₿ Bitcoin Breaks Yearly High - What's Next?

What’s on the Menu 🍴

Just when everyone gets bored with bitcoin’s price…

Boom, it broke out to a new yearly high!

And there are some key economic factors we’re watching closely.

Let’s jump right in:

• Bitcoin Breaks Yearly High, What's Next? ₿

• The Alarming Truth About Wealth Trends ⏰

• What The Banks Are Saying About The Economy 🏦

• Are We Back in Crypto BOOM Season? 📺

Today’s newsletter is a 5 minute read.

Bitcoin Breaks Yearly High, What's Next? ₿

The Northern hemisphere is headed into winter…

But it looks like bitcoin and crypto are headed into spring!

After spending what felt like an eternity—about 6 six months—hovering around the $28k mark, Bitcoin made some serious moves.

Yep, it leaped to a yearly high of over $35k, smashing through the $32k resistance like it was wet tissue paper.

What gives?

The Squeeze Felt 'Round the Web

First, we saw a "popped stop run." For the uninitiated, that's when folks who were shorting Bitcoin got, let's just say, a rude awakening.

They had to buy Bitcoin to cover their positions, leading to a dramatic price surge.

The ETF Connection

Behind this bullish fury was, you guessed it, signs of an incoming Bitcoin ETF.

BlackRock got a CUSIP number and plans to seed their ETF this month.

Bitcoin's Growing Dominance

Here's another thing: Bitcoin's market dominance is still climbing.

This means it’s taking up a larger percentage of the overall value of the crypto economy.

While altcoins are like rocket ships built in a garage—high risk and unpredictable—Bitcoin continues to be the blue-chip stock of the crypto world.

The Altcoin Prophecy

In Monday’s newsletter, we told you to keep an eye on the TOTAL3 chart (which tracks non-Bitcoin and non-Ethereum market cap).

This week it also broke out, hinting at a potential altcoin season.

In crypto, capital flows in this order:

1. People start buying Bitcoin, which gives it a big pop

2. People take profit (sell) Bitcoin, and some of that capital goes into other crypto-assets

3. Large cap cryptos start to see price gains, which attracts more investors

4. Buying begets more buying, which leads to a full-on altcoin season

The Regulatory Tango

What could sweeten this pie?

Regulatory approval.

A U.S. Court of Appeals is pressuring the SEC to make up its mind about Grayscale's Bitcoin ETF. This isn't a 'maybe' anymore. It's a 'when.'

So, traders, whether you're in it for the long haul or just a fling, this Bitcoin action is a must-watch.

Cheers to a blooming crypto spring! 🥂

The Alarming Truth About Wealth Trends ⏰

The Federal Reserve does a pretty good job at collecting data about the financial well-being of Americans.

We recently got the latest “Survey Of Consumer Finances” that gives us insights into asset and liability trends through 2022 (The last major survey gave us data through 2019).

Obviously, a lot has changed since 2019 (including the whole entire world economy shutting down 😵‍💫), and while some data points have improved greatly, others are cause for concern.

Generally speaking, it’s still clear that older generations are winning financially.

Baby Boomers lived through the greatest bull market in stocks AND bonds on record, and have had time on their side to compound. No surprise.

When we look at overall net worth trends by age, it’s clear to see that the 2008 financial crisis did a number on every generation (but not as large of an impact for those aged 35 and under).

When looking at the median net worth adjusted for inflation, it’s impactful to see how long it has taken for net worth to recover to pre-2008 financial crisis levels.

You’d think that a decade of zero-interest rates and low inflation would have made net worth soar quickly.

The truth is, the 2008 financial crisis was just THAT damning to people’s balance sheets.

This chart truly puts that into perspective:

Turning to retirement accounts, another truth arises.

Those in the 35-44 cohort (current millennials) are not seeing robust retirement asset growth. It has been quite stagnant.

Since millennial net worth seems to be growing overall, but their retirement assets are shrinking, we may be able to infer that most of their net worth is held in their home.

What was truly surprising considering positive net worth trends, is how badly adults feel they’re doing financially vs. a year ago. (2022 vs. 2021).

2022 was a bad year in stocks (but we came off of a raging bull market in 2021), and stimulus was still bolstering balance sheets. Not only that, net worth had been steadily increasing over the years for every age cohort… so, why the pessimism here?

It doesn’t seem to be aligning with the data…until you consider inflation increasing since 2020.

Sentiment around how expensive goods and services were costing at the time probably trumped any net worth gains happening for people.

Baby Boomers may have lived through high-inflation in the 70’s, but, millennials and generation X surely didn’t know this world as well.

Life has simply gotten incredibly expensive, and housing affordability has plummeted. This could be contributing to the overall negative sentiment in the face of not-so-bad data.

Overall, it’s interesting to see how badly 2008 damaged American’s finances, and how looking at the median inflation-adjusted net worth numbers, we’re just now seeing a recovery for most age groups.

What The Banks Are Saying
About The Economy 🏦

Most of the large banks & credit card companies have now reported their Q3 earnings, which gives us a great window into the health of the financial sector as well as the economy.

The good news:

• There haven’t been any nasty surprises

• Bank earnings still look strong

• Capital ratios are robust

• Current bank stock valuations are low/reasonable

• Consumer spending grew in Q3

The bad news:

• Consumer credit metrics are still getting worse

• Bank CEOs are planning for a weaker economy

• Bond portfolios are still large & worrisome given recent rise in yields

• Regulators have proposed drastic new capital standards that would begin in 2025

Despite generally good earnings results, the price action in bank stocks over the past week has been poor:

Until investors can get comfortable with the Federal Reserve backing off or interest rates cooling to give the economy breathing room, banks could remain an unloved sector.

Here are some earnings call highlights from bank executives themselves:

Citigroup:

“In the U.S., recent data implies a soft landing, but history would suggest otherwise, and we are seeing some cracks in the lower FICO consumers”

“In the euro area and the U.K., the picture has turned distinctly more negative”

“I'm struck how consistently CEOs are less optimistic about 2024 than a few months ago”

Bank of America:

“We see that in our customer data, our 37 million checking customers, we see their spending slowing down”

“As we moved into October, the spending is holding at that 4% level. So growing, but growing at a basis more consistent with low growth economy”

“Our team of economists predicts a soft landing, with a trough in the middle of next year”

JPMorgan Chase:

“There has been an extraordinary amount of fiscal monetary stimulus still in the system…it can drive markets and sentiment and sales and profits and all that, but it can't stay like this forever”

“Cash buffers continue to normalize to pre-pandemic levels with lower income groups normalizing faster”

Discover Financial:

“Our macro assumptions reflect a relatively strong labor market, but also consumer headwinds from declining savings rates and increasing debt”

“As we took a look at household net worth and savings rate, both have deteriorated, and we're seeing deterioration more specifically in lower FICO bands”

Wells Fargo:

“Delinquencies have continued to deteriorate at a relatively slow consistent rate without signs of acceleration across our portfolios. Our base case remains a continued slowing of the economy, but we remain prepared for a wide range of scenarios given there is still significant uncertainty ahead”

“Consumer spending remains strong with third quarter year-over-year growth rates for both credit and debit card spending increasing from the second quarter”

Goldman Sachs:

“The U.S. economy has proven to be more resilient than expected, though there are reasons to remain vigilant”

“Over the next 2 to 4 quarters, the impact of that tightening will be more evident and will create slowdowns in some areas”

“I am hearing as I interact with CEOs, particularly around consumer businesses, some softness, particularly in the last 8 weeks in certain consumer behaviors”

The TL;DR Summary:

The banks are telling us that the consumer is still spending but momentum is slowing and stress is rising, particularly among lower income consumers.

To us it seems that the Fed & the Economy have a very limited window of time to make the “soft landing” and we can’t yet rule out a recession for next year.

Lower inflation readings can’t come soon enough!

Are We Back in Crypto BOOM Season? 📺

In today's video, Chris is diving into the recent pop in bitcoin's price and answer the question:

Are we back in a bitcoin and altcoin bull market?

He breaks down the most important crypto charts, and shows the recent negative correlation with stocks.

Buckle up - it looks like the markets are heating up again!

Food For Thought 🧠

“It might make sense just to get some [bitcoin] in case it catches on.”
- Satoshi Nakamoto

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.