The Wolf Den #165 - The GameStop Saga Continues
UNI Says To The Bears: You Shall Not Pass - From 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.
UNI says to the Bears: You shall not pass
While Bitcoin and Ethereum have been struggling to sustain above the new highs over the past few days due to high selling pressure from bears, there have been some out performers in the market, like the token of the decentralized exchange Uniswap.
Last September, Uniswap users received a pleasant surprise when the popular decentralized exchange (DEX) distributed 15% of their UNI governance tokens to all users that interacted with the protocol prior to September 1. At an initial price of approximately $3, Uniswap airdropped $450 million worth of UNI tokens. That airdrop is now worth $5,985. How’s that for an incentive package?
Over the past few days, the token has been on a tear, as it increased by a whopping 164% since January 11 and it has been consistently hitting new highs. But not only has the token price increased, but the fundamentals behind the token and the protocol itself have been increasing exponentially.
Even if you disregard UniSwap's liquidity incentives, you cannot deny the growth of the Protocol. Within the last 15 days, the trading volume was around 12.7 billion USD (approximately 800 million USD per day) and over 36.543 million USD in transaction fees being paid (around 2.43 million USD per day).
See the IntoTheBlock’s Uniswap Protocol Insights
This means that more than twice as many transaction fees have recently been paid on the Uniswap network then on the Bitcoin network.
Moreover, for two months, liquidity providers were receiving rewards with the UNI native token for supplying liquidity to the protocol. Since the UNI incentive came to an end, Uniswap’s liquidity dropped by approximately 58% and recently reached a new high of $3.16b.
And as the protocol continues to gain momentum, we have seen some impressive metrics from an on-chain perspective for the UNI token.
The first metric is the profitability of the UNI token holders. IntoTheBlock’s Global In/Out of the Money (GIOM) classifies addresses based on if they are profiting (in the money), breaking even (at the money) or losing money (out of the money) on their positions at current price. IntoTheBlock categorizes addresses and tokens accordingly to obtain an aggregate view of profitability for a particular crypto asset.
See the IntoTheBlock’s UNI In/Out of the Money Chart
At the current price of $13.77, 100% of the addresses with a balance in UNI are “in the money”. Meaning that if they were to sell their position today, those addresses would make a profit.
At the same time, as the price goes up, so does the network activity. Over the past month, the number of active addresses increased by almost 100%, reaching over 7,000 active addresses yesterday. There was only a moment in which UNI had more active addresses, and it was the same the day the token was airdropped, coinciding with a high amount of holders rushing to cash out their holdings and take profits.
See the IntoTheBlock’s UNI Addresses Stats
Overall, as DeFi and the decentralized exchanges continues to gain momentum, the fundamentals behind the protocol token continue to strengthen. It’s difficult to measure how high can UNI go, but it looks like the rally is not over yet.
Bitcoin Thoughts And Analysis
What a wild ride. The newsletter is a bit delayed today because I have been scalping a few Bitcoin trades - not something that I usually do but... it was at least entertaining. I longed too early, stopped out, long again, broke even and then came back to you guys. Normally I do not trade an asset more than once in 24 hours, so this is admittedly a break of my own trading rules. So I will step away.
4-HOUR CHART
Bitcoin is once again flirting with the bottom of the range. The candle that just closed once again managed to finish inside the range with a sizable wick below. We saw that a few days back, which is a long signal that I had discussed. This is a potentially very bullish candle because of that long wick, which would be confirmed by a grey candle to follow.
This could be a good long, the risk/reward is there. But it really is hanging on the edge at the moment. In fact,I was preparing to post a more bearish look because that candle appeared ready to close below the range. If that happens, the technical way to trade it is to look for a short on a retest of the range bottom as resistance, because that has good risk/reward for another drop. For now, it remains cautiously bullish in the range.
We also have potential bullish divergence with RSI on every time frame from the 4 hour to the 12 hour. The 4 hour is shown, but it's the same div and will just take longer to potentially confirm on the larger time frames. In a perfect world, we would like to see the 4 hour confirm, then the 6 hour, then the 12 hour. Building across time frames would be very bullish.
But for now the div on the 4-hour is simply an idea. We need to see a definitive "elbow up" on RSI, which we have for the moment. At 3 PM EST the next candle will close and will ultimately offer confirmation. If it is unclear at that point, we wait another 4 hours. Fun, right?
It is important to note that price could still drop quite a bit and have this bullish divergence. If price drops and RSI still remains above the previous low, this will be in play. Keep that in mind if you decide to take the trade early. You could be "right" and stop out before the real move.
I revised the descending channel that I drew a number of times to this confirmed descending wedge. The blue area is still very much in play if we drop. That area seems to be the consensus target for most of crypto twitter. To me that means it is either a) never reached and gets front run or b) gets nuked completely for lower targets. The crowd is rarely right. Right?
Altcoin Charts
ETH/BTC
It is simply worth noting that ETH did not budge against BTC on the drop. Still holding support and not moving, which is a good sign in my opinion.
LINK/BTC
This is simple. I am looking for a retrace to the blue zone. It may or may not happen, but that would be a beautiful flip of resistance to support and would signal that LINK is likely ready to head back up on the BTC pair.
NORD/USDT
This is a new project that is currently trading on Uniswap. There is no TradingView chart, so the screenshot above will have to suffice. Here is link, if it works:
http://www.chartex.pro/snapshots/2ab0c4fb-1fe6-4c97-b5f7-2c6b319e939b.png
I had this cued up last night, it seems to have already started it's move, breaking out before BTC dropped and sent it back down into the symmetrical triangle. Still, I am watching for a clean break above to signal that this is likely to head up. Target is shown based on the depth of the triangle.
Legacy Markets
SIRI (SIRIUS XM)
I expected this to eventually break out, but I did NOT expect almost 20% in a day. As I said, this is being heavily shorted but is a good company - perfect choice in the current "buy everything that is shorted" environment. Maybe there will be a retest of resistance as support to catch for those still looking for an entry. That would be around $6.73.
SPCE (VIRGIN GALACTIC)
Annoyed! I had this cued up last night because WallStreetBets tweeted that this was the second most shorted stock on Wall Street and it was flirting with a new all time high and price discovery. Even this morning it opened above all time high but wicked down to support, giving a great entry. Now it's run away, so hard for me to recommend buying. But this has the potential to pull a GameStop, so dips are likely for buying. Keep an eye on it for any pull back.
Also, this is a Chamath company.
Reddit Vs. Wall Street Rages On
As expected, the recent absurdity in the stock market has become even more absurd, as GameStop stock trades over 1,000% in just two weeks. The million+ band of Redditors, along with the help of the Winklevii, Chamath, and Elon Musk, have inflicted billions of dollars worth of pain on Wall Street hedge funds. GameStop’s stock price has now become nothing more than a proxy for Reddit to use as fuel attacks against Wall Street. The news of Melvin Capital receiving an almost 3-billion-dollar bailout for being on the wrong side of the bet further infuriated the Reddit community, leading to one Redditor posting, “We don't have billionaires to bail us out, we can't go on TV and make attempts to manipulate millions to take our side of the trade, if we mess up, we have to start from scratch.” Right and wrong have become so unclear, but one thing is certain. The underdog mentality is not far off from the ethos driving cryptocurrency. For thousands of years, wealthy government elites have controlled money supplies, inflicting pain on the majority for the benefit of the wealthy. Whether it be Hertz, GameStop, Wall Street Bets, or Bitcoin, these entities are vehicles or proxies for big ideas to reshape finance. GameStop converting shares to Bitcoin on its balance sheet would be the perfect ending to this story, but the story of Bitcoin beating Wall Street will soon be one of the most epic financial tales of all time.
The Underlying Mechanics Of The GameStop Trade
My friend and favorite Wolf Den contributor Sahil Bloom wrote a great thread on the mechanics of the GameStop saga. Great read, if you are wondering how this all went down.
Does Bitcoin Need A 2T Market Cap For ETF Approval?
Cathie Woods, the Ark Investment Management CEO said, “The flood of demand has to be satisfied so it’s going to have to get well over a trillion dollars – $2 trillion, I think, before the SEC will feel comfortable.” A $2 trillion market cap puts the value of Bitcoin around $100,000, which is only a multiple of 3 from where Bitcoin has recently been ranging. Along with her ETF prediction, Woods said that “if every S&P 500 company invested 1% of their assets in Bitcoin the price would increase by $40,000. Institutional allocations between 2.5% and 6.5% could impact bitcoin’s price by $200,000 to $500,000.” Her assertion is pure speculation, but logically makes sense.
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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.