the rest of the crypto market) performance with almost $100B in AUM in total, this is definitely something to keep an eye on.

While crypto traders might be hurting this cycle, last cycle villain Do Kwon is hurting a whole lot more after he was sentenced yesterday to 15 years in prison. A longer sentence than what the prosecution requested, the judge called Do Kwon’s actions with Terra Luna “fraud on an epic, generational scale”. For those who don’t know what happened, I encourage you to read the full story here, but for basic context the algorithmic stablecoin UST underpinning Terra’s entire ecosystem collapsed in 2022. UST maintained its peg to the US dollar via a mechanic with their other token LUNA, such that anyone could redeem 1 UST for $1 worth of LUNA. If the price of UST fell under $1, traders would close the gap through arbitrage until it regained its peg. If the problem isn’t already obvious, there wasn’t anything dictating that people must buy LUNA beyond this arbitrage relationship. In other words, if both tokens started falling there is no bottom… and that’s exactly what happened, wiping out $40B in market value and beginning the contagion which eventually led to the collapse of FTX.

The Beluga Wallet keeps bouncing along with the market, and while it may not be a particularly interesting strategy, I think the best move here remains making no move. As we mentioned above, we’re heading into potentially volatile waters over the next several weeks. As opposed to traders and institutions who may liquidate holdings for tax or fund structure purposes, we are on no such timeline. This isn’t a good time to be trading crypto, and my personal rule is to only participate when trading is easy. This market has matured rapidly and there are massive teams of professionals and algorithms constantly monitoring the market to siphon off any bit of edge they can. For an individual trader, you’re better off sitting in your coins and patiently waiting for your time to strike. Paradoxically the optimal time is when other retail traders are more active (we are all retail at the end of the day) as was the case earlier this year when volume was concentrated in memecoins. There will be another speculative trend just like that, and it’s our job to identify and capitalize on it as quickly as we can.

Is there a single perps trader left at this point?

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