The Wolf Den #240 - Sentiment Check
Bitcoin Dominance Welcomes Alt Season 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.
Bitcoin Dominance Welcomes Alt Season
The altcoin season is in full-effect, and can be evidenced by several of the top 100 crypto-assets consistently hitting new highs while the Bitcoin dominance has been steadily declining over the past month and reaching a new low today of 42.9%, the lowest since May 1 of 2018.
While the institutional interest is still strong in Bitcoin, retail investors appear to be drawn to lower market cap crypto-assets, looking for greater gains, as we recently experienced with the DOGE mania and Shiba.
And as the day passes, the 30-day correlation between Bitcoin and lower cap crypto-asset continue to reach multi-year lows.
Again, remember that the correlation to BTC indicator measures the price correlation between a crypto-asset’s price and Bitcoin’s price. Correlations of 0 or near-zero suggest low or no relationship between the particular crypto-asset and Bitcoin’s price.
As can be seen in the chart above, and thanks to the recent upward price action of these tokens, the decline in the Bitcoin dominance shows an inversely correlated price performance against assets like Ethereum, Litecoin, Cardano, Bitcoin Cash or Ethereum Classic.
One great example of this has been the recent surge in the price of Litecoin, which recently hit a 13-month high against Bitcoin. Not only did we see a dramatic increase in price, but the number of daily active addresses recently hit a new all-time high.
As of May 12 using Litecoin’s network indicators
This increase in daily active addresses YTD is certainly remarkable (~4x), and clearly shows that it has been correlated with price activity. As such, DAAs can often add as a leading indicator for price action as can be seen in the graph above.
On-chain data also reflects the full effect of the alt season in Bitcoin Cash, which recently surged to an incredible multi-year high of $1,650. As the interest for the token increased, we also detected a new wave of investors coming into BCH. This chart is very self-explanatory. IntoTheBlock’s Traders indicator shows active wallets that have been holding an asset for less than one month. The analysis for BCH shows considerable growth in the last month.
As of May 12 using Bitcoin Cash Ownership indicators
Within the last 12 months, the number of traders in Bitcoin Cash increased by over 118%.
Which will be the next token to the affected by the alt season? We will find out very soon.
Bitcoin Thoughts And Analysis
I am posting almost no charts today. Bitcoin is boring, and altcoin focus still remains on the large caps that I have been sharing over and over again.
DAILY CHART
Absolutely nothing to see here, still. Call me when price gets back above $59,000. There's so little to analyze at the moment.
Altcoin Charts
AAVE made a beautiful move today - unfortunately I was not able to publish a bit earlier when I saw it! Regardless, we have a beautiful rounding pattern, that could potentially form a cup and handle if it reaches the recent hight - and even getting to there would be a nice trade. At this point, I would be looking for a retest of .009105 as support as the safest entry.
Texas Is Becoming Crypto Friendly
Texas Governor Greg Abbot has made it a point to vocalize his support for cryptocurrencies in the past and now the state is inching closer to favorable laws defining cryptocurrencies. Texas lawmakers just passed House Bill 4474, designed to improve definitions of digital assets and blockchain regulations. The bill still needs Senate approval, but can be expected to be signed by the Governor. The bill is designed to incentivize crypto firms, corporations and companies to make Texas their home base with clearer laws - a similar strategy to that which Wyoming has been taking. All it takes is a few key states to shape the path for positive regulation for others states to follow, or the federal government to adopt a similar approach.
Ethereum Market Cap Tops 500B
Ethereum's market cap briefly surpassed 500B, almost half of the market cap of Bitcoin. The narrative of the "flippening" is widespread at the moment, but still quite a way to for for it to become a reality. Either way, Ethereum is going absolutely nuts!
46 Million Americans Own Crypto
This is based on a small survey, so it seems a bit hyperbolic. That said, it is statistically valid. The first was conducted on 1050 participants with incomes over $50,000 and has a margin error of 3.1%. The second was conducted on 2,184 U.S. consumers with a margin of error of 2.1%.
Confusingly the first line of the Newsweek article suggests that 46 million Americans equates to “17% of the adult population” while the original NYDIG survey claims the figure equates to 22% of the adult population. Given NYDIG surveyed only those with incomes over $50K (a smaller group than the entire adult population) this may account for the difference in percentages.
Another interesting finding highlighted by Newsweek was that a majority of respondents (53%) “said they didn't own digital assets, but 55% of those said they would consider adding cryptos to their portfolio.”
Either way, crypto has clearly gone mainstream.
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. Code Wolfsden50%off for a 50% discount on the first month.
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: WOLF25
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
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. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.