Why I Cashed Out

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On Tuesday morning, I closed my my crypto positions at Kraken, wired all my profits to my checking account, and let the original principal remain at Kraken in plain old cash. I’d like to explain why.

First, here is what the crypto market (represented by Bitcoin) and the stock market (represented by the SPY) were doing until a few months ago. It doesn’t matter which is which; the point is that they each went their own ways.

different

Let’s append more recent behavior to those two, and take note how they have converged. Indeed, they are starting to become indistinguishable. One and the same. And that, my friends, is why I decided to Exit Stage Left.

diverge

It has nothing to do with crypto charts as independent units. Indeed, the analog is still intact, and the charts I lovingly selected are still dynamite. Indeed, I may regret selling, as I have approximately 100% of the prior instances that I’ve sold crypto. However, I have a theory, and that theory compels me to be shed of the stuff.

That theory is simply that the animal spirits are all wrapped up in every asset, far and wide. Tesla might as well be GameStop. Oil might as well be Bitcoin. Ethereum might as well be Alphabet. And so on.

As I am typing this on Tuesday night, I observe what’s going on with Bitcoin futures…

btcin

………and with small cap equity futures…………

rtymin

…….and at this point, they are virtually fungible. During the daytime, the ups and downs of equities seem to be reflected in crypto on almost a tick-by-tick basis.

I think equities are in serious trouble. I do not think equities are going to plunge and leave crypto unscathed. On the contrary, I believe Tesla has laid out the proverbial roadmap for how all assets are going to behave.

I was satisfied with my crypto profits. And I decided, for better or worse, it was time to play it safe.

Wednesday Morning Update: given crypto’s swift push higher, reacting to the latest inflation numbers, maybe we can toss my theory out the window! But my rationale at the time remains, nonetheless.