The Wolf Den #250 - Markets Hate Uncertainty
Polygon Leads The Market Recovery - 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.
Polygon Leads The Market Recovery
While this week we have seen an impressive recovery from last week’s crash in the crypto market, there’s a token in particular which has been leading the market with some outstanding returns. And this is the case of Polygon’s token, MATIC, which was also officially backed by the billionaire investor Marc Cuban.
But let’s start with a brief introduction. Polygon is a Layer 2 scaling solution which seeks to stimulate mass adoption of cryptocurrencies by resolving the problems of scalability on many blockchains. It uses the Plasma Framework and boasts of up to 65,000 transactions per second in a single block, offering users cheaper and faster transactions than Ethereum or its other competitors.
The Plasma framework also allows Polygon to create an unlimited number of DApps, and we have seen impressive adoption over the past few weeks, as known protocols such as AAVE, SushiSwap, and 1inch have expanded their offering to Polygon.
Polygon also has its native token MATIC, an ERC-20 which is used to pay for transaction fees and has a current market cap of $13.9 billion. MATIC has been continuously hitting new all-time highs and outperformed the broader crypto markets. More impressively, it recovered from the Sunday’s low of $0.74 to $2.43 in less than 3 days.
On-chain data also supports the premise, as the growth in price has been correlated with the network. The total number of addresses with a balance (holders) reached a new high of 87.42 thousand this week. Year-to-date, MATIC has added a total of 67,300 new holders.
As of May 26 using IntoTheBlock's MATIC'S Network Analytics
The increase of MATIC holders was also reflected in the network activity, as the number of active addresses saw a massive increase over the past month, showing how the Polygon adoption brought a wave of new and active users to the network.
As more DApps are being built on Polygon, the demand for users continues to increase and on May 18, it reached a new all-time high of daily active addresses with 16,820.
As of May 26 using IntoTheBlock's MATIC'S Network Analytics
This influx of new and active users, along with the increasing number of Polygon DApps being built on top of it, brought a remarkable increase in the volume transacted. In just the last 4 weeks, over $13.31 billion were transacted (of the $24 billion YTD).
This increase in transaction volume YTD is certainly remarkable (~47x), though not as high as its price appreciation (~96x).
MATIC's rally has taken over the news in the past few weeks, and as the adoption continues to grow, we can expect the price correlation with Bitcoin and other larger crypto assets to separate even further. We will keep a close eye on their development.
Bitcoin Thoughts And Analysis
DAILY CHART
Bitcoin made a small push above 40K today, but seems to be struggling to maintain the momentum. At the moment, price is trade back at the same resistance level that is has been struggling with now for 3 consecutive days. Not ideal, so we really want to see price closing above that and then ultimately 42K. For now, hard to be confident in either side and difficult to predict.
4-HOUR CHART
Bitcoin once again slammed into supply on the 4 hour and was rejected. With any supply or demand zone, the more it is tapped, the weaker it comes. That does not mean price is ready to push through, it just means that that area is becoming less relevant on each push. We did get the perfect retest of the descending line as support yesterday that I was watching for, which offered a decent entry if you were trading short term. At this point, eyes on the prize - 42K or above.
Altcoin Charts
BNB/BTC
BNB has confirmed an inverse head and shoulders on the BTC pair. I would have liked to see a bit more volume on the breakout, which gives me slight hesitation, but the volume increase does exist on the USDT pair. Target it shown based on the depth of the pattern, which would take us back to the recent highs.
Every trade carries extra risk right now!
BNB/USDT
BNB is setting up the same move on both pairs. Tons of volume over the past weeks as this tries to form a bottom. As you can see, we have a confirmed inverse head and shoulders pattern on the 4-hour, which currently appears to be retesting the neckline as support after the breakout. The target is shown, based on measuring the depth of the pattern from the left shoulder high to the bottom of the head and then extrapolating from the breakout. Areas of likely resistance ahead, but technically this looks good.
This ALL depends on Bitcoin not dumping. Trading anything is risky right now.
Also to note, this can retrace past the neckline and still be valid, retest are not always perfect.
What We Learned From This Dip
Raoul Pal posted an insightful thread with a post aftermath perspective of the dip, so all credit to him. In this correction, we primarily saw a barrage of destructive headlines, but what wasn’t discussed was the resilience of the crypto market. In a world where governments are anxiously prepared on the sidelines to save any crooked entity no matter the cost, crypto received no aid, yet lived to fight another day. As Raoul Pal pointed out, “no firm went under, the Fed didn't need to step in, DeFi didn't break and carried on near normal, there was no collateral pressure, stablecoins remained stable, a few exchanges went down for an hour or two, no protocol failed, no firms needed rapid funding.” This was only about half the list, but you get the point - our system didn't fail. Maybe the correction is over, maybe not. Either way, the ground is still under our feet. Once the dust settles, we can pick up right where we left off.
Mark Cuban Invests In Polygon
Polygon (formerly MATIC) has been an all star in the bull run and a coin that I have invested in and traded, with many setups shared here in the newsletter. Apparently Mark Cuban has not only invested, but is an avid user of the platform. It is very clear that Cuban has gone deep down the crypto rabbit hole and will continue to find diamonds in the rough. Love to see him this involved.
Both Political Parties Can Agree On Bitcoin
There is nothing better to see than two high-level government officials from different sides of the political isles making Bitcoin a bipartisan issue. Senator Cynthia Lummis (R), representing Wyoming, and Senator Kyrsten Sinema (D), representing Arizona, together launched the bipartisan U.S. Senate Financial Innovation Caucus.
The Caucus will discuss domestic and global issues related to financial technology in the U.S. Senate, ultimately providing a natural launch-point for legislation to empower innovators, protect consumers, and guide regulators, while creating opportunities and driving U.S. financial leadership on the international stage.
The focus of the caucus will include, “blockchain, digital assets, central bank digital currencies, and more.” On top of this news, Pete Ricketts (R), the governor of Nebraska, passed a bill following in the steps of Wyoming, giving a framework for digital asset banks. Although we are in a macro bull market, regulation won’t always be this favorable. But there is no doubt that the government is noticing this technology and wanting to both legislate and capitalize on it sooner rather than later.
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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. 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.