If Credit Suisse collapses, how will it affect the crypto market?

Hello, friends, and thanks for hanging out with us here on the market report today. Today is October 4th and we want to welcome all those folks tuning in from around the globe. I hi, I'm your host, Benton, and we're joined again by our resident experts, Marcel Peckman and Sam Borgi. Sam is back this week and he is the business editor of Cointelegraph, where he brings a decade of experience in economic analysis and financial market writing. Marcel Peckman applies his 17 years of experience trading derivatives options and futures to the crypto derivatives markets. Fellas, we are back in the saddle. Things are looking green for now, but is it here to stay? A lot of rumblings going around the general macro markets. What's going on this week, Marcel, how are we feeling, man?

Well, I do think that corporate earnings season are going to be bad because there has been a steady growth of 30, 40% earnings for the past couple of years, especially on tech companies, the big tech companies, and that's not sustainable, especially in a year that the economy is dwindling. So not doing very well. So I think lesser earnings will be would mean that the S P will no longer rally. And in the first moment, I think investors will fear is the is this bad for crypto? But I will show you later on that it's not. That would be positive for crypto.

Very good. We're starting to hear some bullish cases and narratives being spun around the space. Sam, good to have you back this week on the show. How have you been, man?

Been fantastic. It's been an interesting few weeks. We just got back from a conference. Circle Financial was great regarding what Marcel said on the earnings front. He's absolutely right. But Marcel, never underestimate just how bad earnings expectations are because when you set the bar really low, it's really easy to exceed expectations. And that always makes for good headlines. Right? We've seen that quite a bit. It's a game, the Wall street earnings game. It's definitely a game. When you set expectations so low, it's so easy to actually beat those expectations. And obviously you get the headlines that, hey, you know, company X just beat expectations on earnings. Isn't that great? No, it's not so great if you actually look at the underlying numbers. So that's maybe I'm a little bit too cynical there, but how can I not be at this point?

It is stormy seas. We have earnings reports going on, inflation is going awry, and we have some bankruptcy rumblings going around the space as well. So lots of different things happening in the macro markets Want to take a second? Welcome, Catherine Rhodes and Ahmed. Thanks for coming to today's show. Pop your questions in chat. We're gonna have our panel of experts, Sam and Marcel, answer those periodically throughout the show. So if you got questions for them, make sure you're dropping them in the chat. Don't forget to like and subscribe Cointelegraph. We're here every Tuesday at 12pm Eastern to bring you the market news. For those interested today, drop your Twitter handle in that chat. We'll be giving away $50 to the Cointelegraph store. So we're gonna be giving that away at the end of the show. So make sure drop your Twitter handle in there for your 50 gift at the end of the show. All right, we're gonna be diving into bitcoin. What to be on the lookout for this week. We're gonna be talking about the credit Swiss stuff. What does this mean for the markets? What does this mean for crypto? Or is there going to be fallout, is going to be contagion? We're going to dive into that. Sam, Marcel have all the answers for you guys. And then I don't know if you heard McDonald's making some moves in crypto this week as well. So we're going to touch on some of the biggest headlines this week going around the crypto Twitter sphere and Twitter in in general. So let's go ahead and jump into our weekly roundup video for this week to get you some of the biggest Twitter headlines. Shout out friend of the show, markeyusco. By the way, I loved that tweet he posted. He's always got some of those great insights. Financial crisis, they said. So that was a good one. The other thing too, FTX seems like they were just taking over the world slowly but surely. So some of the big headlines from Twitter this week that really kind of stuck out. But we got memes for you guys today. So let's go ahead and jump into some memes. Let's have some laughs here before we kick it off with the market news next. What do we got? Got my feelings when bitcoin is pumping dumpling trading sideways plane. That's about right. I've become numb to any kind of 5% pumps anymore open to anyone. You saw the trading volume down 97% across the NFT space H World is on fire. Oh, shots fired. That's a good one. That's definitely my favorite one so far. I couldn't tell what those were.

I want that one. I want to keep that one in my back. Pocket. This is. It's going to become useful one day.

Feed from Christmas.

Yeah, Marcel, that was good. All right.

Very good. Good memes. Shout out to Adrian Danila for, for pulling those for us this week. Always a good time, having a good laugh. But let's get into some market news this week. We got some big headlines across the board, but we got some things to keep a lookout that could potentially impact Bitcoin. So let's go ahead and jump into this Credis Swiss issue. The unnerving of what's been happening periodically here over the last couple days. You heard the CEO come out and say, hey, everyone, we're fine. Sounds like reminiscent of 2008 when Lehman Brothers, same thing, CEO came out and said, hey, guys, we're fine. We're. We're completely liquid. So quick excerpts from this article, and then I want to get Marcel and Sam's take. So what's really going on here? Worries over liquidity resulted in emergency public reassurances from the CEO, with executives reporting, spending the weekend calming major investors. So, with history increasingly looking to rhyme, nearly 15 years later, the Credit Suisse saga is not going unnoticed. So Mark Jeffrey actually had a good quote here. He said, we can't see inside C5 firm Credit Suisse, just like we could not see inside C5 firm Celsius, 3ac, etc. So is there any correlations or things that you can kind of connect the dots with of what you're seeing currently with Credit Suisse and, and maybe the 3 AC and Celsius situation? I'll go ahead and start this off. Let's. Let's start off with Sam here. Are there any kind of correlations that you draw from either one of those situations? Are you kind of looking at these as two separate events with two totally separate impacts?

Yeah. So the meme section was when we laugh now, this is. This is when we start to cry, I guess. Right. So I don't necessarily see any direct parallels. I mean, except for the lack of transparency, of course. But, you know, I'm, I'm still looking at this as, as its own kind of phenomenon. And I expect what happens in traditional finance to impact crypto. So I don't really draw any. Any direct parallels right now with what's happening or what happened with, you know, those other disasters, except for the fact that we don't really know the extent of what's happening, you know, beneath the surface. And, and we can't know, at least not yet, until it gets really bad. So that's just my Initial thought on that comparison.

Yeah, but at least we have a stock trading and we have the insurance, the CBS, so we have some open market metrics. As for 3ac, Voyager, Celsius, we have none of that. So in a way there's much more transparency.

Well, Marcel, can you kind of just fill us in though? Like what is, what is currently happening in the situation? Why is this actually a headline this week? Should this be a major concern for folks tuning in today? Can you break it down for what's actually transpiring with Credit Suisse?

Okay, so first things first. What is Credits Credit Suisse? It's an investment bank. So it's not like your bank of America with thousand of thousands of millions of clients and thousands of shops over the cities for local small investors. It's more focused for companies and for wealth management, for pension funds, for large investors. So most of the money that has been placed on Credit Suisse and UBS and Switzerland, banks are not the kind of average investor that can. Okay, I don't think Credit Suisse is doing fine this month. So I'm going to shift my money to JP Morgan. Most likely it's a Russian investor, it's some investor from offshore company in Panama who don't want to be identified, who don't want to show papers to the US government. So it's a completely different kind of client. And you got to remember that in June 2022, so over four months ago, the stock of Credit Suisse was already down 92% from its all time high. So everyone in the world already knew that those banks were in trouble. And a large bank as Credit Suisse being traded at a 16 billion dollar market cap as it was four months ago, it already meant it was underwater or it was rather insignificant in the grand scheme of things. So it's not a surprise for the market.

So I, I guess I want to, I want to play this out. Let's just say, you know, I, I know Marcel, we've talked about this and you've said, hey, somebody's going to bail them out. They're going to be safe. People aren't going to just going to run and withdraw their money from the bank. Credit Suisse. But what happens if for whatever reason they do go bankrupt? Is this a situation where Bitcoin could potentially shine? Will people flood or try to leave and to go to other banks? Different currencies, different assets? What, like what are kind of the different scenarios that could play out here?

Well, Credit Suisse has 99, $0 billion of deposits from clients Again, in the grand scheme of things, it's not a bigger amount of money. For instance, I think debtor and USD coin from circle combined have over $90 billion worth of deposits. So it's not really a big number. But if Pretty Swiss is to go down, is to go bankrupt and not being saved by governments and agencies and central banks, it's going to really, really be really bad for the whole industry because people start thinking, well, who's going to be next? Is it Deutsche Bank? Is it another bank that suffered major losses from 2008 crisis or are still in pain? So this confidence crisis can trigger investors to withdraw money from banks and then the whole system starts to collapse. So I think bitcoin wins when there's distrust in the banking environment. And if, if CS collapse, definitely it could be a trigger, could be a positive trigger for bitcoin.

Sam, I want to quickly pivot into the credit default swaps. And so I'm gonna highlight a tweet here that came out earlier this week. So Danila, if you wouldn't mind just sharing my screen real quick, it looks like the credit default swaps here. So first of all, if you wouldn't mind breaking down what is credit default swaps for those that may not know and then why is this level significant? Because it looks like if you look back at 2008, 2009, we are very much so approaching this metric right now currently for where Credit, Credit Suisse, CDC or CDS spread is at. So if you wouldn't mind breaking down credit fault swaps, what are they? And then why is this level significant?

Sure, I think many of the listeners might have heard of credit default swaps if they watched, you know, the Big Short or if they, they're familiar with the 2008 financial crisis. Credit default swap or CDS is basically an insurance purchased against a potential default. So if the CDS price goes up, there's some indications that it costs more to insure and that could be cost for concern around that particular company. In the case of Credit Suisse, we saw their CDS or their credit default swap actually rise substantially. I think it was over last week. So the cost to insure went up. And that again raised concerns that there could be something going on beneath the surface. A lot of this, I mean, Marcel mentioned, a lot of these issues were known back in the summer and I believe in July they announced plans for restructuring or at least refashioning parts of their business. But there was a news report I think last week out of Australia that talked about a potential big European bank that could be in real trouble. And it became pretty evident after a while that that bank was going to be Credit Suisse. So I think if you take a look at how its stock has performed, yes, it's down 92% from its peak back in, back in the summer. It actually fell to new record lows when this whole crisis was unfolding or this potential crisis was unfolding. And then you had the surge in the credit default swap rate. So all of this combined with some bad press around Credit Suisse, especially about the CEO coming out with a memo to employees telling them that, you know what, we're at a critical point right now. All this has led us to kind of be in this particular situation right now and investors are beginning to price in the real possibility that, you know, things can get much worse. You mentioned an important question earlier about the, you know, the prospect of a bailout. It's hard to imagine that, that something like that wouldn't happen in this case. But again, it's, it's too much to speculate at this point. So that's kind of the overarching, you know, view of CDS and how it applies to the current Credit Suisse situation.

Very interesting. Now I do want to read everything is not doom and gloom here. And this is kind of referring to Bitcoin because the quote here from the article read, we've had contagion from UST and 3ac and leverage flush out already. BTC is massively shorted as a hedge. Even if Credit Suisse slash Deutsche bank collapse and trigger a financial crisis, can't see us going much lower. Is this, is this, do we feel like Bitcoin has kind of bled out as much as it could or are there lower levels? If something like this with Credit Suisse were to happen to the global markets which would then impact the crypto space. Do you see Bitcoin going much lower in a scenario like that, Marcel?

Yeah, I think in the first moment investors are going to be scared. We've seen this in the recent past. Whenever there's distrust because of wars or whatever Covid or whatever is happening, Bitcoin investors just want cash positions and most US dollars as we've seen over the past year or so. So I think in the first moments they will tend to seek out US Treasuries and US dollar cash positions. So it's going to be bad for every risk market, including Bitcoin.

Pretty good.

And I can see, I can see us dropping to maybe $14,000, $12,000 if there's a huge contagion risk in the global global banking system.

I see in chat here Hugo Christian is saying BTC is going down to ak. Sam, what's your school thought here in regards to any potential fallout from this situation that we're monitoring with with Credit Suisse?

Yeah, so this is all really interesting points of discussion because Bitcoin has sustained I think the worst right now of the crypto related contagion. We saw some of the biggest, you know, so called blue chip crypto companies turned out to actually be, be worth nothing. And we saw the massive decline in Bitcoin's price. So any other factor right now that's going to affect Bitcoin will probably be a macro factor or something that comes from the traditional financial markets because Bitcoin is correlated with those markets. It's always been my view that we do have one more flush out before we reach bottom. I'm not so concerned with the actual price level because I don't know what that could be. You know, my previous downside target was limited at around 20 to 25,000. Clearly that was breached. So I don't really know what the downside is going to be in terms of price. Marcel mentioned you know, the 14k level which is probable in that case. But I expect that if, if this really gets bad and if things get really bad in the traditional financial markets that it will definitely spill over into crypto because it's been highly correlated. We can sit here and theorize about the benefits of Bitcoin being an inflation hedge, you know, being CDS against the Treasury. We can. All these things make sense in theory. But the adoption indicators don't suggest that investors are treating it as such. Now that could change after a major shakeout. But my base case has always been one more flush out. Sometime now in the next month, month or two before we actually have a definitive bottom. But you know, that doesn't have to happen. You know, there's, there's no saying what's exactly going to happen. Bitcoin's already declined significantly from its peak. I don't even know what the percentage is right now. But going from 69 down to 18 is still a pretty brutal drop. So my base case stays the same. I do expect one more flush out, but we'll see how this whole plays out.

And while we're talking Bitcoin's bottom, let's also talk Max Payne. Which brings us into another point here with this article. And Willy Wu has some excerpts that I want to touch on. So he's an analyst and statistician Willy Wu, creator of the data resource Wuble, the next bottom could have a close relationship with with Hodler capitulation. Previously in bitcoin's history, bear market bottoms were accompanied by at least 60% of the supply being traded at a loss. Woo to conclude that Max Payne may still be around the corner. So to Sam's base case there we could be seeing lower. The one thing that I thought was interesting though is that the bear market bottoms were indicated by the 60% of BTC supply being traded at a loss. And so is that, is that something that you all are monitoring is how much BTC is being sold off and for and for losses? Marcel?

Well, I'm particularly not a fan of on chain analysis first because we've, we don't know if those coins moving are effectively being sold. People can, can be moving coins to exchange for staking proposals or for privacy reasons or whatever. We don't know. But most importantly, as time goes by and investors that bought bitcoin understand what they effectively bought, there will be less panic selling during crisis or crashes. For instance, we saw Tesla buying over 1 billion dollar worth of Bitcoin and at the first 50% crash they panic soldiers. So I think diamond hands are being created as people saw their coins that they purchased at 50,000 or 40,000 or 20,000, going down to 18, going down to 17 and not selling them. So after the while it's going to become harder for those guys to sell. So I don't think we should expect a certain percentage of bitcoin holders going underwater. So I don't think it works that way.

And it's a great point. With lots of pressure diamonds are made. So that's how diamond hands are made is with a lot of this pressure. Sam, we know how you love your on chain data. Are you still this, this steady rock in the stormy sea. Is any of this on chain data that Willy Wu is highlighting here? Does that change anything for you?

Absolutely not. I don't want to pick on Willy Woo at all. But when you make definitive statements about know how bitcoin can't fall below this level because of onchain analytics, I don't really have anything to add there. Onchain data is a perfect example of analysis paralysis. There are so many fancy data charts etc about purporting to show what's happening on chain. Just know that on chain data for me it's, it's more noise than signal. It's not a signal about where price is going to go. If you want to do on chain Data to evaluate maybe what happened in the market, you could potentially do that. I'm not saying it's completely useless. My problem with on chain data is people who use it as a predictive tool. You know, that, that I call on that and I think we've seen that repeatedly the past couple years in terms of the crypto capitulation. The last guys that capitulated were the on chain people who were telling us back at 40k that we're not going to go much lower because the onchain data is, is so positive. And then boom, we had hundreds of thousands of bitcoin entering exchanges. We saw the sell off. It's not a, it's not a signal, it's noise. So no, with all due respect, a lot of smart people out there who, who work in onchain, but for me, it's not a signal of, of price in the least.

Very good. And I want to pivot into our next article with Robert Kiyosaki for those familiar with him. He is the author of Rich Dad, Poor dad and he is stating his bullish case for bitcoin and why folks should be getting involved with gold, silver and bitcoin. So some of the highlights of this article that he really dives into here is talking about this opportunity, this buying opportunity amid the strengthening United States dollar and continued interest rate hikes. So he tweeted out earlier this week, buy, buying opportunity. If Fed continues raising interest rates in the US Dollar will get stronger, causing gold, silver and bitcoin prices to go lower. Buy more. He says when Fed pivots and drops interest rates, as England just did, you will smile while others cry. Take care. Is there any truth to, to what Robert Kiyosaki is saying here? Marcel, are you in agreeance with him or do you disagree? How are you kind of approaching this, this whole interest rate hike and potential pivots in the future?

Well, but it's partially true because the Fed and the central banks, they have two options to go. The first one is continue interest rates hiking so the economy itself is going to wind down because there will be less jobs. The, the, the market will have less incentives to put money on risk investments, including expansions or buying stocks and whatever. So the market will ad. Adjust itself. And the second way is, okay, we're no longer hiking interest rates. That the inflation takes its course and inflation will cause the consumer to go down and will adjust itself eventually, but in both ways. The economy, so the gdp. So what is, produces, what is consumed by, by the countries is gonna reduce, is going to be greatly reduced. And with that, housing prices are going to go down, stock prices are going to go down. And when that happens and people see that it was not the US Dollar itself that was getting stronger, it was just the bubble of everything that was winding down. People who seek shelter in alternative assets and gold and silver and Bitcoin have a chance. So either way, if Fed continues to raise interest rates or not, the end result will be the same.

Very good. And Sam, I guess while we're on this point of talking about quantitative tightening and hiring interest rates, is there a scenario where the Fed would somehow reverse course like we saw the bank of England do and shift from this quantitative tightening into quantitative easing? And could you think of any kind of black swan events that may impact the Fed's decision?

Yeah, well, I think everybody has been expecting a pivot of some sort because they know that we live in a highly financialized economy and we can't sustain higher rates for longer. And my, my position has always been they'll continue raising rates until they break something. What that something is, it's, it's yet to be seen. It could be the economy, you know, it could be the overnight lending market. The, the bank of England situation is, is interesting because that was a perfect example of the left hand not talking to the right hand. Basically you had the bank of England trying to fight inflation by raising rates. Then you had the government introducing new fiscal policy to encourage spending, which in turn heats up inflation. So that was a really epic disaster that happened in the UK with the new Prime Minister there horribly communicated. So now I think the bank of England has pivoted on. They're actually supporting the bond market now because we saw interest rates skyrocket. They're still raising rates and I think they'll continue to do so because they expect inflation to hit 11% this year. So will the Fed pivot? I think eventually it will, because its base case now since the financial crisis of 2008, is to ease. It's a lot easier just to ease than it is to do anything else. But right now the elephant in the room is inflation. And I don't really see anything in what they've said that indicates a pivot anytime soon. But the thing is about the black swan events, as you mentioned, Ben, is that they're black swan. So we can't really predict them. If we see a, a, a massive financial meltdown or a really steep decline in GDP because we are technically in a recession right now, that could force the Fed's hand. But right now, if you take a look at what they're saying, if you take a look at what different Fed policymakers are saying, it seems like they're still standing pat on their, or standing resolute on, on the need to raise rates because what else can they do? Right now they're sacrificing the economy, the stock market and the economy to keep inflation or to try to get inflation under control. Because if inflation spirals out of control even more, that's going to have an even bigger negative impact than, you know, losing a few percentage points of GDP or even the unemployment rate going up to 5%, as horrible as that sounds, because these are people losing their jobs. But inflation is a monster. It's an absolute monster. And if you don't contain it, the effects are going to be much, much worse. So I expect to pivot eventually. Not this year, as most people in the crypto community were, were saying. And yeah, once the printer goes bur again, Bitcoin will rise. I mean, that's, I don't think that's, that's the thesis that a lot of us had originally about the value of bitcoin. It should be rising in this environment here, in an inflationary environment, but we haven't seen that yet. But as Marcel mentioned, you know, multiple roads lead to heaven for bitcoin. And I still see that in the future. But I don't see any way out for the Fed in the short term. But that will change.

Very good. And I see some folks chiming in there, chat. Ron Gin says one more raise. On a pause, Alpha ing says federal raise at least another 125 basis points this year. We're going to see, I think there's going to be a lot more tightening here before they start to loosen the belt, so to speak. But we got another article to dive into here which is going to be written by our very own Marcel Pekman. So he's talking about crumbling stock market could create profitability opportunities for bitcoin traders. So, Marcel, I know you dove into a very deep, complex topic about options trading. And so I want to kind of touch on. You mentioned a strategy that you like to use, but I want to first get into how can traders use options if they've never done it before?

Okay, Benton, so I think if you are starting out in options market, you should only use, you should only buy options because when you sell an option, your risk is infinite. As long as the stock goes up or the coin goes up, you're losing money. So you can only buy options if you're a beginner, if you just want to experiment to get to know the system, I would recommend buying maybe December options call options. So buy options for Bitcoin at $40,000 or $50,000 for year end or $4,000 for Ethereum because those are really cheap. You're going to pay like $10, $100 for an option. If the coin rallies, you gain money. If nothing happens, you lose hundred dollars. You only lose what invested. But remember, focus on buying call options for year end for the beginners. Don't try to do complex strategies.

And so let's go right into the deep end. And you mentioned long butterfly. Can you break this down in as easily and digestible as possible? What is the long butterfly approach when you're trading options?

Okay, so the point of the article was highlighting how an option strategy could yield a 3 to 1 profit to loss ratio. So this long butterfly that I suggested, you're gonna call, you're gonna buy some call and put options. But most what you are Expecting is a 10% to 30% price hike in Bitcoin over the next 30 days. So you have a limited downside of 0.46 bitcoins, but you also have a limited gain at, I don't know, it was about 30, $23,000. Sorry. Yeah, $23,000. That, that's the max gain. You're going to earn one and a half bitcoins. So you start your strategy knowing what your max gain is and what your max loss is. But the point here is if corporate earnings are sluggish or they are weak, this could be a trigger for Bitcoin because there's 90 trillion 9,0 trillion worth of dollars invested in stock market. So even if a 1% of those investments go out to Bitcoin because people think, well, okay, corporate earnings are really going to be bad for the next 12 months. So we have to pick another risk assets. We're not going to Treasuries because they're paying 4%, 5% per year where inflation is 10%. So even if 1% of the stock market money or half percent move to Bitcoin, it's going to be a positive trigger. So I do think that over the next couple of months we could see a 10 to 30% rally in Bitcoin easily. I'm not saying it's going to go to 30, $40,000, but a 10 to 20% the next 30 days if corporate earnings are weak, it's quite feasible.

It's a. Why, why should anyone use this bullish strategy on Bitcoin if we're expecting potential negative earnings, like you mentioned, you know, earlier.

Because the stock market is perceived as investors as a way to profit. So if, if there's earnings, either the. The stock is going up or I'm gonna get paid in dividends. And if the stock market is not providing earnings, then investors have to look for gains elsewhere. So I think. I don't think that 20% or 30% of the money going out of stock markets is going to be directed to Bitcoin, but 1% is feasible because some people will think, well, okay, if there's a crisis, not a huge crisis, not bank going bankrupt, but if there's no earnings in stock market, I need to find other risk investments to get some yield.

All right, excellent. And Marcel's going to dive a little bit deeper into some tips and tricks for you all this week. But our last headline that I want to cover Today is about McDonald's. We're gonna do a quick hit here. I just want to get hot takes on the big yellow arches offering folks being able to buy in Switzerland, a small town in Switzerland. You using bitcoin and tether in a small Swiss town. Is this a big deal if these big multinationals are starting to test this out? Sam?

Well, I know what I'm going to get for lunch today, put it that way. I think it's an interesting story. It is a big deal because it's McDonald's, right? I mean, are there any bigger, more iconic brands in the world than McDonald's? I mean, there are, but it's one of the top, I would say. The fact that they're, you know, rolling out, you know, these, these sorts of payment options, I think speaks to the fact that more people realize that this is a. A trend that's not going away. And we want to try to understand what it is and actually participate in it and let people, you know, it's good for our business if, if we. If we expand our payment options. And I think they're recognizing, you know, the value proposition of Bitcoin and stable coins. I think it's definitely a positive story. And I love the. The little art that we had there too. It's just. Just brilliant.

So I don't agree with Sam.

We saw that it's a nothing burger.

Yeah, we saw that in El Salvador. If a company accepts payment in bitcoin and it at the same time is selling those bitcoins for tether, so they're not using as capital reserve, it's not changing anything. It's not really adoption. No, my point, I don't, no, I.

Don'T think it's changing anything. But what I think it does is it, it shines the spotlight on, on crypto and the fact that a company like McDonald's, even though it's a very specific case, is willing to accept that payment. You know, obviously it's going to be converted. They're not going to be holding bitcoin. But I, I want to at least have one positive to take away from this show today.

All I know is that the McRib is back and I'll hopefully one day be able to buy that with bitcoin. All right, moving on here, folks. We got, we're checking the chat. Go ahead and drop your Twitter handle in there if you're looking for that 50 gift at the end of the show to the Coin Telegraph store. We have, we've, we have our crypto tips coming up next. So let's go ahead and jump into that foreign have you ever heard of the trickle investment buying? Well, if you're planning on investing in a cryptocurrency for the long term, don't purchase your entire investment amount at the same time. The most effective and efficient way to profit from a long term investment is divide your investment amount up over a number of weeks or even months. Coin price will continue to go up and down, but your initial stock purchase could have been at a high without you realizing it. Splitting your overall investment fund into small parts and investing them over the long term is more likely to increase your overall profits. This is also called dollar cost averaging, which is one of the basic fundamentals of investing. And so again, use that dollar cost averaging method with any kind of investment that you're doing and it will typically pay off in the long run. And that was our crypto tip for this week. All right, Marcel's got the goods this week. He's got some trading insights for us. So I'm going to hand it over to Marcel, take us into the deep end and drop some knowledge on us this week.

Okay, Benton, so there are two big problems when we try to interpret IT patterns and for I don't know why, but we love staring at price charts. I think we can do it for the whole day, for the whole week, for the whole year. But we're really bad, we're really lousy at it. So the first issue lays on correlation and causation, meaning we create stories to justify price movements when most often they're not. There's none. There's no reason for that it happened by chance or sometimes the rational makes sense, works for a couple of weeks or a couple of months and then simply disappears. It changes winds. And we don't know how to explain why the correlation happened or not. So I want to share. Screen here please, Danilo. So on the orange line we have bitcoin price. So the scale on the left and the blue area is byd. It's an electric auto producer based in China, but it also has production in Europe. So if you have ever seen an electric autobus in England, especially in London, it's made by byd. And our eyes tells us there's a huge correlation among the two charts because you can see that the hike in 2020 and the peaks almost coincided and the market shift late 2021. So the prices kind of move in tandem as we untrained ic. But that's far from the truth. For instance, there was the huge bitcoin price crash in 2018, the Bitcoin fork wars, which was not reflected on BYD price, and also a rally. The bitcoin price rally in 2020 happened five, 50 or 60 days later than BYD. So untrained eyes see correlation where there is none. Thank you, Danilo. So the first problem is that we tend to see price charts. We tend to create stories. Oh, that was the Federal Reserve. Oh, that was the 3ac crash. Oh, that was the Voyager. Oh, that was Tesla buying. That was Tesla saying. But sometimes it makes sense and sometimes, well, okay, Tesla bought bitcoin, a billion dollar bitcoin rallied, then Tesla sold Bitcoin 1 billion dollar and nothing changed for the price in the next 30 days. So how can you explain that? So our eyes and our minds are great for jungles to detect lions or to detect patterns in caves, because we've been doing that for million years. But staring at mathematical equations or price charts, our eyes have not. And our minds have not been designed for that. So, Danilo, I want to share my screen again, please. So this time around, I want to show you the correlation metric, which is this blue chart down here. So the correlation is an indicator that goes from one, which means 100%. So when one price goes up, so does the other. When the price goes down, so does the other asset. So a positive correlation is close to 1 and minus 1% means they're inversed opposite. So if BYD price goes up, BTC price goes down and the other way around. So we can see that historically there has never been a sustainable correlation. So our eyes tell us one thing, but the mathematical equation Shows another thing. And more importantly, if we fast forward this chart to the more recent period, you can see that they completely lost any correlation. So the bitcoin, bitcoin price and the bid price are flowing in other directions, unlike what we saw in the the previous year. So thank you, Danilo. So the first point is both price charts were nerve, were never really correlated. It was just our mind detecting part patterns. There was none. And the second thing is even if there's some correlation that lasts for six months for a year, like S and P and bitcoin right now, the same way that it started, it can just disappear without a plausible explanation. So we shouldn't rely on that much, a lot. So when we see price charts, try not to come up with stories to explain why the price movement happened.

Very good. I was going to ask like, why in particular were you, you choosing byd? Is that pretty common thing for people to like look at a stock and be like, oh, this is also correlated to crypto as well.

Yeah. Because people try to find assets that have high correlation for over two or three months and then they come up with a story, oh, that's a risk asset in China. So it's being perceived as a tech stock and bitcoin right now is being perceived as a tech stock for investors. So people come out with weird stories to fit the chart. That's what happens.

Very interesting, Marcel, always dropping knowledge on us. We appreciate you sharing your trading insights this week. And we got a quick question though, I guess while we're on. This is Catherine Rose says, when did BTC and S& P start to correlate? Does it. Do you know any of that off the top of your head?

As I recall, the strong correlation came out in February or March. Sam, do you have any data on that? But I think it was about seven months ago.

Yeah, I think Marcel, I think it really started to become a thing after the COVID crash is. That's when we started to notice more of it. But during, during like a. The macro bull market, Bitcoin was basically doing its own thing. It sometimes it was correlated, sometimes it wasn't, but really since COVID and then the aftermath of that, there seems to be a stronger correlation. That's really when I've been picking up on it most for the past couple of years now. The correlation may have become stronger earlier this year, but it seems to be the correlation has been more or less there in some capacity since. Since the COVID crash.

Yeah, I just checked the chart between November 2021 and December 2021, the correlation was really low at zero. But then at the end of January 2022. So January this year the correlation started at 65, 70% or higher and has been at that level ever since. So kind of since late January.

Excellent. All right, I'm. Thank you for walking us through that, Marcel. See Kevin Chambers in the chat. When is the ETH merge? My man. Welcome, welcome. Eth merge happened last month. All right. I hope it was being sarcastic, but if not, you know, hey, go to Cointelegraphy in the news. We got, we got plenty of that about the ETH merge. All right, let's get into Markets Pro, folks. We got two tokens that you should have been watching this week. And if you had your Newsquake alerts on your phone and you were monitoring Vortex scores, you could have gotten into a couple of these trades. So let's go ahead and jump into our Markets Pro segment for this week. All right, well, we got Orbs trainer in the ticker Orbs. And this week our Newsquake alert, which is an automated alert that instantly notifies users when market moving events happen, went off well. Newsquakes continue to bring the heat even during this crypto winter. This week several newsquakes about listings preceded major price movement. Like in the case of orbs on September 29, orbs price was about $0.03. When a Newsquake told tuned in markets per subscribers that Huobi Global would list the token right after that listing, that price shot up to a peak about 4 cents and rapid fire increase about 33% power. The news quakes in your pocket. That's why you got to get Markets Pro going. We have a mobile app which is why it's on your phone. All right, next one that we had this week you should have been watching was Oaks Oax and well, the Vortex score, which is the comparison between its current market conditions and social conditions of the past ranks in between 1 and 100. Closer is to 100 more confidently bullish, that is 30 and below indicates historically bearish conditions while high vortex scores continue to proceed. Impressive price movement in the bear market. For example, a green score lit up this week for Oaks while the token was trading price and lull within 72 hours, price shot up from 26 cents all the way up to 39 cents, 50% gainer. You don't see that very often here in these bear markets. But if you're tracking those Vortex scores, you have the advantage in your pocket for Markets Pro. And that's going to do it for the two tokens you should have been watching. All right guys, let's wrap this up here today. Let's get some closing thoughts and then we're going to give away our $50 to the coin telegraph score all the swag your, your heart could imagine is in there. All right. Look at that. Sam's rocking a shirt today. We got it all in there. What just bought RGT 99 score. Okay. Wrong against Hawk in the markets pro app. Good to see. All right guys, closing thoughts. What are you going to leave us with this week? What's big takeaways from today's show. Marcel, I'll start with you.

Well Benton, I'll go out by saying that nobody knows what's going to happen over the next six or 12 months. If anyone knew he will already be a millionaire because he who bought futures or options or whatever made tons of money knowing in advance what's going to happen. So the thing is you're going to have to diversify a little bit. So even if you are a bitcoin maxi, maybe having a 20% cash position for payments of monthly bills or for buying bitcoin if go slower. So it makes sense to be prepared even if you're a bitcoin maxi or ethereum maxi.

Always excellent advice. What do you got for us this week?

Well, I don't know if it's going to be an uptober or a rocktober or what are we gonna get a Moonvember or whatever they call it. But I don't really care because I have a long term value proposition of bitcoin and I value that. So again it all depends on, on what your approach is to investing. But it's really easy to get roiled up, caught up into all this that's happening with Credit Suisse and everything. Ultimately we should be trying to find high quality assets and invest that in the long term and I think that's a prime opportunity right now. You know Robert Kiyosaki mentioned that it could be a very good buy opportunity for bitcoin and some precious metals coming up. I, I fully, fully agree with that and I've been cost averaging back in again because these levels are very attractive. So for me nothing has changed. And try not to get, get lost in the noise of the day to day market activity because if you do, you're not going to succeed in the long run.

That's why we're always trying to give folks that long term vision and that's why we have the panel of experts. Marcel and Sam always bring the best knowledge in the game, folks. I think Marcel made a great point. Have that dry powder on the sidelines. You never know when it's going to go lower. And when it does, we want to Robert Kiyosaki that and get in because it could be a potential great buying opportunity. All right, folks, I want to give away that $50 to the Cointelegraph store today. I saw Alpha ing was chiming in a lot. Great feedback, great insights. You're going to be our winner for the Coin Telegraph store giveaway today. $50 is coming to you. We're going to shoot you a message on Twitter. Keep your DMS open. Alpha G. We appreciate all your thoughts and all those folks that were tuning in today chiming in. Catherine, welcome back. And wrong again. We appreciate everyone chiming in and tuning in to today's show. Until next week, this has been the Market Report and this has been Cointelegraph, the future of Money. We'll be back next Tuesday, 12pM See you then. Deuces. Sample.