Overview:

Cryptos are showing little signs of recovery.  We have been mentioning for months that it was likely large operators or “whales” were absorbing the selling pressure.  Finally we are starting to see evidence of larger players accumulating and do you think they are looking at triangles and other patterns on an hourly chart?  

Large Operators:

Grayscale (parent company Digital Currency Group DCG), has slowly been accumulating Bitcoin and other crypto currencies under the radar.  They now hold over 200k BTC for their institutional investor clients.  This is over 1% of the total circulating supply.  Endowment funds such as Harvard, Yale, MIT, Dartmouth, etc, have also been investing as reported with their 3rd quarter filings.   

Overall as of November 1st, in 2018 Grayscale has brought in over 330 million in cash, of which 70% was from institutional investors.  This is up 10 fold from the same time period in 2017 where they raised a mere 25.4 million.  This is significant with regards to the space, and all this was during the great bear market.  Regardless of the “Dooms Day Profits” large players are buying the dip. 

That is not all, eToro has also reported that their clients have been marginally increasing their holdings as well.   Now marginally implies minimal, but it is an increase none the less.

Long term is long term!

The crypto currency fund started by Adreessen Horowitz launched a new $300 million fund focused on crypto currencies.  What is interesting to note about this fund is what general partner Chris Dixon stated.

“We’ve been investing in cryptos for 5+years.  We’ve never sold any of those investments and don’t play to any time soon.  We structured the a16z fund to be able to hold investments for 10+ years.”  This is why those with money make more money, their period is long term. 

However his most interesting statement was this. 

“We plan to invest consistently over time, regardless of market conditions.  If there is another ‘crypto winter’, we’ll keep investing aggressively”.  –Chris Dixon

Smooth Operators:

This is exactly why the rich get richer and the retail investor sloshes around in mediocrity!  The retailer is looking for a quick buck, the home run, the lottery ticket, the larger investor is more focused on the big picture and broader gains.

While the retail investor is giving into the emotions or sentiment of the market, throwing in the towel, and totally discouraged, the smooth operator is adding to their hoard.  This is something we speculated on months ago; and now we are seeing the evidence.

Gold Philosophy:

As an avid gold and silver investor, nothing is more boring than watching the gold market.  Nothing takes more patience than investing in metals.  Why?  Because large moves happen infrequently, but when they do, you have to be in already.  This is why I accumulate when the market is out of favor not when everyone is scrambling to get in.  I am not waiting for the market to return I am planning and positioning for it. 

In 2015 the gold market was destitute, the end was in for gold.  When gold broke 1100 the bears came out in fury with extreme calls of $600-800 gold.  It was no longer a store of wealth and time had passed it by.  It was a tough time for dealers, as there were more sellers than buyers, which decreased premiums of physical to below melt.  By June of 2016 gold was pushing 1350 and everyone was buying, dealers were calling dealers to see if they had any wholesale inventory for sale.  Premiums rose, as the herd piled into the rally.

Ever wonder why large companies like APMEX and others do NOT hedge their gold purchases?  The reason is simple, the herd is always on the wrong side of the trade. Just like 2015 and gold, many are simply throwing in the towel, taking a loss on their sweat equity and ignoring what has happened for centuries.  “Money transfers from the weak to the strong”.  They are not slick operators; they are just taking advantage of weaker hands that have the wrong philosophy of investing.  The lottery ticket mentality!

Bitcoin:

 

Nothing has changed; we still remain in the short term bear camp.  It is still likely we test the 3100 or psychological level of 3k, however, Bitcoin is trying to build support here.  The 3k level is a key psychological level and a push through this level may result in the mid to low 2000 area.  The 2500 level is our second support level and an area I will likely throw a few more bones at if we get there.

As a long term investor I would love to see lower prices in the near term.  I am looking at a 3-5-10 year time frame, not to throw $500 at something and hope it becomes Lambo money next year.   I am a buyer in bear markets not a seller regardless of the charts and constant trolls that are now calling for 1500.  Keep in mind these are weather forecasts not TA.  The market is the perfect discounting mechanism and is always an equilibrium of buyers and sellers.  This does not mean we can’t get to 1500, it implies these are simple guesses as the market is a balance of supply and demand.

The longer you are in markets, the more you will ignore extreme bearish calls.  IF you believe in the long term viability of Bitcoin and in the long term we move higher, these are distractions in the “here and now”.  Of course when they are right they strut out into the media to pronounce their snake oil works.

Ever wonder why the Elliott Wave expert Robert Prechter under performs the market with around a 33% success rate?  I mean he practically wrote the book on modern day Elliott Wave Theory.  In 2015 he was calling for a “potential collapse” of stocks like the great depression.  In 2009 he called the rally a “bear-market rally, not the beginning of a new bull market”.  How did that work out for his followers?  Pretty much missed the entire bottom, the break out, and bought gold into a peak?  This is why we do not try and time the markets, but position in them.     

Snake Oil Salesman:

Those like Prechter warning his clients of a further correction in 2009, had their sheep out of the market.  They missed a 400% bull market.  Market timing is for liars and losers, and those that listen to bear market prophets are likely to miss out on bull rallies.  In hindsight they could have gotten in at any time since 2009 and made money.  But instead they sat on the sidelines, and watch the bulls run by, while Pretcher kept calling for a market catastrophe.  Sure he will eventually be right, but when is the question?  This is why Buffet is successful and Pretcher is, well rich off his followers. 

Again we can move lower, and the chart is not bullish by any means, but every bull market starts with an ugly bottom and bears piling into the short side calling for extreme lows. Then they call for Bull Traps keeping the herd scared and frightened during an initial rally.  Every level higher is where the next big collapse is going to be.   In simple words they never get in the market, because they are moved by snake oil salesman, having no plan or strategy of their own to accumulate into weakness.

Again we can move lower, the chart is weak, the trend is bearish, nothing says we have hit bottom, only the future beholds where that is.   It could be here, 3000, $150 quite simply nobody knows.   Yet like Pretcher’s followers it is generally to late when they realize the bottom was in, or, like in the case of gold, they buy into a top.  This is not the Poop Cannon on TV, this is a guy that wrote the book on EW.  

Plan & Strategy:

The key in any market is having a plan or strategy for investing.  Investing takes not only time and patience, but realistic expectations.  Those throwing in the towels, waiting for the market to return are simply gamblers. Others listening to Snake Oil salemen, like Pretcher, are ignoring markets trend up over time.  They want to feel like they are winning, so they buy into the highs and sell into the lows and never win.  Why? Because they are moved by snake oil salesman and fear.  Meanwhile the smooth operator will be there buying when they are selling, and selling when they are buying!  They love guys like Pretcher and Jim Willie!

Do you think the large operators, fund managers and wealthy are looking at a dangling triangle, bearish bat, or inverted butterfly to buy?  They look at a long term chart and see opportunities, allocate money at certain levels, and buy when they get there.  They are not looking at flags and pennants on the hourly, they have a plan and strategy to accumulate into weakness. They have no problem stepping into a selloff, and waiting out further pain for the long term.  

Summary:

If Bitcoin pulls back to extreme levels do you have a plan or will you be reacting listening to bear prophets?  Are you frustrated during bear markets, or look at them as opportunities?  Do you have a strategy to build long term wealth, or are you simply a weak player giving into market sentiment and playing right into the smooth operator?  The answer to these questions determines your future success as an investor.  

In the end you have the choice of investing like a smooth operator, taking advantage of market downturns like Warren Buffet, or listening to snake oil salesmen like Pretcher and Jim “slick” Willie that prey on fear. 

 

 

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