Market Meditations | July 16, 2021
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✅ And just like that, another week in the crypto markets draws to an end.
? As we approach the weekend, notorious for illiquidity and choppy price action, let’s make sure we are updated.
? Today, we share all the technical and fundamental analysis you need to know.
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⏰ In A Rush?
? Bank of America Approves Bitcoin Futures Trading
Bank of America, the second-largest bank in the U.S., has approved the trading of bitcoin futures for some clients, according to two people with knowledge of the matter who spoke on condition of anonymity.
? Binance Stops Stock Token Sales
The crypto exchange gave no indication as to the reason, stating only that it would be shifting its “commercial focus to other product offerings.”
? Tennessee Wants To Accept Property Tax Payments in Bitcoin
Jackson Mayor Scott Conger believes that Bitcoin is the only solution to fix inflation and the U.S. dollar devaluation.
?? US To Clarify Digital Assets In The Context Of Securities Law
A group of Congressional representatives has proposed legislation to provide clearer definitions for digital assets and technologies, especially as they relate to securities laws.
? Thorchain suffers $5 million exploit.
A bug was exploited that saw $5 million in funds withdrawn from the protocol. The developers are already working on solving the issue and covering the hole in the finances.
? You, Me And $BTC
Market structure remains bearish. We continue to draw lower highs and lower lows as we trend towards the $30k level. No real signs of new support either.
⚠️ Pay attention to the $30k level. Consider this the danger zone. If $30k is lost, there is scope for much more downside.
Moving Averages agree with bearish assessment. We can see that they have gone from sideways to more bearish.
Return to bullish? That would take a reclaim of the $36k level at the very least.
? For more on reading, using and interpreting Moving Averages, check out our guide.
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? Jack Dorsey’s New Developer Platform
Jack Dorsey, CEO of Square, said Thursday that the payments services business is working to create “an open developer platform“ focused on bitcoin-tied financial services. The Block reports:
In his tweet thread, Dorsey wrote that: “Like our new #Bitcoin hardware wallet, we’re going to do this completely in the open. Open roadmap, open development, and open source.”
More information – including dedicated Twitter and GitHub accounts – are forthcoming, Dorsey concluded.
Dorsey’s developments in the space have been exciting and show no sign of slowing down. In recent months, Dorsey has outlined plans for developing an open-source hardware wallet, and bitcoin has played an increasingly significant role in Square’s financial footprint via its Cash App, as detailed in recent earnings disclosures.
For more on Square’s hardware wallet, check out this ? newsletter.
? Somewhere Between A Rock and A Hard Fork
Compared to Bitcoin? Ethereum is not looking much better.
Looking set to continue to trend downwards. Similar to BTC, we are experiencing lower lows and lower highs. We also retested a previous structural level at $2.3k and came back down again.
Conclusion? We don’t see much upside in fighting this trend.
Return to bullish? Wait to see a reclaim of the $2.9k level. Until then, watch the BTC market structure. For we would need to see BTC pave the way for a bullish reclaim.
✅ TIP: ‘fighting the trend’ refers to the popular trader’s expression of ‘the trend is your friend’. The idea here is that when multiple indicators (Fibonacci Retracement, Moving Averages, etc.) are showing a strong case for either the upside, consolidation or downside, it is best not to try to take a position in an opposing direction. Of course, nothing is ever certain, but we can ascertain strong predictions or higher probabilities of the market trending in a particular way. The trend does end, however, sooner or later. If you miss out on a breakout, it might not seem so friendly. So it is always important to watch the market patiently.
? For more on how and why BTC price action impacts ETH price action, check out our Crypto Cycles Guide.
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? Framing Bias: Keeping Focused on What Matters
Almost every decision we make can be affected by an innumerable number of variables. Sometimes these can be obvious. When we make a coffee in the morning the simple question we ask ourselves is are we tired? Other decisions, such as our investments, can be far more complex. Let’s take Karen, an investor who is looking into cryptocurrency for the first time. She googles Bitcoin and immediately sees “Bitcoin Crashes to $32,000”. Now she continues to do her research, gets to grips with the value proposition and even quite likes the idea of investing. But she decides that it’s too volatile to the downside and therefore is not interested.
Karen, like many of us, has fallen into the trap of framing bias. This occurs when someone bases a decision on the way information is presented, rather than based on the facts themselves. In our example Karen saw the word “crashes” and each new piece of information (including its rise in the last year) was framed by that first headline.
This was first examined in 1985 when Amos Tversky and Daniel Kahneman asked study participants to choose between two treatments for 600 people affected by a deadly disease1. Whilst framed differently, both treatments had the same success rate. However, 72% of people choose treatment A when it was framed in a positive light (that they could save 200 people) compared to only 22% choose when framed in a negative light (that 400 people would die)
One explanation for this phenomenon is heuristics, or shortcuts our minds take when making decisions. The availability heuristic describes our tendency to use information that comes to mind quickly and easily when making decisions about the future. Combined with recency bias (where we favour more recent information), it becomes clear our minds try and process new information through the lens of easily available and recent information even when it is not right to do so.
This bias is so dangerous due to the amount of subjective information we process everyday. From media sources who try and exaggerate news to increase their profit, to twitter accounts who all have their own opinions, there are few truly objective sources of information. Framing can even happen internally! Let’s say your recent trading performance has been poor, your decision making may happen through that lense and vice versa.
So what can we do to avoid it?
Break down information into subjective opinions and objective facts. Even if you think a source is reliable, split out the facts and consider them in isolation.
Deliberately avoid opinionated media. From twitter to certain news publications, make sure you are sourcing information that allows you to make your own decisions.
Don’t make any assumptions. With every piece of information you read and every decision you make, ensure you carry out analysis in isolation. Once you have finished your analysis, you can factor in prior knowledge and experience to influence your overall thinking on the matter.
Framing impacts almost all of our decisions on a daily basis, from preferring 75% lean beef over beef labeled 25% fat2 to negatively impacting our trading and investing. Seek objective facts, deliberately review information in isolation and you can keep focused on what actually matters.
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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.
Tversky, A. and D. Kahneman. “The framing of decisions and the psychology of choice.” Science 211 4481 (1981): 453-8 .
Irwin P. Levi, Gary J. Gaeth, How Consumers Are Affected by the Framing of Attribute Information Before and After Consuming the Product, Journal of Consumer Research, Volume 15, Issue 3, December 1988, Pages 374–378, https://doi.org/10.1086/209174