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Chart of the Day
GMTT / Chart of the Day / Copper (MAY) / April 19, 2021
Last week, copper looked like it was breaking out a wedge consolidation but China clamping down erased the break. Now it has taken a second run and broken the mid-March high.
At GMTT we went long Copper last Wednesday at 4.04 and our target of 4.23 is reached. Very short term we get the next target of 4.29, while a good close above confirms a move towards 4.46. We suggest raising the protective sell stop to 4.21.
On another note Gold (JUN) – long from 1726 – reached our given target of 1789 and its next upside target is 1806. We raised this morning the protective sell stop to 1774 – but Gold only elects a sell signal below 1759.
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The Dangers Of Crypto Currencies
Many of you do not know this but in addition to having an S&P 500 futures and options trading operation, I also had a very big currency operation. The largest account the desk had was Sheikh Mohomads of Dubia, who at any one time had thousands of currency futures and options on. The account got so big we would roll part of the position on the CME and the other part was with a foreign exchange desk.
We also had a $500,000 account from a company in Europe, which had 21 short Swiss Franc options when the Swiss government intervened and the futures rallied 300 or 400 points. That guy left us with a $1 million loss. So, yes, I know about currencies! But those are not the currencies we are going to be talking about — today we are talking cryptocurrencies.
I do not pretend to be an expert, but the CME and the CBOT are regulated exchanges and so are the clearing firms. If you have a trade problem with a CME product and you are not satisfied with the outcome, you can seek legal action. All the money moving in and out of the exchanges are from bank wires. In the crypto world, you open up an account, or more specifically, a “wallet.”
The cryptocurrency wallet is an app that allows users to store and retrieve their digital assets. When the user acquires cryptocurrency, such as Bitcoin, he or she can store it in a cryptocurrency wallet and from there, use it to make transactions.
For instance, if you are a Coinbase customer, you have your choice of a hosted wallet or a non-custodial wallet. The Coinbase app, where you buy and sell crypto, is a hosted wallet. You can also download the standalone Coinbase Wallet app to take advantage of the benefits of a non-custodial wallet.
Despite the “crypto craze,” there are a lot of very unhappy investors out there. Over the last few years, billions of dollars in Bitcoin have disappeared and over 20% of the existing 18.5 million Bitcoin are in stranded wallets they can’t open, worth roughly $140 billion.
The almost total lack of regulation in this space is on a global level. Current regulatory powers are not large enough to control how crypto asset companies conduct their business and how cryptocurrencies are used. This is a wide open door for misuse by fraudsters and criminals and the US regulatory environment will not get any better after the US Treasury announced its plans to tackle financial institutions for money laundering carried out through digital assets. It’s an environment ripe for ponzi schemes, hacking, unregulated or fake brokers, and wholesale fraudulent cryptocurrency exchange platforms. It’s the Wild West of investing and not something I have ever promoted.
I know it’s made people millions of dollars, but the only way I would trade Bitcoin would be through the CME. However, the margin on just one contract is $45,000.
To conclude, I do not think the US central bank will ever embrace cryptocurrencies due to their lack of transparency and that is not going to change. Is cryptocurrency trading going away? No, but the news is not good for companies in the US that offer it! Only time will tell.
Our view: Bitcoin dropped more than 13% at one point this weekend. It’s currently down 12.5% and at its lows, it was down about 20.6%. Despite that, the ES Futures are barely unchanged, down about 7 handles as we approached midnight ET.
Danny Riley is a 39-year veteran of the CME trading floor. He ran one of the largest S&P desks on the floor of the CME Group since 1985.
As always, please use protective buy and sell stops when trading futures and options.
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Decisions to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS