Sell the Rallies

The interest rate hangover continues to hammer the leveraged crypto markets as the price of bitcoin (BTC) is stuck in neutral.

The silver lining around this whole situation is that Bitcoin hasn’t crashed and is clinging onto that $40,000 level which appears to be the proverbial line in the sand.

I can’t say the same for tech stocks who have been shown no respect whatsoever in this sell-off and will continue to get shut down until investors feel an interest rate bottom can be formed.

Short-term bearish signals are running riot with retail investor sentiment on social media turning negative since late last year with the recent downward price momentum providing a self-fulfilling prophecy.

Taking a barometer of the social media forums shows us what’s bubbling under the trading surface because bitcoin traders coalesce around these forums to offer us insight into the real mentality of traders.

Bitcoin’s market capitalization has tracked the growth of the global money supply since late 2013.

The annual change in money supply hit a high-water mark in February 2021, while bitcoin’s annual growth rate reached a peak a month later in March and these two are very much correlated.

In the long run, cryptocurrency’s usage as a payment exchange of value is what will give us higher prices.

The problem I have right now is with how the market is starting to view crypto assets in the short term as a speculative type of technology asset even though that’s not entirely true.  

To get down to the nuts and bolts, crypto and its nascent industry haven’t matured enough to shake that speculative label and now they are getting penalized for it with higher interest rates.

Truthfully, crypto still needs the perfect storm of variables to go its way to supercharge the price of crypto, and recently many of these variables have reversed.

The result is the incremental Bitcoin trader fleeing the asset like rats fleeing a sinking ship.

Recent data showed that bitcoin’s correlation with the M1 money supply has risen to 0.77, suggesting a strong statistical relationship between the two.

But with the Build Back Better legislation halted, where does the incremental free money come from?

There are still many long-term positive signals coming from the crypto industry like rampant hiring.

Crypto jobs pay well and offer high salaries ­­— even more importantly, they are highly appealing to Generation Z which has a good 50 years of work in them ahead.

The positive trend in crypto careers will mean more innovation leading to a better product.

Crypto hiring outstripped price action in 2021, as crypto job searches soared by 395% in the United States alone, according to LinkedIn.

Critically, the crypto industry outpaced the wider tech industry, which also saw overwhelming hiring success, almost doubling its number of job listings. However, at 98% growth, the tech industry pales in comparison to crypto jobs, which gained a whopping 395%.

Also, I’d like to point out that tech jobs are starting to bleed over into crypto jobs as the early iterations of the metaverse are being hammered out.

This is occurring through the gaming industry which has been earmarked as the launching pad for the future internet 3.0 or metaverse.

Eventually, these two sectors will fuse together which is highly bullish for the price of crypto.

Some type of crypto offspring will be needed as a payment vehicle inside the metaverse.

Sure, we aren’t there yet but it’s coming soon.

The lions’ share of job postings was in software and finance, other industries are also seeing a rise in demand for crypto talent.

These include professional services like accounting and consulting, as well as the staffing and computer hardware sectors.

Platforms with the most generous crypto hiring - Coinbase has over 250 openings, Kraken over 300, and the world’s most active exchange, Binance, lists more than 600 job posts.

There are healthy signs under the surface but hiring will be killed if Bitcoin is cut in half.

At this level of $40,000ish, the price still justifies another wave of hiring which is why holding these levels is utmost critical to the short-term direction of Bitcoin.

From a trading point of view, I would sell any substantial rally short-term in Bitcoin until we get more visibility about monetary policy.