November 10, 2021

Bitcoin – the Inflation Hedge!

Nov 10, 2021

Introduction

Since many of you are new readers of the EllioTrades newsletter, we want to express a warm welcome to all of you! This is the perfect place to stay up to date on all things crypto. No matter if relevant macro topics, breaking crypto news, market analysis, altcoin tips, and of course, NFT- and blockchain gaming-related content, we got you covered.

There are a few important things to mention:

The newsletter consists of two main sections: The daily roundup (which you are reading right now) and the deep dive section with in-depth analysis and breakdowns of interesting topics.
Of course, nothing in this newsletter should be considered legal or investment advice. We try our best to provide you with profoundly researched and helpful information which is meant to help you build your own framework. Nothing we say replaces your responsibility to do your own research and make informed decisions.

With that being said, let’s jump into today’s roundup!

Alex Svanevik @ASvanevik

In 10 years, these bank logos will be replaced by crypto logos.

BTC Demonstrating Its Inflation Hedge Function

After yesterday’s record producer price inflation read, we have gotten even more horrific inflation data today: The CPI has jumped to 6.2%! The immediate effect? While stocks are sliding due to fears of an imminent Fed intervention, the DXY (US Dollar Index) and Bitcoin are rising. Who would have thought that BTC is an inflation hedge after all? 🤭

Heather Long @byHeatherLong

BREAKING: U.S. inflation was up 6.2% in October over a year ago. That’s the highest inflation in 31 years. Inflation was up 0.9% in Oct. alone, a much higher increase than 0.4% in Sept. and 0.3% in August. Prices are rising for food, energy, shelter, used cars and new cars.

Gabor Gurbacs @gaborgurbacs

The Fed printed $6 Trillion in the past 18 months increasing U.S. money supply more than 30%. We shouldn't be surprised of 6% inflation number in fact we should ask why is inflation "only" 6% if money supply increased 5x that.

Will Clemente @WClementeIII

$BTC Ahhh I'm inflation hedginggg

Sisyphus @0xSisyphus

I’ve always been of the opinion that high inflation should be bad for gripto (rates go up, long duration assets go down) Market always disagrees, unless the word “tapering” mentioned explicitly

Of course, there has been no shortage of jokes and memes today…

sassal.eth 🦇🔊🐼 @sassal0x

Will devs DO SOMETHING https://t.co/7lcAH8xKUS

*Walter Bloomberg @DeItaone

- BIDEN SAYS REVERSING INCREASE IN INFLATION IS A TOP PRIORITY FOR HIM

Naturally, with every all-time high push from BTC and ETH the fears of a correction or even “the end of the bull market” resurface in the crypto community. This is actually a good thing because as long as there is no bullish consensus we still have room to grow. As soon as the warning voices quiet down and everyone is lulled into the bullishness of the markets, that’s when you want to start looking for the exit…
A nice effect this summer’s “bear market” had on the fundamental structure of the crypto markets is that it reduced the overall amount of risk-taking and leverage, which provides a far more fertile ground for organic, spot-driven price action.

Will Clemente @WClementeIII

This is one of the most "macro" bullish charts for BTC that very few are talking about. Much less of futures open interest is crypto-margined than early 2021. This means the market is less susceptible to major long liquidation cascades & shorts are more likely to be squeezed.

Thus, instead of massive liquidation cascades and red candles, mild sideways consolidation can often be enough to reset funding rates and set the basis for the next leg up. As long as we don’t rise too parabolically and greed stays in check…

₿yzantinΞ General @ByzGeneral

This is beautiful, exactly what you want to see. Higher price, less leverage. $ETH

“Bear Market Proof” Your Portfolio

With BTC and ETH in price discovery mode and altcoins set to follow suit, it’s time to ask yourself if you are really prepared for what comes next: A massive blow-off top in December followed by a brutal bear market, a slow and steady grind up to new highs next summer or even a “supercycle” that lasts many more years – are you mentally prepared for either of these scenarios? (We haven’t mentioned the unlikely but possible scenario of a “macro puke” where global stock markets implode and send the crypto markets down with them).
Here is a possible scenario that could leave many crypto investors in pain:

Coiner-Yadox @Yodaskk

$btc $btcusd #BTC So,I still think (hope?) that $btc will end its cycle in a parabolic way into 100k+ by year's end.. BUT I still have this scenario in mind (which WOULD be the max pain = fck the majority of the market expecting a giga rally into end Q4),but actually starting Q1

So, how should you handle the uncertainty of outcomes and position your portfolio accordingly? After all, you still want to sleep at night, right? While crypto can make people rich quickly, it can also end up in a catastrophe if you approach the crypto market like a casino…
Here are some thoughts that can help shape your strategy now that we enter the most volatile but potentially profitable time in the bull market. Firstly, there are two different “base strategies”:
1. The aggressive and active strategy is where you try to stay on top of the markets and anticipate which altcoins are the likeliest to produce gains in the near future. This involves of course much bigger risks and a lot more time commitment since you expose yourself to short-term volatility by trading in and out of positions and need to be able to react VERY fast to developments in the markets.
2. The more passive strategy involves picking projects which you expect to grow long-term – irrespective of the current hype cycles which ebb and flow. Such a strategy includes identifying narratives and overall sectors with massive growth potential, for example, L1s with strong network effects (ETH, maybe SOL, AVAX, ADA, etc.), infrastructure projects (e.g. file storage and distribution: The Graph, Filecoin, Akash, Coldstack, etc.) and of course gaming and metaverse projects. Be aware though that for some narratives with long-term potential the “time to shine” might not come in the next few months just yet…
- Of course, the two strategies can also be combined since long-term bets can also do very well during the remainder of this bull cycle. You just have to be careful to not confuse hype-driven price rises with fundamental adoption (which is very hard during an altcoin mania phase)
- While some of you will try to maximize your profits in the coming weeks (and take on massive risks), others might already want to prepare for the inevitable market downturn and only hold projects that you are willing to hold for more than just a few months.
- Of course, most if not all altcoins will get crushed in a bearish downturn but it's good to remember that certain narratives and coins with fast-rising adoption can also do exceptionally well even during bearish times (e.g. CEX tokens like BNB back in 2019).

Crypto Gaining More and More Recognition

While crypto’s rise has never been dependant on endorsement by public figures, it’s an inevitable step on the way towards mass adoption. Thus, Apple’s Tim Cook declaring he owns Bitcoin and Ethereum is certainly another step in the legitimization of crypto. After all, some of the most influential tech innovators in the world, Elon Musk, and Tim Cook, own crypto now.

DealBook @dealbook

Tim Cook of Apple reveals that he has personally invested in cryptocurrency. “I think it’s reasonable to own it as part of a diversified portfolio,” he said at the #DealBook Online Summit. nytimes.com/2021/11/09/bus…

Cointelegraph @Cointelegraph

What do all the cool kids do? Invest in crypto! Visa’s head of crypto @cuysheffield said that investing in cryptocurrency has become a lot cooler thanks to an influx of creative types drawn in by the booming NFT sector.

buff.lyCrypto has gone from ‘weird’ to ‘cool’ thanks to NFTs says Visa executiveDuring the Singapore Fintech Festival, Visa’s head of crypto said that a “whole new class” of mainstream users are flocking to crypto via NFTs.

Gaming & Crypto: A Trend That Is Only Just Beginning

After years of ignoring, the gaming industry is finally paying attention to crypto and NFTs. In the last few days alone, Ubisoft, EA, and other big gaming players have voiced their support for the emerging blockchain gaming space!

64% of game developers are sure that blockchain will prevail in gaming in next two years.

Cities Fomoing Into the Metaverse

Not just crypto projects and tech giants such as Facebook and Microsoft are scrambling to conquer the Metaverse. Now, we also see cities – yes you read correctly – trying to play a role in this emerging trend of the future. We don’t know yet what role crypto will play in Seoul’s Metaverse though…
With all the Metaverse hype right now, it’s important to remember that not all Metaverses are equal and that what the crypto community strives for has little to do with centralized virtual reality projects from the likes of Facebook.