November Outlook: The market is right?
It’s hard, nearly impossible, not to remain bullish in November. An ETF verdict is nine weeks away, and institutional traders provide the only significant heater witnessed in the derivatives market. CME traders are more exposed than ever before, and per futures premiums, CME traders sit confidently long and strong. Natives and retail are still conservative, leverage is low, yields are prudent, and volumes shallow.
All in all, these are all positive observations from the market.
ETH trades at 2-year lows after being hammered throughout October but has seen strengthening momentum. The futures premium disparity between ETH and BTC on CME has normalized, a promising signal for ETH, favoring a re-rotation into ETH again at 0.053 ETHBTC.
Erroneous news correcting the markets wrong
In the past half year, crypto traders have traded one thing and one thing only. News. Particularly ETF news. This creates notoriously unpredictable and irrational bursts of volatility.A lack of news leads to a lack of volatility. Throughout the summer, this caused a steady downturn in markets, leading me to state that the market was wrong with BTC trading at $25,700.
In pure laughable crypto nature, an erroneous Cointelegraph tweet was what the market needed to push towards more reasonable price levels of $35,000. The weeks that followed made it obvious that the market thirsted for trading the ETF narrative.
After the irrational rationalization of prices, an important buff to Bitcoin’s PR machinery, Larry Fink, appeared on live TV. Bitcoin remains uncorrelated to gold, bonds, and U.S. equities. Regardless, Fink attempted to downplay the impact of the erroneous tweet by calling the crypto rally a flight to safety.Who would have thought that the most powerful person on Wall Street would vouch for crypto one year after SBF and Co were caught commingling naked? Aside from ETFs’ direct price impact, statements such as these from Fink are the core silver lining as to why the current ETF process is monumental. Bitcoin has received BlackRock’s approval and will be perceived as a fully reasonable component of any investment portfolio as we advance.
The conundrum
News is, in its nature, not something you can predict in advance. Thus, it’s utterly challenging to pull forward a comprehensive and cohesive action plan as we all eagerly await the SEC’s thumb of glory or doom to decide whether properly structured and regulated paper bitcoins will be accessible for U.S. institutions.
Thinking in probabilities
We know with 100% certainty that the SEC will give a final verdict to ARK 21Shares by January 10. From now until then, our best tool is assumptions and likelihoods.
Past actions from the SEC points towards heightened odds of a verdict near the deadline. Still, the SEC has deviated from its pattern by postponing verdicts early and communicating actively with filers in 2023. I thus give a final week (Jan 3-Jan 10) verdict a 50% likelihood.That leaves a 50% likelihood of a 2023 verdict. We’re still nine weeks off the final deadline, reducing the SEC’s decision urgency, but urgency should pick up alongside your sense of hurry to prepare for the Holiday season. I give a 20% likelihood of an ETF approval in the coming 5 weeks while a 30% likelihood for an ETF verdict in the two weeks leading into the Holiday season.
So, accumulate while the rest of the market is waiting
While most of the market is busy waiting for news to trade, November represents yet another solid month for aggressive accumulation of bitcoin, with an extended plan to distribute, reduce exposure, and reallocate to alts once the cat’s out of the bag.
