Bitfinex is under investigation by the NY State Attorney's office for FRAUD which is a big word, but may be more smoke than fire. Bitfinex has denied the allegations and in lieu of regurgitating the news, we will focus on how the market is reacting. In the end News does not drive markets, sentiment does. Sure it pulled back a few hundred points, but it was already in an area where a pullback was probable. The news may have just been a catalyst.
As we mentioned last night, this was not a time to panic, but to simply step aside and let the market determine the extent of the news. So far it seems to be a BIG Nothing burger! Bitfinex came out quickly with a response to the NY Attorney's allegations and mentioned they have been fully cooperative with the State Attorney's office. In short they claim that the purported $850 million loss is in fact "seized and safeguarded". Hardly Fraud if it is true.
Regardless markets are a perfect discounting mechanism and all news is discounted quickly, faster than you can sign on and click sell. This is why we mentioned last night to our followers, just stand aside. However for those with the stomach, the guts, the grit, there is an opportunity to take the contrarian trade. Last time I wrote a contrarian trade article it was on Litecoin at 28 and Bitcoin was poised to crash below 1500. Maybe history repeats though this is significantly different than January for sure. You had to have gonads of iron to take that trade. Currently you just need a strong stomach.
The Big Move & The Pain Trade
A whopping 300-400 pt move is hardly a capitulation into the Abyss or a deep market selloff. In fact this would be considered a normal pullback if there was no news at all. Yet looking at short interest, TV Experts and social media, many are preparing for an apocalypse that may never happen. So why you take a break from stocking up your fall-out shelter with food and water lets examine the "pain trade".
Shorts are finally thinking "this is the big one" and the evidence is clear. Short interest is up nearly 75% since early April, and yet Bitcoin has barely flirted with the 5k area let alone pulled back to 4500. Someone is absorbing all this selling, and do you think it is the ignorant Bitcoin trader, or smart money? Probably the latter. Someone has to take the opposite side of the the seller, and I doubt it is the weak and frail.
In addition the 5k level was rejected and if price can maintain above 5k, as ugly as it looks, there is a potential contrarian trade here, especially with the pain trade being short. Let the price falter a little more, let a bearish continuation bar trigger and when the shorts really pile in.......... it's a buy! Reminds me of the movie trading places. "A little longer, a little longer, a little SELLLLLLLL". If you believe in manipulation and the exchanges are manipulating price action, where is the pain trade? SHORT.. Let them pile in some more, let it become exuberantly bearish, let the so called analysts on TV get the herd excited, let the short trigger happen and THEN PULL THE RUG! I love that scene in the movie, it was epic, and really gives you an idea of the herd mentality.
Let's look at the other side of the leveraged market.
Leveraged longs are already headed for the exit, and it is like a stampede. Many are getting liquidated, others, well they are cutting their losses. Obviously it is headed lower, being down 30% over the past few days.
So think about it, if you were a market manipulator, where is the best opportunity to make money? Long or short?
The "pain trade" is to the short side, and regardless of the outcome, I want to be positioned against the herd. If there is going to be manipulation by exchanges do you think it is easier to squeeze out longs or squeeze out shorts? Hmmm didn't they just transfer a few hundred million from the Tether Treasury? You think they might be looking to buy up the market here and squeeze out them short traders?
Pullback to 4200
I would not get my hopes up that we pullback to the low 4k's and actually anything between 4700-5000 would be an area of interest for me. Price is supportive so far. We could see a long setup sooner than later. We are monitoring the price action for a swing trade long and if it does happen we will issue a trade signal. These opportunities do not come by every day, and if you can ignore the news, think like a market maker in lieu of "that guy that feels he is an expert" you can take advantage of the market, especially when it looks its worst.
There is still the potential for some downside which is why you have to have True Grit and Guts to take the contrarian trade. The herd continues to pile into the short trade, the Gurus are bragging how they are finally "going to be right", and the Contrarian is thinking "hmmmmm maybe I take a stab at it here, what do I have to lose?"
Sure you might lose some sleep, you might loose your catfish dinner tonight, but then you probably do not have the stomach to be a contrarian. If you don't, then just step aside and let the market determine the outcome, stop guessing. But if you do, that short squeeze could put a contrarian long, well into the money.
In the end if you don't have the guts and grit, just step aside and let the market stabilize. Let the market determine the direction, do not try and guess it. However if you really believe in manipulation, have the courage to be the contrarian, well the short squeeze is looking just to sweet to pass up here. Gosh if I had some fresh Tethers sitting around I would be thinking, maybe a simultaneous raid across a few exchanges using my newly printed Tether and I could make an easy buck or two%. Well that is if you believe in market manipulators. After all what are they going to do with 300 million or so just printed, try and bribe the AG of NY?
As we mentioned last night, this was not a time to panic, but to simply step aside and let the market determine the extent of the news. So far it seems to be a BIG Nothing burger! Bitfinex came out quickly with a response to the NY Attorney's allegations and mentioned they have been fully cooperative with the State Attorney's office. In short they claim that the purported $850 million loss is in fact "seized and safeguarded". Hardly Fraud if it is true.
Regardless markets are a perfect discounting mechanism and all news is discounted quickly, faster than you can sign on and click sell. This is why we mentioned last night to our followers, just stand aside. However for those with the stomach, the guts, the grit, there is an opportunity to take the contrarian trade. Last time I wrote a contrarian trade article it was on Litecoin at 28 and Bitcoin was poised to crash below 1500. Maybe history repeats though this is significantly different than January for sure. You had to have gonads of iron to take that trade. Currently you just need a strong stomach.
The Big Move & The Pain Trade
A whopping 300-400 pt move is hardly a capitulation into the Abyss or a deep market selloff. In fact this would be considered a normal pullback if there was no news at all. Yet looking at short interest, TV Experts and social media, many are preparing for an apocalypse that may never happen. So why you take a break from stocking up your fall-out shelter with food and water lets examine the "pain trade".
Shorts are finally thinking "this is the big one" and the evidence is clear. Short interest is up nearly 75% since early April, and yet Bitcoin has barely flirted with the 5k area let alone pulled back to 4500. Someone is absorbing all this selling, and do you think it is the ignorant Bitcoin trader, or smart money? Probably the latter. Someone has to take the opposite side of the the seller, and I doubt it is the weak and frail.
In addition the 5k level was rejected and if price can maintain above 5k, as ugly as it looks, there is a potential contrarian trade here, especially with the pain trade being short. Let the price falter a little more, let a bearish continuation bar trigger and when the shorts really pile in.......... it's a buy! Reminds me of the movie trading places. "A little longer, a little longer, a little SELLLLLLLL". If you believe in manipulation and the exchanges are manipulating price action, where is the pain trade? SHORT.. Let them pile in some more, let it become exuberantly bearish, let the so called analysts on TV get the herd excited, let the short trigger happen and THEN PULL THE RUG! I love that scene in the movie, it was epic, and really gives you an idea of the herd mentality.
Let's look at the other side of the leveraged market.
Leveraged longs are already headed for the exit, and it is like a stampede. Many are getting liquidated, others, well they are cutting their losses. Obviously it is headed lower, being down 30% over the past few days.
So think about it, if you were a market manipulator, where is the best opportunity to make money? Long or short?
The "pain trade" is to the short side, and regardless of the outcome, I want to be positioned against the herd. If there is going to be manipulation by exchanges do you think it is easier to squeeze out longs or squeeze out shorts? Hmmm didn't they just transfer a few hundred million from the Tether Treasury? You think they might be looking to buy up the market here and squeeze out them short traders?
Pullback to 4200
I would not get my hopes up that we pullback to the low 4k's and actually anything between 4700-5000 would be an area of interest for me. Price is supportive so far. We could see a long setup sooner than later. We are monitoring the price action for a swing trade long and if it does happen we will issue a trade signal. These opportunities do not come by every day, and if you can ignore the news, think like a market maker in lieu of "that guy that feels he is an expert" you can take advantage of the market, especially when it looks its worst.
There is still the potential for some downside which is why you have to have True Grit and Guts to take the contrarian trade. The herd continues to pile into the short trade, the Gurus are bragging how they are finally "going to be right", and the Contrarian is thinking "hmmmmm maybe I take a stab at it here, what do I have to lose?"
Sure you might lose some sleep, you might loose your catfish dinner tonight, but then you probably do not have the stomach to be a contrarian. If you don't, then just step aside and let the market determine the outcome, stop guessing. But if you do, that short squeeze could put a contrarian long, well into the money.
In the end if you don't have the guts and grit, just step aside and let the market stabilize. Let the market determine the direction, do not try and guess it. However if you really believe in manipulation, have the courage to be the contrarian, well the short squeeze is looking just to sweet to pass up here. Gosh if I had some fresh Tethers sitting around I would be thinking, maybe a simultaneous raid across a few exchanges using my newly printed Tether and I could make an easy buck or two%. Well that is if you believe in market manipulators. After all what are they going to do with 300 million or so just printed, try and bribe the AG of NY?
