The Wolf Den #127 - The Pareto Principle
Bitcoin Thoughts And Analysis
Little has changed for Bitcoin since yesterday. For paid members, you can revisit the analysis. Bitcoin continues to range below the all time high, so there's very little way to have conviction in a move to either side, in my opinion. Sometimes it's best to just watch and wait.
The one thing that I do want to note is that we now have a clear and confirmed bearish divergence with RSI on the daily chart.
While this is "bad," daily divs often take ages to play out, and can see price continuing to push for a long time before correcting. They are not always actionable, and one could argue that we already have slight potential hidden bullish divergence at the bottom to cancel it out. If this was a 4-hour div, which I view as immediately actionable, I would be considering it much more diligently.
Ethereum 2.0 Blows Past Staking Deposit Target By IntoTheBlock
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB). ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data.
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market. We present this EVERY WEDNESDAY!
Ethereum 2.0 Blows Past Staking Deposit Target
Ethereum finally began the initial phase of its anticipated Serenity upgrade on December 1st as scheduled. Dubbed ETH 2.0, the upgrade consists of multiple phases aimed at improving Ethereum’s scalability.
Phase 0, the Beacon Chain, will be the first step towards migrating Ethereum into a proof of stake consensus mechanism. While many doubted its capacity to launch in 2020 after several delays, the Ethereum community will finally embark on this journey after approximately 6 years of research. The last prerequisite to initialize Phase 0 was for the amount of Ether deposited into the first staking contract to reach 524,288, or roughly 0.5% of the circulating supply.
Having reached the target just in time for the November 24 deadline, the Ethereum community celebrated this milestone. By analyzing on-chain indicators, we can analyze these events from a data-centric perspective to have a better understanding of the implications in the underlying Ethereum blockchain.
IntoTheBlock’s Large Transactions Volume indicator aggregates the total volume transferred in transactions of over $100,000. This acts as a proxy to institutional investors and whales’ activity. Large transactions volume for Ethereum has been on an uptrend for Ethereum and hit a two-year-high few days after the staking contract started to accept deposits.
As of December 2 IntoTheBlock’s ETH Large Transactions Indicators
The growing large transaction volume is indicative of higher institutional participation in Ether. While the two-year-high of $4.56 billion seen on November 17 did not coincide with increased deposits in the staking contract, on November 23 there were also over $4 billion in large transactions as deposits doubled within less than 48 hours, and have continued to increase even past the deadline.
Though certainly not all large transactions went into the deposit contract, there is evidence that whales and institutional players have led the way towards the deposit target. With only 2,756 unique addresses depositing into the staking contract, that brings the average deposit to $195,000, well above the minimum to be labelled as a large transaction. Needless to say average Ethereum users do not have such funds, pointing to large players confidently blasting past the deposit target right on time.
While the introduction of the Beacon Chain marks the beginning of the end for Ethereum miners, the network’s hash rate has sustained near its all-time highs.
As of December 2 IntoTheBlock’s ETH network indicators
The hash rate represents the total power miners contribute to solving cryptographic puzzles in the proof of work consensus. Though the Ethereum hash rate did drop 5% the day after the deposit target was reached, it bounced back to be within 1% of its all-time high. This suggests miners are still as interested in mining Ethereum while they can.
It is important to note that even though the Beacon Chain genesis began on December 1st, the proof of work chain will also continue to work in parallel, which is probably why miners have not rushed to shut down their operations. Overall, though, miners appear as eager as ever to earn Ether as the initial phase of ETH 2.0 approaches and the price of Ether surpasses $600.
Institutional adoption has been a key theme for both Ethereum and Bitcoin in 2020. The large transactions deposited into the staking contract is the most recent vote of confidence from institutional players in Ethereum. Similarly, miners continue to support the Ethereum blockchain as hash rate nears its all-time highs.
Additional Analysis: 4 Key Analytics to explain why we are Bullish on Ethereum
Although ETH has experienced a minor correction, the signals of the bullish momentum are everywhere.
(1) Bitcoin on Ethereum is just getting Started
See the IntoTheBlock's DeFi Insights
Since Bitcoin cannot be easily moved cross-chain, tokenized versions of Bitcoin are available on the Ethereum blockchain. These ERC-20s are pegged 1:1 to the price of BTC being backed by the equivalent amount of Bitcoin. The addition of incentives has had a clear impact on the growth of tokenized versions of BTC.
At the moment, 163.88 thousand BTC, which represents 0,88% of the circulating supply has been tokenized and locked on DeFi Protocols.
(2) There are over 1 million DeFi Users
See the IntoTheBlock's DeFi Insights
DeFi has seen explosive growth throughout 2020, as the number of users increased by 10x compared to January of this year. This shows that DeFi is here to stay with real use case applications.
(3) There are more addresses profiting on their ETH positions than those holding BTC
See the Ethereum Addresses Stats
As can be seen in the graph above, the total number of addresses with a positive balance of Ethereum grew by almost 15 million during 2020. To put things in perspective, during the entire year 2019, Ethereum added 12.89 million addresses with a balance, which means that the network already broke last year's record.
By comparing this metric to the Bitcoin network, we can establish that there are 16.34 million more addresses currently holding ETH than those holding BTC. This also means that the number of Ether addresses experiencing profits (42.15 million) has now surpassed the total number of Bitcoin addresses with a balance (33.01 million). In other words, more addresses are making money in Ethereum than the total number of addresses holding Bitcoin.
(4) HODLING trend on Ethereum.
See Ethereum’s Ownership by Time Held Chart
At IntoTheBlock, we classify an address with a holding time of over one year as a hodler. As can be seen in the graph below, the number of ETH hodlers has increased by over 10.82 million within the last twelve months.
Our Hodlers indicator has continuously shown an almost linear growth every month, despite Ethereum’s price drop of about 50% back in March, it is now at about 28.52 m addresses, an All-Time-High for this metric, and it represents 57.79% of the total ETH holders.
Altcoin Charts
Last week I shared a review of a project called BASE Protocol, in an effort to be transparent with the private sales that I participate in. What was unique was that, in this case, I shared a link and opportunity for newsletter subscribers to participate in the final round of that sale as well (I did not receive any compensation for this and it was the same price I paid!) That investment in BASE at .31 cents a coin has done a 7X in a week, with the coin now trading at $1.29. For those of you who participated, congrats! A number of you have reached out to tell me how happy you are, which really has me psyched. I did not expect that level of profit so quickly!
Sushi has also risen over 23% since I shared it in the newsletter yesterday, so another great opportunity for profit. Here is another trade I am actively in.
YFI/BTC
Revisiting an older trading idea, because it appears to be finally playing out to its potential. This has moved a bit since I decided I was going to share it, so the entry is now a bit higher.
We had a clear break of the descending blue line, which signals a trend reversal to the upside. Further, we had an inverse head and shoulders form and break out. It came down to retest the black neckline and temporarily dropped below. It struggled with resistance at 1.368. We can now see that price is clearly popping off of that level as support and away from the neckline of the inverse head and shoulders. The target, based on the depth of the pattern, is shown by the grey column. Key levels are marked. My stops are below the neckline and blue support.
YFI/USDT
This is another setup I shared before. We had a clear bull flag (blue) after the move up. Depending on where you consider the flagpole to have started, the two targets are shown.
Altcoin Thoughts And Another SUSHI Trade From Altcoin Psycho
Right now, I think altcoins have a higher beta than Bitcoin. Many altcoins have an easy 2-3x target price from where we currently are, compared to Bitcoin which has a relatively unknown / unmeasured target if we do break all time highs. This does not mean I'm bearish on Bitcoin by any means, but for now I think "blue chip" altcoins are the play. What I mean by blue chip altcoins are your major ones like Ripple, Litecoin, and Ethereum. Last week I shared an Ethereum long set up that is in very good profits right now, so I hope everyone had a chance to set the stink bids I mentioned.
SUSHI/USD
For right now - I think we will see De Fi begin to pick up some quick steam, especially the majors like $YFI and $SUSHI. Personally, I think Sushi is the better trade. I have been accumulating sushi since $2, and would suggest continuing to add on any dips. As you can see from the chart, I've got quite an agressive target. I would absolutely not recommend trading any defi tokens with leverage. I have only been purchasing spot(edited)
VIDYA Overview
The Vidya platform looks AWESOME, perfect for someone like me who loves a retro aesthetic and throwback games. The NFT incorporation is mind blowing as well. I love everything about this, so I wrote a review for the blog. Here is a quick summary, but read the entire post at the link above!
The Vidya gaming platform is a promising new project by Team3D, the development team behind Vidya Games Incorporated — a blockchain gaming startup from Toronto, Canada. The platform will include a lineup of fast-paced, turn-based and single-player games which use non-fungible token based items, utilities and cosmetics. As NFTs, these items can perform as cross-game and cross-platform methods of progression tied directly to your Ethereum wallet. Decentralized, player-driven markets, as well as a centralized shopfront, allow users to directly buy and sell NFTs to each other through their vendors, or purchase and mint new items directly from Team3D. Play-to-earn avenues for non-PvP users are not only offered, but appreciated, as they support the artistic goal of the team to produce intriguing content for all kinds of gamers. This provides blockchain aficionados and gamers both an interesting and potentially profitable outlet for their interests, in a fashion that hasn’t been rehashed in the way most products and services in crypto have been.
The transactional volume produced by user engagements with these products assists in funding of the Generator, a staking mechanism that incentivizes lockups with rewards in the form of Vidya tokens, which are circulated through player activity. For example, when parimutuel lobbies close, a 1% rake is used to fund stakers who lock their tokens up in the Generator platform, who also earn utility NFT’s from their stake. Whenever a user purchases an item through the Team3D marketplace from the team, 100% of the tokens used to make the purchase are used to fund stakers as well. This allows for increased volume for incentivized token locking not only from our in-house items, but also from the matchmaking and inventory roster of 3rd party projects. A 3rd party developer has already started a project using VIDYA that is expected to release within the week. Every Team3D and 3rd party product can be discovered or accessed from the website, referred to as TeamOS due to its stylistic representation of a retro desktop environment combined with a vaporwave aesthetic. In all, the platform is to serve as a wagering service for games, a place for Vidya Games LLC to publish games with tokenized incentives, a means of staking for passive token holders and a brand new step into the future of DeFi gaming.
The Grayscale Commercial Returns
Back in May 2019, Grayscale released a popular 30-second advertisement for their #dropgold campaign across mainstream television for a month... and it is now returning. Everyone and their mother had an opinion on the commercial. Regardless of your opinion, the commercial does one thing really well - it brings in fresh retail. As Grayscale continues to grow as a crypto behemoth with its popular trust product, other companies will likely follow suit and have their own commercials moving into 2021. With each new attempt at targeting the mainstream, the money will follow.
Visa Launches Bitcoin Rewards Credit Card
Beginning in 2021, credit card users will be able to receive Bitcoin rewards on their purchases.
With the help of Blockfi, Visa is now offering a credit card that offers 1.5% in Bitcoin rewards with every purchase. Visa already offered a debit card with this feature. This is a great way to easily increase crypto exposure or to avoid earning airline credits you’ll never use. The growing trend right now is that major legacy companies are deploying the services of existing companies to solve backend functionalities. eBay just integrated with Lolli to reward users with crypto for purchases made on the e-commerce site. Major companies are warming up to the crypto space, meaning that we will see more ways to passively invest and increased mainstream adoption.
Voyager Adds Desktop Platform
If you follow me, then you know that I trade and invest on Voyager. This is the platform that I use for buying and selling Bitcoin and a number of other coins. Customers have been asking for a desktop version for as long as I can remember, and it is finally here in Beta!
Also, if you are wondering how their business is doing, here are their results from the last quarter... spoiler, they are crushing it.
Dow Has Best Month Since 1987
This news is from a few days ago, but is still noteworthy. In the midst of a potential COVID second wave and further shutdowns, the stock market continues to rage against logic. It's amazing what infinite money printing and a weak dollar can do, regardless of the economy.
The best month since 1987 - during the worst global economic slowdown in history. Figure that one out.
UK Authorizes Covid Vaccine
Britain becomes the first Western nation to get a coronavirus shot, with earliest doses to go to the most vulnerable. This is not huge "financial" news, but seemed important enough to share!
Phemex Is Giving Away A Tesla!
PHEMEX IS GIVING AWAY A TESLA. They are also offering up to a $600 bonus for anyone who deposits for the next few weeks using the link below. This is dependent on how much you choose to deposit. Sign up here!
https://phemex.com/a/ScottMelker
Defi Tokens From Bittrex Global
Bittrex Global is offering all of Wolf Den's readers the ability to trade DeFi tokens without paying trading or gas fees through the end of 2020. Bittrex Global is the safest and most secure place for you to trade DeFi tokens like Compound, Aave, Balancer and all of the rest of the top tokens. Use the code WOLF to get free trades and no gas fees now.
My Recommended Platforms And Tools
This is where I trade with leverage and can also trade spot with no fees.\
This is where I spend my days teaching and learning! Our Discord group is a one stop shop for everything you need to learn to trade and control your emotions. Feel free to DM me on Twitter or respond to this email for questions.
This is where I invest, commission-free. They now let you earn interest on your Bitcoin held in Voyager, so you can compound while trading. Not only that, you’ll get $25 in free BTC when you download & fund.
Rewards Code: Scott25
I use RoundlyX to buy small amounts of Bitcoin every single day. They automatically round up my credit card purchases (with 10x multiplier) and invest them in crypto. Absolutely brilliant. Passively invest money you don’t need without a thought. Further, they have integrated with Voyager (see above) to offer commission-free purchases.
Rewards Code: WOLF
This is one of the main places where I hold crypto to gain interest. Celsius also offers dollar or stablecoin loans against your crypto, starting at just 1% annual interest. Celsius is giving WOAS followers $20 to open a new Celsius wallet. All you have to do is enter promo code WOLF, then transfer and keep at least $200 worth of crypto in your wallet for 30 days.
Binance is finally available in Florida!
Concierge Phone Service for Americans that protects your from SIM Swaps and other phone related hacks. I cannot stress enough how amazing this service is.
Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
On-chain and fundamental analysis, research, predictions and indicators, all in one place. Highly recommend.
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor.