Sunday Rundown - August 22, 2021
We have met the entities, and they are us
Welcome new subscribers! Happy Sunday to all. Look for the monthly issue this week, I’ve been traveling on-and-off since the end of July and it’s been hard to pump out free content. Rest assured, it’s coming.
I’m still hearing about the wall of institutional money and big entities coming into the market. That’s undeniably true, but not at a scale that shows up in any data that I look at.
In other words, we know businesses and funds are putting bitcoin on the balance sheets, perhaps some Ethereum and altcoins, too. Just not enough to sway the markets.
Perhaps the crypto market is so big, their actions don’t matter as much? The total crypto market cap is 5x larger now than it was last year when institutions poured in. As a result, we need to see 5x more institutional money to get the same impact.
Or, maybe the reports of “entities” hoovering up massive amounts of bitcoin are overblown. According to Coinshares, CryptoQuant, and Glassnode data, crypto investment products saw very slight outflows over the past month and they still carry negative premiums.
Could this mean big buyers are buying directly from OTC desks and custodians, not funds? That would seem unlikely given the negative premiums on most of the major funds make it advantageous to buy those funds, not spot bitcoin. And in any event, at some point that activity would show up on the blockchain.
Suffice to say, they won’t tell you that they’re doing this until bitcoin’s price goes up and validates their decisions. As somebody on Wall Street told me, “if they tell you they’re buying, they’ve already bought.”
The good news?
Institutions don’t matter as much as you think. We can see accumulation patterns in lots of different data sources without any signs of selling or capitulation that we saw during previous bear markets. I’ve covered this in my updates to premium subscribers.
Whether you’re an institution or a whale or just a normal person like you or me, the blockchain can tell how bitcoins move and what that suggests about the momentum and mindset of people in the market. That’s a perspective that the trading charts and news reports don’t capture.
Since the beginning of 2021, we’ve flipped from a market dominated by people looking to sell to a market dominated by people looking to buy, a shift we’ve seen play out in real-time as the market moved from mania to consolidation.
Does that mean supercycle/altseason/moon tomorrow?
We shall see. Whenever prices go too high or too low too quickly, those sellers come back really quickly. You don’t want to get caught holding the bag when they crash the market. Accumulation raises the floor for prices, but we don’t know where that floor is.
Here are some interesting articles I saw this week. Sorry, no videos or podcasts this time.
45% of Family Offices Regard Cryptocurrencies as a Hedge – Private Investors Increasingly Purchasing for Fear of Missing Out
Bottom line: minds are changing regarding bitcoin.
My take: I’ll assume the data is correct. Amazing how quickly people change their minds about an investment once the price goes up.
Why we care: hard to imagine this data holding true and getting a two-year bear market or drop to $9,600, as others expect.
Bottom line: Central and Southern Asia, Latin America, and Africa see a whole lot of crypto usage.
My take: I’m looking forward to the full report in September. I spend a lot of time covering US-centric news and also keep tabs on what’s going on in China, because those two economies have a disproportionate sway on global markets. They’re also heavily influenced by investment funds, government agencies, trade agreements, and all the trappings of the legacy financial system. Until those influences migrate to the crypto markets, we don’t need to worry about them.
Why we care: for the world’s economy, the US and China matter a lot. For crypto, they don’t. This is a global asset that’s driven by local needs and personal motives, accessible to everybody, everywhere, all the time. The news will never capture that perspective.
Bottom line: as part of an anti-corruption plan, Russia’s government will check its government employees’ reports of their crypto holdings.
My take: as I don’t know much about Russia’s government, I’m not entirely sure why this step has anything to do with stopping corruption. Government officials already have to disclose their crypto holdings. Is Putin genuinely concerned about corruption? Is this more about capital controls? Is he trying to boil the frog slowly?
Why we care: Russia has outwardly been hostile to crypto, though it seems to have a lot of peer-to-peer crypto transactions according to the Chainalysis report mentioned immediately above. First, China cracks down hard, then US Congress starts haggling about crypto rules, and now Russia is wagging its finger. Yet the market seems undeterred. What does that tell you?
Relax and enjoy the ride!