The Wolf Den #277 - Charity: Water
Bitcoin Thoughts And Analysis
Bitcoin trading volume is nearly nonexistent and we are heading into a holiday weekend in the United States, meaning that volume is likely to drop even further. Weekends have generally been rough, although we did see a move last Sunday to the upside. It's probably not even worth watching Bitcoin for a few days, and any move will potentially be on low volume and suspect.
MONTHLY CHART
I neglected to post the monthly chart yesterday after the close. The June candle closed right at the EQ, so this month will be very telling. We want to see price move up and close above that dashed line, which would probably mean 38K+ by August. Otherwise, we have a potential break of support which could target the lower end of the ascending channel, but that could take a while and is not certain by any stretch. For now, we have a support test that looks successful and we need follow through. It's close.
The candle from June was a high wave spinning top. Here is some more information.
"High wave candlesticks portray situations where the market is having difficulty coming to a consensus on a security's value. They are indicative of a market in which uncertainty and indecision prevail. Neither the buyers nor the sellers have a clear sense of which direction the market will head. The forces of supply and demand are equally balanced."
4-HOUR CHART
Boring. Nothing has changed since yesterday. I would love to have more to report, but this is less exciting than watching paint dry. Go read a book or find a hobby until something happens!
What Is A Stablecoin?
We tend to measure success in the crypto markets by the total percentage that our holdings rise over a given amount of time. Stablecoins are the one exception to this rule. Their success should be measured by their price stability rather than price appreciation. Stablecoins are algorithmically designed to hold a steady value, typically $1 USD, even as the market moves up and down and users go in and out of their assets.
So why would anyone bother to convert their fiat into a cryptocurrency that is designed to remain stable? Doesn't it make more sense to buy a coin that’s poised to rise rather than one that is designed to sit still? Let’s find out why.
How Stablecoins Work
To understand why someone would buy a stablecoin, or even convert their entire crypto portfolio to one, it’s best to take a look at their technical background. Stablecoins are stable because they peg their value. According to Investopedia, a currency peg is “a policy in which a national government sets a specific fixed exchange rate for its currency with a foreign currency or a basket of currencies.” In crypto, rather than the governments maintaining the “fixed exchange rate,” blockchains, decentralized autonomous organizations (DAOs), and smart contracts sustain the structure. Stablecoins must maintain this peg, typically to USD related instruments held in a 1:1 reserve.
The reason a stablecoin holds a steady value typically set at $1 is because the value of the crypto is matched to an equal value held in the reserve, much like the dollar, once on the gold standard. The most popular stable cryptocurrency Tether (USDT), for example, can instantly be swapped for $1 USD at any time because the creators claim that there is $1 in their reserve for each minted USDT.
Why Should I Use A Stablecoin?
This cryptocurrency can be instantly swapped back and forth for USD, but why would someone waste their time trading a digital dollar in the bank for a pseudo dollar? First, stablecoins offer near instant global settlement times at a fraction of legacy costs. This makes them an ideal candidate for remittances, while also avoiding price fluctuations or inflation during the settlement times. Further, you can send micropayments with minimal cost using a stablecoin, even a few dollars. This is effectively impossible using a bank because of wire fees, especially across borders.
Secondly, their near zero volatility makes them an ideal safe haven for investors and traders during times of instability in the crypto markets. These factors on their own are effective, but together, they make stablecoins an extremely attractive option for their wide range of flexible use cases.
Active traders rely on stablecoins during large swings to exit positions without having to convert back to fiat. Imagine if a trader only had two endpoints - money in their bank account or Bitcoin on an exchange. If a trader began to suspect Bitcoin was preparing to make a short-term correction, in this hypothetical, their only safe haven would be to sell their Bitcoin and send the money directly to their bank account which is costly, slow, and ineffective. Stablecoins are the instant intermediary between those two destinations and offer ease of use and instant liquidity to dollars. Furthermore, as the trader prepares for a dip in Bitcoin, but perhaps believes a specific alt coin on a different exchange is ready to rise in value, they can instantly send the stablecoin to another location and exchange it for a new position. Stablecoins are the perfect vehicle to quickly move money from one exchange to another.
Stablecoins can also be used to earn yield on countless platforms in the crypto space, often over 10% per year and compounding weekly or monthly. There is an insatiable appetite for people to borrow stablecoins, meaning that platforms can pass on the bulk of those interest payments to customers willing to park their funds. This is perhaps the most compelling new use case for stablecoins that there is.
Binance Under Attack
We recently saw a questionable news report about Binance being banned in the UK, which was proven to be misleading. It is true that regulators in that country are taking a closer look. Now it seems a coordinated attack is underway, with other countries putting Binance under the microscope. From the article:
The Cayman Island has started a probe against Binance stating that the country is not authorized to operate in the country.
Thailand’s SEC has also filed a criminal case against Binance for operating a non-licensed exchange.
Regulators in the U.S., U.K., and Japan have all raised similar concerns about the exchange in recent months.
When it rains it pours, and we are still in FUD season for Bitcoin and related companies. It will be interesting to see how this all plays out.
Robinhood Is Gearing Up To IPO
Robinhood on Thursday released its prospectus to debut on public markets.
Despite a rough start to the year and a questionable track record of fines and penalties, Robinhood filed an S-1 in preparation for its upcoming IPO. They have not announced a date. Robinhood has been hinting at this for a while, but has probably delayed due to bad press and regulatory issues. Robinhood has been compared to Coinbase, but their numbers tell a pretty interesting story. One would expected Robinhood’s financials to be similar to those of Coinbase, but that is just simply not the case. Let’s take a closer look:
Coinbase Q1 reported “$223 billion, representing 11.3% crypto asset market share.”
Robinhood reported “$15.1 billion” and it offers both stocks and cryptocurrencies.
Coinbase had “$1.8 billion” of revenue in Q1.
Robinhood's crypto revenue was about “$89 million.”
To top it off, about a 1/3rd of Robinhood’s cryptocurrency revenue was from Dogecoin alone - MUCH WOW. Imagine if Coinbase had listed Doge sooner - the differences in these numbers would be astronomical.
When Coinbase listed, there was a lot of conjecture surrounding the future performance of the stock. Average investors tend to forget that these stocks are privately traded behind closed doors for a long time before they are made publicly available. Furthermore, only about 20% to 35% of Robinhood’s shares will be available to retail investors when it does go public. If Coinbase (the lesser of two evils) turned out to be a “buy the rumor, sell the news” event, it is hard to imagine it didn't set a precedent. The two companies are quite different, but they are competing for the same customer base and Coinbase is clearly doing a better job.
Staking Is Poised For Big Success
JP Morgan released a report this week outlining the current and future importance of staking along with the role it will play in the crypto industry. Right now, it is estimated that the staking industry generates about $9b a year, which is minuscule compared to the size of the $1.3t crypto market cap. Although many coins contribute to the $9b a year staking total, analysts at JP Morgan specifically pointed out that Ethereum’s 2.0 launch can be enough of a catalyst to propel staking totals to “$20 billion in the quarters following the launch of Ethereum 2.0 and $40 billion by 2025.” Once Ethereum’s staking opens up from the 2.0 launch, I expect its percentage of staked tokens to compete with other protocols that currently boast much larger staking percentages. Staking is very lucrative, but many investors also want liquidity which Ethereum does not offer yet.
Crypto Scores In The NBA
2021 has been the year of crypto infiltrating the sporting world. FTX bought naming rights for an arena in Miami, Strike sponsored a Formula 1 race car, Voyager sponsored NASCAR, Tom Brady became an ambassador for FTX and more. The newest sport/crypto partnership is the NBA’s Portland Trail Blazers and StormX, which is a crypto rewards platform. This is the first crypto company to lock down a jersey sponsorship and probably won't be the last. As I continue to say, prices may be down, but mainstream interest in the market continues to grow at a rapid pace.
Love Is Bitcoin
Find your ₿itcoin lve I am a Man Woman Looking for Woman Man
Since there is a dating app for just about every niche hobby or lifestyle, it was only a matter of time until Bitcoin became the next new dating focus. The website reads, “it is time for a new generation of sovereign couples. Just like any dating site, only Bitcoin is at the forefront.”
Considering the line for the men's bathroom at the Miami conference was about 30 minutes long and there was not a line for the women’s, I imagine the imbalance of sexes may be a bit of an issue here. My only plea is that you don’t share how much crypto you own on this site - a lot of users would probably love to have your keys more than you as a partner.
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
Mining for everyone! You can buy an ASIC and have it set up at a destination of your choice by them, and you only pay the electricity cost. Absolutely awesome.
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.