🧘♂️ Our Biggest Regret
Don't make the same mistake.
Crypto weekends. They can be extremely rewarding and so too can they be extremely punishing. That’s a fun feature of low liquidity markets.
Not to worry. Every Friday, we share:
Technical Analysis ➡️ so you are aware of key support and resistance levels.
Fundamental Analysis ➡️ to ensure you’re up to date with news and on-chain metrics.
A Personal Finance Segment ➡️ because we all know your analysis is nothing without mastery of your mind, emotions and self.
Patience is the biggest virtue in these conditions. Jumping into ill-thought positions now would be the biggest mistake.
Read, enjoy and share with your network. Let’s all build wealth together.
🤔 And The Money Keeps Flowing?
Looking at the chart above, we see the Number of Bitcoin Active Addresses at the lowest number since April 2020.
When you first bought crypto, you would have had to open up a wallet, which contains a unique address, for every coin you purchased.
By tracking active addresses (the number of unique addresses that were active in the network either as a sender or receiver) we can gauge the level of new adoption and activity and understand how many people are using the network.
The more people who open wallets the bigger the network effect becomes.
✅ TIP: This indicator is NOT helpful for day-traders or scalpers but rather more pertinent for long term investors. You’ll notice during a bull market, the number of active addresses rises exponentially. And now, we see it trending downwards.
Despite this downtrend, we continue to see lots of new interest in the space:
💡 Perhaps then, institutional investors see this less so as a cause for concern and more so an opportunity to accumulate at lower prices. For more on how bearish market conditions can be fruitful, check out the message we sent yesterday 👉Message to Crypto Holders.
In the publication industry, there is an idea of ‘the hungry writer’. The hungry writer will make up news and headlines because their salary is driven by the number of views their content gets. What then happens when there is nothing noteworthy on a particular day? The hungry writer makes up news.
🍔 We don’t believe in doing that. Which is why we are happy to present you with the truth:
For BTC, we continue to observe lower highs and lower lows. That’s a clear bearish market structure. Nothing has changed that yet.
The $30k level remains a key support level. Lose that and it’s air until around $24k.
Strong resistance levels cap the upside, such as around $36k.
Nothing has changed our market bias this week. We continue to observe. We continue to opt against aggressive plays at this current juncture. The majority of investors will do well to continue with pre-determined DCA strategies.
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⚖️ How Stable Is Your Stablecoin?
Stablecoins are digital assets designed to mimic the value of fiat currencies like the euro or the dollar. They allow users to cheaply and rapidly transfer value around the globe while maintaining price stability.
Tether (USDT) was the world’s first stablecoin. It was originally released in 2014. Since then it has been subject to questioning and reservations. Some readers may remember an essay written by the account ‘Crypto Anonymous’ that managed to create a good deal of market uncertainty back in January 2021. For a full assessment of the essay, challenges made and counters to some of those challenges, check out our guide: The Truth About Tether.
Nowadays, USDC is gaining significant traction. USDC was launched on Ethereum in 2018 and expanded to Algorand, Stellar and Solana in the second half of 2020. The stablecoin, now native to four blockchains, could soon be on eight to 10 more networks, Coindesk reports.This is the broadest expansion of USDC to date, potentially surpassing the eight blockchains that support Tether.
💡 The expansion shows momentum behind USDC as an interest-generating savings vehicle. To start earning passive income on stablecoins such as USDC, check out our Passive Income Guide. This is one of multiple methods to Build Wealth even when market conditions are choppy.
Similar story to BTC. Our view has not changed on ETH this week:
We experienced a really strong S/R flip (support and resistance flip) at the $2k level last week.
Whilst we’re currently trading above the $2k level, we’d prefer to see $2k re-established as a support level before shifting our bearish bias.
The $1.4k - $1.6k levels remain a high risk buy zone, for those who are comfortable with trying to catch a knife. However, the majority of traders and investors would be better off being patient 👇
⏳ Patience has been a large theme of the newsletter these last few days. In the words of Jesse Livermore: “Do Not Trade Everyday of the Year”. No position is often the most profitable position. We must all learn not to force trades and to only pick the trades that have the best likelihood to make us money. The trades that don’t have the best odds, will cost you time, stress and will never be the trades that make you big money.
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❌ Why You Need To Admit You’re Wrong.
In 1977, 240 business school students took part in a role playing game allocating funds in a hypothetical company. Once the allocation occurred, they were told the outcome of their decision and asked to reallocate. It was found that the subjects who allocated the most capital to an action they had already committed to, were those who were already personally responsible for negative consequences. This highlighted commitment bias. Whilst it would be rational that an individual would alter their actions when faced with a negative outcome, what happens is the opposite - individuals become even more committed to past behaviors1. This effect has been shown to increase when we publicly share our decisions.
One explanation for this is self justification theory2 - where decision makers are unwilling to admit that prior allocation of resources (whether time or money) were in vain. Another is expectancy theory - where an individual expects that their behaviour will lead to a positive outcome3. In these instances we genuinely believe that we are still correct! We end up weaving a narrative to support our prior decision, making it even more difficult to abandon.
Whilst trading and investing, this bias can have a significant impact on our ability to make profitable decisions. Let’s say you have allocated a large amount of your portfolio to a specific asset, which then decreases in value. Commitment bias means you will have to first work against your own psychology before being able to critically evaluate what to do next. If you had shared your conviction with your friends or on twitter it would be even harder to overcome this effect! This can lead us to hold onto losing positions or have faith in underperforming assets far longer than we actually should.
Whilst we must have convictions in our investing, we also must be willing to change our opinions quickly when required. So how can you overcome this bias and make better decisions? First, and this is a big one, remember that embracing our failures is something that drives personal growth. If you cannot realise and then admit you were wrong, you will never learn to improve or become a more profitable market participant. Another method is to write out your reasoning for a decision. If anything is related to your past actions rather than future outcome, remove that reasoning and reassess the decision.
As well as having negative impacts on our financial performance, commitment bias can lead us to stay in jobs we hate, continue a college degree that has no value or even stay in a relationship that makes us unhappy. However, learn to embrace your failures, understand the reasoning for your decisions, and you will be able to admit when you are wrong.
Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.
Disclosure. Some of the links we’ve included are affiliate, they give you rewards and discounts and earn us a commission. Additionally, the Market Meditator writers hold crypto assets. See our investment disclosures here.
Staw, B.. “Knee-deep in the Big Muddy: A study of escalating commitment to a chosen course of action.” Organizational Behavior and Human Performance 16 (1976): 27-44.
Brockner, J., & Rubin, J. Z. (1985). Entrapment in escalating conflicts : a social psychological analysis. New York (N.Y.): Springer.