SBF Was Funding The Block; S&P Rejected at Resistance; ETH and BTC Diddle Around
Weekly Update 12.11.22
This week we found out SBF had been funding The Block, one of the leading crypto news publications, and that the CEO, Mike McCaffrey, had also received a loan from SBF that he used to buy a condo in the Bahamas. McCaffrey stepped down after the news became public, though he still owns most of the equity in The Block. People speculated whether SBF’s backing had biased their coverage. McCaffrey claimed that only he knew about SBF’s involvement and that everyone else was kept in the dark to protect journalistic integrity. The two most public faces at The Block, Frank Chaparro, a reporter, and Larry Cermak, head of research, claimed they had no knowledge of SBF’s involvement and were devastated by the betrayal. As an outside observer, it didn’t appear they were any more biased toward SBF than anyone else in the industry. SBF was the belle of the ball for this entire bull run, and in hindsight, everyone should have been much more publicly critical of him, but unless additional information comes out to the contrary, I believe that they were in the dark. During the one occasion we worked with The Block to sponsor some research on blockchain finality, I found them to be very professional and of high integrity and it certainly did not seem like the type of place that would be pay-for-play. For now, The Block has an interim CEO and are figuring out paths forward but ultimately, I am hopeful that the reporters and researchers will find good jobs elsewhere if they aren’t able to work things out.
Aside from that, Coinbase announced it will now be free to convert stablecoin USDT (Tether) to USDC on their platform. Putting aside the various conspiracy theories, I presume this is just good old fashioned business development and encouraging users to switch to a more US-oriented stablecoin.
Outside of crypto, I think the market is mostly just awaiting this week’s economic data and FOMC meeting. It’s basically a lock that the Fed will only hike by 50 basis points this month, but people will be watching closely for any clues as to what the next hike and terminal rate will be. Powell has been pretty clearly hawkish, trying to talk down the market, so we will have to watch and see how this week goes. As I’ve said in the past, I don’t recommend trading around major events like rate hikes and luckily, nothing that the markets showed me change that stance.
S&P500
The S&P500 ended the week down 1.5% from the prior week’s close. The resistance seems to have held, forming a lower high and thus additional ammo in the camp of the bears. We could easily chop sideways between the suppose at 375 and that resistance for a while, or just continue downward, making a lower low towards that long awaited pre-covid high at 338. Obviously the CPI and Fed will have a lot to say with how the market moves this week so I would say I continue to be bearish until proven otherwise by a change in market structure.
Ether
Ether closed the week down 1.3%.
There is a saying, “When in doubt, zoom out” and I think looking at the Ether chart on a weekly timeframe, the simplest story you can tell is that we consolidated around $1300 from September to mid-October (where the white box starts in the charge above). We broke out of the range only to make a lower high and then fell through the $1300 range that had previously acted as support which now has become resistance. We have attempted to reclaim that resistance over the past 4 weeks unsuccessfully. Two weeks ago looked like an attempted break out but it didn’t quite make it. If we had continued to push upward this week, even a little, I’d be encouraged but instead we were rejected which leads me to believe we must look to recruit buyers at lower prices before attempting to move higher. The June/July lows around $1070 seem plausible for now. If we do see that, my “bouncing ball losing energy” thesis from two weeks ago looks more likely, which would mean one more large flush down, which I would welcome with open arms and open wallets.
Bitcoin
This week, Bitcoin did its best imitation of a possum and played dead, closing the week down 0.15%. Store of value indeed. Looking at it on the daily, it had been in an incredibly tight range between 17163 and 16885 for days. Then, there was a false breakdown below the range which was reclaimed and turned into a false breakout above the range which was rejected. Super exciting stuff. Given that barely anything happened, my stance from last week has not changed.
So yeah, I think that’s it for this week. Look out for volatility around CPI on Tuesday and FOMC on Wednesday.