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S2N Spotlight

The S&P 500 closed 4% below its all-time high. The market after hours when writing this got a 1% pop due to the fact that a court found Trump’s Liberation Day tariffs as unlawful. We will let people more qualified than me respond to this stumbling block to the administration’s plans. The question I want to look at is what the probabilities are when the drawdown gets closer to its high water mark.

Let’s assume we are 3% from an all-time high (ATH).

Since 1990 we have had 179 occurrences where we have experienced a -3% drawdown from the ATH. The probability of recovering to a new high in 30 days is 39% and 86% within 100 days.

Just FYI, if the drawdown gets to -1%, there is a 61% probability of a new high in 30 days.

S2N Observations

I recently came across James Wynn @JamesWynnReal, a high-profile crypto punter on X. This has to be the most insane level of reckless trading I have ever witnessed. If you are looking for entertainment, this account is one you want to follow for all the wrong reasons.

A little background: he supposedly got a little start ($7,000) in 2022 from Alameda Research (remember Sam Bankman-Fried), which he turned into $25 million by investing in PEPE, a meme coin.

A few months ago (March), he started trading on Hyperliquid (HYPE) exchange with $4.65 million and turned it into $46 million earlier this month. However, things started getting really wild over the last 2 weeks with him trading Bitcoin with 40x leverage.

He opened a long Bitcoin position worth $830 million, then added another $1.1 billion as BTC crossed $111,000, at one point showing nearly $40 million in unrealised profit.
However, market volatility quickly reversed his fortunes. After Bitcoin’s price dropped following geopolitical news, his positions turned negative. He attempted to hedge with an $856 million short but closed it after 15 hours with a $15.5 million loss.
Within a week, Wynn reportedly lost between $60 million and $87 million, wiping out the bulk of his earlier gains. At one point, he lost $28 million in a single 24-hour period by flipping from a long to a short position as the market moved against him.

His tweets taunt the haters and inspire the dreamers.

I bring this story up because Bitcoin is currently trading at or near all-time highs, and I keep getting requests from people close to me to please explain what Bitcoin is and why it is worth $110,000. We will need to come back to this question, but throwing the kind of numbers James Wynn is throwing around having only started trading a few years ago is not normal and kind of underlines the crazy world we are living in.

I remain interested in Bitcoin at lower levels, much lower levels, as a potential adjunct to gold. What I find particularly fascinating is that someone as flamboyant as Trump—someone who embodies ostentation—would be drawn to something so intangible and conceptual (though, to be fair, it’s his sons).

I have so much more I am tempted to write, but I am going to keep it short and sweet.