Welcome back to CryptoG weekly newsletter!
I would like to thank everyone that subscribed and for all the positive and constructive feedback. It is very important for me to know what kind of information you would like to see in my publications and adjust the content accordingly.
Key takeaways from this episode:
Fear and Greed - Learn how to improve your investment strategy and resist FOMO by monitoring market sentiment
Trading opportunities - There was little action of note on crypto market, since we are still hanging around same level as a week ago and we are still waiting for lower prices
Macro outlook - War dominated the news and while this will continue for foreseeable future, look out for central bank’s decisions on Interest Rates in UK, Japan and most importantly USA
Fear and Greed
These are two dominant states of mind for most active investors and definitely for all traders. One of the most overwhelming urges is Fear of Missing Out, commonly known as FOMO. It can take over even most disciplined traders and often leads retail investors to some brutal losses. Most often experienced when market is making fast gains, also when you are trying to execute a strategy like Smart DCA mentioned last week, but reading/hearing everywhere that crypto will go to the moon tomorrow makes you buy at higher prices.
How to manage FOMO? One of the ways is to look at Fear and Greed Index, yes someone came up with an idea to measure it, as a clear reading of current market sentiment. You can find separate one for Crypto (click here) and Stock market (click here). Both are updated daily, so showing you how market participants “felt” yesterday.
As you can see both are in the extreme fear zone, meaning most investors are selling and prices are going down with a view that this trend could continue, often leading to panic selling and markets crashing. The opposite state being extreme greed means that most have fallen “ill” with FOMO, seeing many assets reaching new highs they buy already overvalued coins or equities exposing themselves to higher losses if market reverses.
Be a better investor and never BUY when index is in extreme greed zone, even better when it is above 50 and rather than selling during extreme fear, prepare yourself to spend your hard earned cash when everyone else are panic selling.
Here is most recent example, with crypto index moving above 50 on 16th of Feb and 1st of March.
Below Bitcoin’s price action shortly after F&G Index turned positive, what looked like potentially a start of long anticipated move higher.
While this market sentiment meter won’t tell you exactly at what price to buy or sell, it can definitely save you from the most common “buy high, sell low” scenario.
Trading opportunities
Nothing to highlight in this section considering current situation and what next week might bring as described in next section, in my opinion best to wait and observe the markets.
Weekly overview
Markets continue to mainly react to Russia/Ukraine related news, as we’ve seen throughout the week trying to cling to any glimpse of optimism, like Ukraine no longer wanting to join NATO or Putin expressing his views that ceasefire talks are going well, we had short-lived small moves up. Oil price going even higher, plus as expected inflation numbers in US eventually everything on the Risk on side went back down, as you can see in the group chart below.
Even the highly anticipated J Biden’s executive order on crypto was a nothing burger, but as regulations on digital assets are inevitable eventually allowing for more clarity for institutions that would like to locate their money in this lucrative space. (you can read full story here)
Let’s look at what might be quite a volatile week in the markets with the following roster of economic events.
UK and Japan central banks will look at their monetary policies, but everyone’s attention will be on Wednesday’s FED’s decisions and FOMC press conference. We had quite a roller-coaster of interest rate hike predictions in last few months as see below at some point even raising by 50pts had almost 50% probability.
Market looks to be pretty sure (95%) interest rates will move up by 0.25%, although no raise is still on the cards with more and more likely global recession looming.
Sanctions imposed on Russia, will also cause damage to Western banks, especially if Russia defaults on their USD debt. Cost of USD borrowing already spiked in similar fashion as during the pandemic crash in March 2020. Expect only higher inflation and diminishing growth, not a pretty picture for the coming months.
I highly recommend reading two articles below for anyone wanting to know more and that heading into recession is not just me trying to scare anyone.
https://www.rte.ie/brainstorm/2022/0307/1284822-ukraine-invasion-russia-global-economy/
That said, if FED in a surprise move does not increase interest rates, we should see a volatile move up on equities and crypto, so if you have not invested at all in digital assets yet, there is no harm to buy a little bit (max 10% of your total allocation) of Bitcoin if prices drop below 36,000$ before Wednesday.
Even if we see a surprise move towards Risk on assets again on Wed evening, I still expect more downside in the coming months. Lower prices are not a bad thing if you expect them, as you could see in my S2F Bitcoin value model, the long-term outlook is nothing but positive
As we might be getting closer to buy zones, I will expand a little bit more on what to buy and why over the next few newsletter episodes. This should be useful especially for those new to this type of asset.
Extra content
I understand there are still a lot of people that are new to crypto or heard about it, but do not know where and how to start investing. That is why I have created a separate section where I will try to keep adding articles on how and where to buy your first coins/tokens safely, where to learn about chart reading, glossary etc. (while you wait for my post this page will cover most popular crypto slang). You can find first post below and I will be adding more as time permits.
As mentioned earlier, please continue to send me suggestions on what you would like to see included in my newsletter.
Stay safe and get ready for a volatile week in all markets.