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
- The amount of accounts on margin is at an all-time-high
- 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