TL;DR

  • Equities are over-leveraged
    • The amount of accounts on margin is at an all-time-high
      • Either they de-risk because of interest rates increasing, resulting in a sell-off
      • Or they go insolvent and the Fed is forced to “print” more money to bail out their friends and we enter hyper-inflation
    • Both outcomes are bad for the markets – and this is why I believe asset prices are headed lower in the next few months
      • The system appears unsustainable – something is bound to break
  • Crypto is over-leveraged
    • FTX is wiped out
    • Crypto lender Genesis is on the verge of insolvency: Read More
      • Gemini Earn customers still do not have access to their funds
    • Greyscale refuses to show proof of reserves – investors worry Greyscale could be next on the chopping block
  • I’m still majority in cash until the next leg down for both crypto and equities
  • Money is getting expensive and it’s getting harder to borrow
    • Smart money has been pricing this in already, so I do not believe “capitulation” will look like 2008 – but it’s still going to cause some more pain in the markets
    • Some firms (eg: FTX, Genesis in the crypto space) are finally facing reality – money isn’t cheap or free anymore like it was in 2020

Margin Accounts

  • Accounts are coming off an all-time-high triggered by “cheap money” from 2020
  • With Fed rates increasing every FOMC, it’s only a matter of time until borrowers are margin called with asset prices on a general downtrend
    • Couple this with the fact that credit card loans are also at an all-time-high
    • Correction in this market is overdue and will have a domino effect across equities, commodities, and crypto

S&P 500 / $SPY

  • Price action is losing momentum
  • Leverage got us to ATH, but leverage will also get us to a 30-40% correction from ATH
  • We could still see price action crawl into the grey shaded box to retest resistance
    • But it’s likely price will bounce back down to make a lower-low
  • Target remains at $320 to $330 range

Ethereum / $ETH

  • Eth dumped roughly 9% Sunday night
    • The “FTX hacker” has been swapping Ethereum for wrapped-Bitcoin during low-volatility periods (like Sunday evenings)
    • That same wallet has ~100,000 Ethereum left so I anticipate the balance will get dumped throughout this week or this coming Sunday
  • Another Sunday dump and we could see Eth drop to sub-$1,000 prices again
    • That’s where I’ll be buying

Bitcoin / $BTC

  • Bitcoin fell 4% with the Ethereum sell-off Sunday night
  • Price continues to retest support range sub-$15k
  • This is a bear pennant
    • Next major sell-off could put price in $13-$14k range
    • This remains my main target – this price is where I’ll accumulate more
The Rebel Economist
Author: The Rebel Economist

Civil Engineer // Aviator // Photographer // Avid Coffee Enthusiast // Your investment strategies could differ from mine based on your risk tolerances, research, and time horizon, so I encourage you to do your own research as information provided by The Rebel Economist or Breaking Metrics should never be considered financial advice.

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