The Wolf Den #275 - Healthy Corrections
Bitcoin Buying Appetite Is Slowing - 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 buying appetite is slowing down (for the moment)
Despite Bitcoin currently trading just over 50% its recent all-time high, institutions and retail are showing little buying interest.
With the upcoming unlock of the 140,000 BTC in the Grayscale Bitcoin Trust, the $34,000 level is not looking attractive enough for institutional investors, as not many big names are joining the Microstrategy "buy the dip" narrative.
At IntoTheBlock, we like to track institutional movement, and one way to do it is via “Large Transactions”. ITB categorizes on-chain transfers of over $100,000 as Large Transactions. The aggregate volume in large transactions serves as a proxy to institutional investors’ and high net worth individuals’ transaction activity.
Bitcoin has experienced a dramatic slow-down in on-chain activity, as the total value transacted in USD above $100k is showing levels not seen since December of 2020.
As of June 30, 2021 using IntoTheBlock’s Bitcoin financial indicators
The total value transacted in these large transactions has seen a decline of 54% compared to the recent highs set in February of this year. A potential reason for this decline is the upcoming unlocking event of the Grayscale Bitcoin Trust, with 140,000 being unlocked in a couple of weeks. Selling pressure is likely.
And while it is true that long-term holders are maintaining their positions and even buying the dip, new investors have been the ones selling at a loss, showing a remarkable decline in new retail buying interest.
Using IntoTheBlock’s Traders indicator, we can track that the number of addresses with a holding period of less than a month has also decreased dramatically from the recent all-time highs. As can be seen in the image below, the number of addresses with a holding period shorter than 30 days has dropped by 27.5% between the months of April and June.
As of June 30, 2021 using IntoTheBlock’s Bitcoin ownership indicators
Furthermore, the volume held by trader addresses has dropped by 14%, reaching 1.6m BTC, its lowest level since July 2020. This coincides with the recent crash of BTC price, pointing to a large number of traders rushing to sell out of panic. This is usually one of the leading indicators of a potential bubble taking place.
Bitcoin Thoughts And Analysis
The community was once again bullish at resistance after being bearish at support. My bias has not changed, which is sideways chop and difficult to trade. For now, not much signal amidst the noise, and altcoins once again look crappy after a single day of optimism.
4-HOUR CHART
Price failed to hold the EQ of the range as support... for now. The daily closed below 36K, which was not encouraging.
We have seen it chop around 36K many times in this range, as it has been a key area. If you are bullish, price is back at very local support, based on the fact that there was a lot of price action in this area before the move up yesterday. If you are bearish, you probably shorted 36K already.
For me, this is just chop, nearly impossible to trade. We need to hold above 36K to even think about being optimistic... then 40-42K being the next key resistance that will be strong.
Above 42K is when the bull case even begins. For now, nothing doing.
HOURLY CHART
We have a small confirmed bullish divergence with RSI on the hourly (not oversold) and another potential bullish divergence if price closes down in this area. We also have potential hidden bullish divergence on multiple time frames.
This is a somewhat weak signal, but could indicate this is just consolidation around 36K and not a harbinger of a quick return to the range lows.
Institutions Are Jumping Into The Mining Space
Argo Blockchain, one of the major Bitcoin miners based out of London, received a $20m loan from Galaxy Digital to expand their mining operation in Texas. The loan is also partially backed by Bitcoin, which could favor Argo if Bitcoin rises in price before the loan is fully due in December. Peter Wall, the CEO of Argo, was a phenomenal guest on the podcast a few months back and offered a really unique perspective on the mining industry. At the time of recording, mining was extremely popular and celebrated as Bitcoin’s price was near its $60,000 peak. Today I am recording with Whit Gibbs, the CEO of Compass Mining as the market is recovering from a 50% drawdown. It will be interesting to see how and if the perspective shifted due to the difference in current market conditions.
FBI Targeting Hackers
The FBI is taking a more offensive tact to thwart hack attempts, forcefully reversing the hacks and "hacking back" the hackers. From the article:
"For the last several years, FBI agents debated turning the tables on hackers by remotely accessing breached computer networks and booting out the attackers caught in mid-hack.
They got their chance earlier this year after state-backed Chinese hackers compromised thousands of private Microsoft Exchange email servers with the press of a button. In response, an FBI special agent petitioned a Houston federal judge on April 9 for authorization to remotely access hundreds of hacking victims’ to topple the attackers’ digital points of entry.
Put more simply, the FBI out-hacked the hackers."
Hacking is obviously a huge problem, and one that is being used to wrongfully attack the crypto space. It would be good to see the government stop this activity.
Coinbase Launching App Store And Yield Product
Taking Apple as an example, Coinbase is launching an app store to allow third parties to build products and dapps. Interesting tactic, knowing that the space will grow and they cannot build everything themselves.
Coinbase is also launching 4% APY yield on USDC - a far lower rate than competitors, but far higher than holding USD in a bank. This should appeal to mainstream investors who are wary of "crypto banks" but trust the publicly traded company and will view it like a bank account.
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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.