Volatility Alert: Warsh Hearing + Iran Deadline

Chart of the Day — Make or Break for 4-Year Cycle
Trade of the Day — Bitcoin Short Open Now
Alpha Leaks — AAPL, TSLA & USDai
News Roundup — Warsh Hearing, Iran Deadline, Strategy Record, and DeFi Hack
Degen Play — AMD Long Open Now

Make or Break for 4-Year Cycle

Bitcoin’s biggest debate is the four-year cycle or a new cycle (that we can’t see yet). And judging from the chart, we might get further evidence for one or the other within the next week or two.

Under the four-year cycle, after Bitcoin’s cycle top, the cycle bottom hits in about 370 days. And price tends to form and break below bearish wedges and flags all the way down. Bitcoin is in a clear multi-month bearish wedge right now.

Thus, a break above this wedge, perhaps with Bitcoin getting back above $90K, will indicate that we’re in a new cycle. But if the four-year cycle is still in charge, then history says Bitcoin breaks below this wedge, with a new local low forming in the upper $50Ks.

Bitcoin Short Open Now

Continuing from our discussion above, we believe that shorting Bitcoin now is a smart trade.

Here’s why: (1) when in a bear market, shorting at resistance is ideal, (2) the four-year cycle remains until proven otherwise, (3) most are probably long spot BTC, so this trade offers a great hedge; and (4) if this short gets invalidated, a flip long can be performed without much capital lost.

We like stop losses somewhere above the most recent local high at $78.3K, and there’s two take-profit levels at $71K (bottom of wedge) and $58.7K (technical break-down target).

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Volatility Alert: Warsh Hearing + Iran Deadline

Prepare for volatility across both the equity and crypto markets, because we've got two major macro events coming in the next 35 hours.

Kevin Warsh Confirmation Hearing

This is Trump's pick to replace Powell as Fed Chair. Warsh’s confirmation hearing with the US Senate Banking Committee happens today at 10 am EST. His confirmation is expected, but he’ll be pressed about interest rate cuts and shrinking the Fed’s balance sheet. Historically hawkish, Warsh has recently flipped dovish, because he believes that AI will be a major disinflationary force. Dovish signals during the hearing probably give equities and Bitcoin a boost, while hawkish signals will do the opposite.

Iran Ceasefire Expiry

The fragile two-week ceasefire ends tomorrow evening around 8:00 pm EST. Both sides are rattling their sabers and showing signals that they want to negotiate. Diplomatic talks are tentatively scheduled this week in Pakistan, with VP JD Vance leading the US delegation. This is a highly uncertain situation. De-escalation probably gives equities and Bitcoin a boost, while escalation will do the opposite.

Taken together, these two events set up a very high-stakes 35-hour window. We’ll know a lot more by tomorrow night.

Strategy Edges Out Blackrock in Bitcoin Holdings

This week, Strategy pulled ahead of BlackRock to become the world’s largest public Bitcoin holder.

The company purchased 34K BTC last week for $2.54B. Strategy now holds 815K BTC — about 4% of total supply — at an average price of $75.5K per coin. So this latest purchase edged out BlackRock’s iShares Bitcoin Trust, which currently holds 802K BTC.

Last week’s purchase was funded through a combination of STRC and MSTR sales, with the STRC sales constituting 86% of the Bitcoin purchases. Thus, Strategy’s STRC product continues to be the company’s acquisition workhorse.

Saylor shows no signs of slowing down. And this relentless, large-scale bid for Bitcoin is something the market has never seen before, so we’re increasingly finding ourselves in uncharted waters in terms of the four-year cycle. However, the larger Saylor’s position gets, the larger the risk there will be to price if Bitcoin cannot appreciate beyond STRC’s annual return (i.e. 11.5%).

DeFi Shrinks 14% Over Kelp DAO Hack

According to DefiLlama, the total value locked in all of DeFi was $99.5B this past Saturday. Today, that number is $85.5B. So, the entire DeFi ecosystem has lost 14% in the past 72 hours due to the Kelp DAO hack.

So what the heck happened?

A hacker (possibly North Korea’s Lazarus Group) exploited Kelp DAO’s LayerZero-powered cross-chain bridge over the weekend. A transfer message was forged, and 116.5K rsETH - worth $292M — got printed out of thin air. The hacker then deposited the fraudulent rsETH into Aave and borrowed $190M against it. So this leaves Aave holding $123M to $230M in bad debt, depending on how Kelp accounts for the rsETH shortfall.

Then the real contagion started. In a panic, Aave users pulled $6B out of the protocol, and the fear spread across the rest of DeFi, with the entire space losing $14B at the time of this writing.

What an absolute mess. If DeFi is going to survive, it must build robust systems to stop this from happening. The benefits of DeFi are needed, real, and game-changing. But without solid security, it will wither and die.

AMD Long Open Now

DEGEN AMD longs anyone?

A seven-month sideways channel broke to the upside last Thursday on elevated volumes. Prices have flipped the resistance to support at $266, and prices are close to that level now. So punching longs here makes sense if you bullieve that nothing ever happens.

We like stop losses around $260, and the technical take profit on this trade is $340.

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