Crypto and USA Infrastructure Bill
Crypto has enjoyed a nice rally recently with Bitcoin and Ethereum basically charging straight up since bottoming on July 20th, 2021. Of the two, Ethereum appears to be the strongest with only two red candles over the last twenty days and an 80+% gain. Most other crypto names have been in the green as well and in general price action has been largely bullish.
As usual, this rally has also seen the fud machine turn on as crypto found itself in the crosshairs of the United States Government Infrastructure Bill currently working its way through the Senate. Most of the bill has nothing to do with crypto but there is some language regarding crypto reporting that has the potential of having negative effects on the industry in the United States. You can read this tweet to get a general sense of what’s going on, but the short story is that as of writing this it looks like all amendments have been blocked by Senator Richard Shelby (R-AL), and the original Biden language regarding crypto will be in the bill voted on by the Senate as soon as tomorrow. That language widely broadens the definition of “broker” to encompass just about everyone in crypto and could strangle the industry with unrealistic reporting requirements.
While the bill will likely pass in the Senate, it still needs to get through the House before becoming law and I think it’s way too early to take any real conclusive stance on the state of crypto in the USA from it. At least I’m not going to try and I’ll leave that up to you and your own research. I’m more interested in watching this play out in the market and making sure that I manage my actions and emotions appropriately through it.
We’ll never know the whole truth behind fundamental events like this and if anything we need to stay in tune with the fact that what is said in the media is usually not the whole story. There’s likely a greater narrative that the general public is not privy to that will ultimately determine the direction of the market. Oftentimes the reality is actually quite different if not completely opposite to the story we’re being told. It shouldn’t be a surprise that big market players have interests that are not inline with the public and they might even mislead market participants to be thinking one way while they do something else. This makes trading extremely difficult as the game is a bit rigged against you from the start.
So how does one act in the face of events like this? First off you need to make sure your emotions are in check so that you don’t go and make impulsive decisions driven by your fear and greed. A big part of our education program is teaching traders how to work from a plan and utilize risk management to take emotions out of the decision making process for this very reason. Ideally you will be in a position where regardless of the event outcome, you will have a clear plan of action based on a predetermined strategy with an appropriate amount of risk so that you don’t blow your account up if the market moves quickly.
Secondly, If you’re feeling a certain way about a fundamental event or news story, consider that you’re being played and ask yourself what the powers that be gain by getting you to act a certain way. It’s important that you consider this from a contrarian viewpoint and try to decipher what “they” want you to do and consider doing the opposite.
I like to use technical analysis to help guide me through events like this. In my experience, it is really common for technical setups to start presenting themselves right before or during a fundamental event. It can be really helpful to ask yourself if current price action lines up with the narrative that is being pushed. In the case of this current event, I think the general narrative in the media is mostly negative with fears that the US government is clamping down on crypto. However, when I look at the charts I am seeing bullish price action and I think you can make the argument that crypto has bottomed for the time being and is not currently breaking down. BTC and ETH have probably come a little too far too fast but overall they still look like they want to push higher. When the news came out a little while ago Bitcoin did sell off a bit but was quickly bought back up and is now leaving a pretty big tail on the 4hr chart. To me it seems likely that this fud is trying to scare the public into selling and for now I will remain bullish and consider pullbacks to be buying opportunities.
Read Brian’s tweet about COIN and his take on another recent fundamental event for crypto. Also follow the official TRi Twitter account where I will be posting some bullish looking alt coin ideas this week.