I Can’t Keep Up With All The Craziness

by JDH on March 15, 2025

Today, the Wall Street Journal has an article describing this past week: The Week the Smart Money Got Whipsawed by the Market.

Monday’s heated trading—when the S&P fell 2.7% and the Nasdaq dropped 4%–capped the biggest two-day flight from risk among hedge funds in four years….The chaos continued Tuesday. ..

By the end of that same day, though, Goldman was telling clients something very different: It had been “the best single day” in three years for those hedge funds compared with the overall market, thanks to a price spike in shares of companies most favored by hedge funds.

As the week continued, though, economists ratcheted up the odds on a U.S. recession and markets continued to fall. By the close of trading on Thursday, the S&P 500 had fallen 10% from its Feb. 19 record high. That amounted to just 16 trading days—the quickest about-face into correction territory in five years and the 11th quickest in the last half-century. A rebound on Friday lifted spirits but left traders more confused about the market’s direction.

So, all in all, not a great week.

There are two big problems:

First, the market has gone up dramatically over the last decade or two, but it can’t continue to rise forever.

Second, no one knows what Trump will do tomorrow.  Will there be tariffs on everything?  Or nothing?

The DOGE experiment sounds like a good idea: cut government spending, but if they do, that removes stimulus from the economy.  That’s good if, in the long term, those resources are redeployed into profitable private enterprises, but in the short term, the transition is a killer.

Gold

Not surprisingly, gold is in a one-year uptrend, up 40% in the last year.

In hindsight, I guess we should have loaded up on gold a year ago.  It took a while, but the gold stocks are also moving substantially higher.

Bitcoin

This brings us to our favourite cryptocurrency, Bitcoin.

Bitcoin is currently sitting around $84,000, exactly where it was on November 11, 2024.  That’s 124 days of sideways action, although there was a lot of up and down during that period.

The chart clearly shows that Bitcoin continues in a downtrend that started at the all-time high in January. $92,000 was significant support, but that didn’t hold, so the next level of support is around $74,000.  Bitcoin got to $76,600 on March 10, so it’s possible that was the bottom.  Or not.  I’ll feel more confident if we have a test of that level that holds for a week.

Microstrategy – MSTR

And so we end with our favourite gamble, MSTR—Microstrategy Inc. (now called Strategy Inc., but the ticker symbol has yet to change).

MSTR is down 45% since the all-time high on November 21, 2024.

But, since August 6, 2024, it’s up 190%.

So, pick your metric and decide whether you are happy or sad.

Conclusion: The Big Picture

With all this noise, stepping back and looking at the Big Picture is helpful.

The USA (and most countries) have a significant debt problem.  If you have a lot of debt due, you want to lower interest rates so you can refinance at lower rates.  A good way to do that is to induce a recession and crash the stock market.  In a recession, there is less demand for borrowing, which lowers rates, and if the stock market crashes, there is a “flight to safety” in bonds.  More bond buying drives rates down.

So Trump may be crashing everything because he can blame Biden if he does it now.  Once the debt is refinanced at lower rates, he can turn the money printer back on and take credit for the recovery well in advance of the mid-terms.

That will be good for Bitcoin, MSTR, and all risk assets.

If you have cash that you are willing to risk, you can start deploying now.

If you are more risk-averse, slower deployment may be advisable.

Or you can do both.

I’m holding my shares of Strategy Inc., but I’m selling out-of-the-money-covered calls two weeks out and pocketing the premium.  On big down days, I buy them back to book the profit, and on up days, I sell them again.

It’s a great strategy as long as MSTR trends sideways or down.

It’s a horrible strategy when it spikes upward, so keep watching to see when I get wiped out!

Thanks for reading.  See you next week.

 

 

He announced it during the election campaign, and on  Thursday evening, President Trump signed an Executive Order creating a Strategic Bitcoin Reserve (SBR) and a digital asset stockpile.  The Executive Order says that the SBR and the Stockpile would NOT involve the government purchasing Bitcoin or other cryptocurrencies.  It would be formed from cryptos already controlled by the government from assets they have seized from various previous criminal cases.

No new Bitcoin would be purchased unless it can be purchased in a “budget neutral” way, whatever that means.

The problem with an Executive Order is that the next president can sign a new Executive Order, undoing whatever this Order says. Senator Cynthia Lummis sponsors the BITCOIN Act, which, if passed, would be more permanent, but it has not yet happened and perhaps never will.  So, we are in a four-year holding pattern, waiting to see what the next president will do.

That’s why Friday’s Crypto Summit at the White House was a “Buy the Rumor, Sell the News” event.  Here’s the one-year chart of Bitcoin:

As you can see, Bitcoin rallied strongly before the November election and peaked at around $107,000 at the end of 2024. There was a period of consolidation before the final (so far) all-time high of $108,000 on January 20, 2025. Since then, Bitcoin has been down 22%, but it was down as much as 28.5% at the end of February.

Zooming in, it’s obvious that Bitcoin was trading between $92,000 and $99,000. It had two pops above that range but has recently traded primarily below $92,000.  The next obvious level of support is $74,000, approximately where we were on election day.

Every Bitcoin Guru warns that Bitcoin could fall to that level of support, leading most speculators to take a “wait and see” approach. If Bitcoin can test that level and hold, everyone will assume that’s the bottom, and the bull market can resume.

If Bitcoin hits $70,000, panic will ensue, and $50,000 is in play.

So how do you play it?

If you believe that long-term Bitcoin is going up, you ignore the noise and dollar cost average every week.

If you are a degenerate speculator, like me, you play MSTR—Microstrategy Inc. The recent chart is informative.

The long-term upchannel that started a year ago remains intact. The gap up at $293 from election day in November 2024 is both support and resistance. MSTR closed at $287 on Friday, slightly below that key resistance level. The trend since the all-time high in November 2024 has been down.

If you believe MSTR is a stupid Ponzi scheme, you don’t own it, so my comments are moot.

If you believe MSTR is subject to wild speculative swings (which it is) but that both MSTR and Bitcoin are going up in the long term, the strategy is simple: Hold and Cover.

That’s why I’ve been doing, with varying degrees of success.

I currently have two open covered call positions, both purchased within the last week, and both expiring on Friday March 14:

  • the $300 strike price calls, sold at an average price of $19.00, and currently worth around $11, so I am in the money by 42%.  That’s good.
  • the $295 strike price calls, sold at $9.25 and currently trading at $13, so I’m down by 40% on that position.  That’s not so good.

Both of these positions are out of the money, so if MSTR stays where it is this week, the positions will expire worthless, and I will pocket the premium.  But MSTR can swing wildly, so my plan is to watch closely this week, and when my positions get to a profit of around 75%, I’ll buy the options back to cover.  I’m not waiting for a 100% profit, because on options expiry day MSTR can swing upward and I’m busted.

So, that’s the plan.

HODL, but pocket some premiums along the way.

It appears that Trump is engineering a stock market correction and a recession.  He wants to do it early in his term to blame Biden and save the day before the mid-terms in less than two years.

So, it will be a bumpy ride, and I wouldn’t blame anyone for staying on the sidelines.

Let’s see what happens.  See you next week.

Bitcoin and Microstrategy: The Crash

March 1, 2025

Last week, I asked a simple question: Bitcoin and Microstrategy: Consolidation or Imminent Correction?  We now know the answer.  Last week, I said: My bias at the moment is that Bitcoin, at best, is in a trading range.  Support at $92,000 is very strong:  Nine times since November $92,000 has offered significant resistance and then […]

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Bitcoin and Microstrategy: Consolidation or Imminent Correction?

February 22, 2025

I spent last weekend shovelling snow, but I’m back today to ask a simple question: what’s up, or not, with Bitcoin and Microstrategy? The 5-year chart of Bitcoin shows that the uptrend line joining the two prior highs in 2021 and 2022 are providing significant resistance. A closer view, back to the beginning of December […]

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Bitcoin, Microstrategy, Tariffs and Market Uncertainty

February 1, 2025

Remember when the first “Bitcoin President” was elected?  Bitcoin went up 60%, from under $70,000 in November to and all-time high of $108,000 by the middle of December.  Since then, nothing. How is that possible?  If everyone is buying Bitcoin, why has it entered a new consolidation pattern?  Here’s a closer look: Bitcoin is trading […]

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Bitcoin – New High Incoming

January 18, 2025

I’ll keep this brief.  As I write this at 7:15 am on Saturday morning, Bitcoin is at $103,000 USD ($150,000 CDN) and appears poised to exceed the all-time high of $108,000 within the next few days. While that is interesting, the real question is: what’s next? My guess is that $108,000 will be significant resistance, […]

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Bitcoin: Stuck in a Trading Range: Will it Break Out Up or Down?

January 11, 2025

Let’s zoom out and look at a five-year chart of Bitcoin.  I’ve drawn a red resistance line, joining the two previous all-time highs in 2021. Now, let’s zoom in.  Here’s the chart for the last three months: As you can see, from around November 11, 2024, to around December 19, 2024, Bitcoin stayed in a […]

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Interesting Close on Friday for Microstrategy

January 4, 2025

It’s been a fun ride on  MSTR—Microstrategy Inc. Since November 11, 2024, MSTR has gone up 84% in ten days, but then it “round-tripped” and gave it all back, so 50 days later, it was back where it started. Since bottoming on New Year’s Eve at just under $293, it has been up almost 20% […]

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Bitcoin and MSTR: The Action Starts in January

December 28, 2024

I did a Deep Dive on Microstrategy last week. This week, nothing much happened, which isn’t surprising since it was Christmas week, and many participants were on vacation. In the last five days, the price of Bitcoin has remained flat. MSTR—Microstrategy Inc. closed at $330, which is exactly the price it traded at on Christmas Eve. So, there […]

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MicroStrategy: A Deep Dive

December 21, 2024

MSTR—Microstrategy Inc. is a data analytics company. In 2000, Michael Saylor, then the CEO of MicroStrategy, faced significant sanctions from the U.S. Securities and Exchange Commission (SEC) due to accounting irregularities. Here’s the story. In March 2000, at the height of the dot-com boom, MSTR hit $333 per share.  But, that same month, MicroStrategy announced […]

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