About Pamplona and San Fermin
Cryptic ball: bears better be ready for the weekend.
An explosive move like Wednesday's is typically followed by some peace. But the weekend ahead will likely bring back the action, at least in the 24/7 crypto markets. So far, it's interesting to see that, in today's pump attempts, bitcoin has paused at the diagonal resistance we highlighted in the last email. This means this meme line is indeed important for traders, and so it should be for you too. Why?
If the orange coin breaks it in a sustained way, say it closes a 4-hour candle above that level, then it's likely we'll see Pamplona's historic "Running of the Bulls" take place in the digital world. This Spanish city holds this annual event every mid-July, but due to COVID it was cancelled this and last year. Maybe their animal spirits will move from the streets to the charts and finally beat the summer blues?
Conversely, bears are finding hope in the possibility that this diagonal resistance is just a descending triangle, a sign of further doom. This is a low-probability possibility, as explained over the past weeks. Still, you should have a plan in case that happens. What we anticipate is that bitcoin drops a bit from its current level and forms a clear higher low, around $31k, and then resumes its new trend.
Chart art: do you really think we'll test $30k again?
Market musings: we'll pump one more time.
Zooming out and looking at the wider market, it's clear May's crash wasn't only because of the combination of memecoin-induced euphoria and the incoming summer, but also due to the fear of regulation - especially in the field of stablecoins. These projects woke western regulators to the possibility that a decentralised currency can also have a stable value, according to fiat standards.
While bitcoin and even ether where always considered innovations which didn't affect the status quo of central banks that much, that isn't the case with projects which can offer an alternative to the dollar, euro, and yuan. This compounds the system risk of crypto as an asset class, as argued in a paper by Gary Gorton we shared with you Monday. But the major risk is that of overregulation.
While things are just being discussed for now, you should consider the possibility that this bull run will see an end next year (if we're to follow the behaviour of previous halving cycles, as shown below) once new laws come into place, affecting Tether and other major stablecoins. After all, MiCA, Europe's major regulatory framework for crypto markets, will have its final version shared by then. And it's clear it is very much focused on stablecoins. When will the US announce theirs?
Visual block: prepare for the second and likely last leg.
Three things: "observe, don't predict".
- "The B Conference" reformed Elon Musk's crypto reputation. But there was more about this epic conference. Check CMS Intern's notes to know it all!
- 'Centralised Finance' platforms are typically one's first experience of crypto lending markets. But are they less risky than DeFi? Check this comparison.
- Arthur Hayes is definitely our most referred writer in this column. But what can we do about another must-read piece about the state of global debt?