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Reasons to be bearish 🐻
If you want to make money, you need to focus on facts. What happened, what’s likely to happen, and what probably won’t. The market doesn’t care about your feelings or hopes.
🤔 To be objective, always ask yourself, what if I’m wrong? Even if you’re bullish, search for reasons to be bearish to avoid bias.
Here are three recent developments worth noting 👇
1️⃣Hedge funds are shorting at the fastest pace since April, especially in tech. Goldman Sachs data shows aggressive de-risking even as indexes hover near highs. Big funds are clearly hedging against weaker earnings or a revaluation of overpriced growth stocks.
2️⃣Michael Burry, the man behind “The Big Short,” placed 80% of his portfolio in puts against Nvidia and Palantir. His view is that AI might be real, but valuations aren’t. When someone who predicted 2008 bets this heavily on a correction, it’s worth noting.
3️⃣Warren Buffett is sitting on a record $381B in cash while selling stocks. When the world’s most famous and patient investor refuses to buy, it’s not bullish. He’s clearly waiting for better prices and a reset.
All this is happening while crypto moves in lockstep with U.S. equities and often underperforms. If the AI narrative breaks and the S&P corrects, crypto won’t be spared 🔽 $COIN - The price has broken below the Weekly Bull Market Support Band, which has been a strong reversal spot over the last couple of months, a clear sign of weakness.
That said, it’s still holding above the high-timeframe support range, which keeps the broader market structure intact for now. I believe that as long as the price stays above this range, there’s nothing to worry about from a structural standpoint.
However, if the price fails to reclaim the lost support band in the coming days, rejects, and then fails to hold above the high-timeframe support range marked in green, I would look to hedge part of my spot holdings to mitigate short-term downside risk, since that would open the door for a deeper pullback on the mid-term and confirm structural weakness on the high-timeframes.
That said, my broader outlook on this stock and company remains unchanged, as we move deeper into a risk-on environment and closer to the cycle top, rising transaction volumes and fees should act as a direct tailwind for Coinbase’s revenue and, in turn, its price.
The short-term structure may have weakened, but the fundamentals remain strong.