Two Contrarian Trades

One Bitcoin-related.

Note: Before we get to these trades, a heads up for subscribers—I changed the strikes on yesterday’s post-earnings trade and got a fill on it today. You can see the details here.

Now on to today’s post.

What Might Cool Crypto Mania

Yesterday’s CPI report ought to give Bitcoin bulls a bit of pause. As ChatGPT summarizes it:

The year-over-year increase of 3.1% in the CPI suggests that inflation, while perhaps moderating from previous highs, remains above the Fed's long-term target of 2%. The core inflation rate, which excludes the often volatile categories of food and energy, also provides insight into underlying inflation trends. A 3.9% increase in core CPI over the last 12 months indicates persistent underlying inflation pressures.

Normally, the Federal Reserve’s response to this would be to pivot from signaling rate cuts this year to suggesting it might need to raise rates instead. In fact, a post on the homepage of Seeking Alpha yesterday argued the Fed would need to raise rates this month (“Horrible PCE Inflation Report - Fed Needs To Hike In March”). Of course, politics will come into play, since this is an election year, and the Fed doesn’t want to be seen as unduly influencing the outcome.

Nevertheless, if the Fed signals caution here, that could cool off Bitcoin for a bit. And if a that happens, a Bitcoin-related company whose year-to-date return beats Bitcoin’s by about 50% is likely to tumble. Our first contrarian trade today is on that happening.

Our second contrarian trade is a bet that a former high-flyer that’s down nearly 20% year-to-date is going to return to its high-flying ways.

Details below.

Our Bearish Contrarian Trade