UNPACKING CPI, THE US DEBT CEILING, AND PREPPING A CRYPTO EXIT STRATEGY

Hey crypto champions, it's that time of the week again!

The day when we need to cut through the Elon Musk smothered, meme-sprinkled, high Bitcoin fee noise from the crypto markets and find the true signals 🎯.

I won't beat around the bush - last week was a bearish one. This is even more perplexing when you consider the low inflation results that were released on Wednesday (US CPI came in at a 2-year low of 4.9%).

But sometimes not everything is always clear. Sometimes you need to take the time to step back and dissect what really is going on.

So, let's dive in.

• Recognise - unpacking CPI & the debt ceiling saga + BTC technical analysis
• Respond - we are now less than 1 year away from Bitcoin's halving ⛏️
• Research - have you got a crypto exit strategy in place 🚪?

RECOGNISE - UNPACKING CPI & THE DEBT CEILING SAGA + BTC TECHNICAL ANALYSIS ⛏️

The crypto markets are in 'up only' mode, right? RIGHT?

Clearly, the crypto markets didn't get the memo 📝.

Perhaps whales 🐋 were expecting a pullback and have taken profits?

Perhaps investors became nervous about high fees and high congestion and bolted for the door?

My own opinion? As always, I think both technical and fundamental elements have a role to play (it's oddly weird how often the two align).

So, let's focus less on the ifs, buts, and maybes, and more on the concrete things - and that should start by unpacking last week's Consumer Price Index (CPI) results.

Here are the key takeaways:

• Year-on-year CPI came in lower-than-expected at 4.9% and is now the lowest it has been for more than 2 years ✅
• The housing and shelter component of the CPI has started to roll over (this is usually the last component of inflation to decrease).
• PPI (the Producer Price Index) continued to fall to 2.3% - this is often considered a leading indicator of CPI.

So, this all sounds good. Which it is. It means the Fed can pump the brakes slightly.

But, there was one thing causing a lot of uncertainty in the markets last week - namely, the US debt ceiling.

Here's what we need to be aware of:

• The US debt ceiling is the amount of money the Federal government is allowed to borrow. The debt ceiling gets bigger as the economy grows
• The government reached its debt ceiling of $34 trillion in January 🥵
• As the ceiling has been reached, a vote now needs to be taken over whether or not it should be raised

And there are three scenarios here:

1. Option 1 - the ceiling is suspended (ignored) and the US government can continue to pay its obligations
2. Option 2 - the ceiling isn't raised, and instead the US government agrees to make significant cuts to spending - which could hurt sectors of the economy but prevent the government from running out of money
3. Option 3 - the ceiling is not raised, and there is no agreement to cut spending. In this scenario, the US government would eventually default on its obligations. This would likely be catastrophic for the US economy and, therefore, by association, catastrophic for the global economy.

In my opinion, it is extremely unlikely that we will get to a point where the US government cannot pay for its obligations - it's just a matter of the Republican and Democrat parties jostling until a decision is made.

But, with an insane amount of traders using Credit Default Swaps to bet that a country-wide default is on the cards...

...there's understandably a high level of uncertainty at the current time - which could drag all markets lower.

This brings me neatly to the technical analysis of Bitcoin 📉.

On the daily chart of Bitcoin, we can see that the coin's price has closed below the level of support at $27,000.

It has also broken below the 50-day MA (blue).

This now means there is very little on a daily timeframe to hold prices up until the zone of support at $24,000 is reached.

However, if we jump to the weekly timeframe, we can see the price of BTC coming down to retest the 200-week MA (orange in the image below).

The 200-week MA marked the bottom in 2015, 2019, and also 2020.

For this upcoming week, I will be waiting to see if this 200-week MA holds.

If it doesn't hold, I'll then be looking to see how the price reacts from the strong zone of support at $24,000.

RESPOND - WE ARE NOW LESS THAN 1 YEAR AWAY FROM THE BITCOIN HALVING ⛏️

We mentioned above that as crypto investors we need to focus on things that are concrete.

And one of the largest concrete things steaming straight toward us is the Bitcoin halving event - which is now less than 1 year away 📅!

As I'm writing this to you now, Bitcoin is on the edge of producing the seventh consecutive bearish daily candlestick and is staring down the barrel of a drop to $24,000. But, that may not seem as significant when we are sat in 2024.

At a block height of 840,000 - which is set to take place on 2nd May 2024 - the reward granted for every new block added to the blockchain will be halved to 3.125 BTC.

For those that may not be aware, this event causes an overall reduction in supply, which means that if demand stays the same, or gets higher, the price of BTC should move skywards.

That is, at least, historically what has happened.

• In the first halving (2012) BTC increased from $11 to $1,000 in a year 📈.
• In the second halving (2016) BTC increased from $650 to $20,000 in less than two years 📈.
• In the third halving (2020) BTC increased from $8,500 to $69,000 in less than one year 📈.
• In the fourth halving (2024) BTC increased from X to Y in less than Z...👀

If only we knew the answers to X, Y, and Z.

So, my parting question to you is, are you leaving an allocation of your portfolio for BTC in readiness for next year's halving?

Or will you leverage a position with Bitcoin-related altcoins instead?

RESEARCH - HAVE YOU GOT A CRYPTO EXIT STRATEGY IN PLACE 🚪?

I, like many others, did not take enough profits during the last crypto bull run in 2021.

I was only just finding my stride when it came to true macro awareness.

I wasn't in a position to make an informed decision about exiting the market.

So, while I had investments that did well in the bull cycle, I also held many all of the way down.

Keep HODLing for life right?

No! We don't to be HODLing for life - especially with altcoins.

The most successful investors never hold on to assets - they rotate out of them.

And to do that, you need an exit strategy.

This is a strategy that you can deploy when prices are skyrocketing and you are mesmerised by the numbers climbing on the screen.

Now, there are several strategies that can be employed, but in this newsletter, I'm going to cover the exit strategy that involves price targets 🎯.

The price exit strategy involves two elements:

1. You need to define clear price levels that you believe price will reach
2. And you need to know how much of your allocation will be sold at each price level

The great thing about this strategy?

With the use of limit sell orders, you can have this strategy in place, ahead of time, so that you don't have to think about it when the time comes - which should help to remove the emotional element.

Here's one example using the ETH/USD chart:

In this example, 40% of an ETH portfolio would be sold at the previous all-time high of $4600. 20% of the remainder would be sold at $6000, and 20% of the remainder of that would be sold at $7000.

And, of course, these price levels could be adjusted on-the-fly depending on market conditions.

So while the levels and % allocations should be kept fluid, having an initial base plan can help to prevent you from freezing when the time comes 🥶 .

And that brings us to the end of this week's newsletter!

Thank you so much for subscribing and being part of the Access All Crypto community. I can't tell you how much it means.

I hope you enjoyed this seventh issue of the 80/20 newsletter and hope that it is helping you cut through the crypto noise.

As always, if you have any feedback or you would like to see something different in the newsletter - please reach out! Every idea is a good idea!

Have a great weekend and I'll see you for the next one.

James

CEO & Founder of Access All Crypto

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