The Wolf Den #285 - Meme Coins Are Dropping Hard
Bitcoin Continues To Struggle - 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 continues to struggle
Bitcoin is still chopping sideways, as the current compression range has lasted 56 days and price has been unable to surpass the $36k mark since June 19.
As of July 14, using IntoTheBlock’s Bitcoin Financial Indicators
As the volatility dries up, the boring price action has been also reflected in short-term interest from new investors and unremarkable growth in the derivatives market.
This significant decline across the derivatives market can be easily illustrated by the funding rates across major centralized exchanges, which have been negative ever since the May sell-off occurred.
As of July 14, using IntoTheBlock’s Bitcoin Derivatives Indicators
As can be seen in the graph above, the last time we saw negative funding rates for such a long period of time was between March and late May of 2020, back when we experienced the infamous “Black Thursday”.
At IntoTheBlock we like to track new money flowing into the market by analyzing the number of addresses with a holding of less than 1 month. While some of these addresses will continue to hold for longer periods of time, changes in the number of traders point to the level of speculative activity taking place.
As of July 14, using IntoTheBlock’s Bitcoin Ownership by Time Held Indicators
In the graph above we can see that the number of traders for Bitcoin has decreased by 43% since February, currently showing levels not seen since September of last year. As the volatility has decreased, the amount of speculation happening has also slowed down considerably. This may not be a bad thing - this chart shows that short term investors have been the ones selling, since the number of HODLERS (addresses holding >1 year) is currently at an all-time high. Long term conviction amongst Bitcoin holders hasn’t changed.
Not everything has been bad for Bitcoin. As we recently experienced “the great migration,” it looks like the worst may be over for miners.
Following China’s crackdown on mining, Bitcoin’s hash rate decreased by 40% in June, making it one of the sharpest drops in its history.
As of July 14, using IntoTheBlock’s Bitcoin Mining Indicators
Since the hash rate bottomed out on June 22nd, it has increased by 59% and has been showing signs of stabilizing around the 100 Th/s range, meaning that miners have successfully relocated in other countries or that other miners have picked up the slack.
Bitcoin Thoughts And Analysis
DAILY CHART
Bitcoin dropped a bit over night (for me), but quickly jumped right back to where price was before. It is aggressively testing the ascending blue line as support for the 9th or 10th time. A candle is still yet to close below, so today's close will be interesting in that regard. Still, this is sideways with nonexistent volume - very little to see here. Be careful not to get caught up in the chop, thinking that what you are watching is meaningful.
There is a potential small bullish divergence forming on the daily, which would require price to close higher to form a definitive elbow up on RSI. I will be watching.
4-HOUR CHART
Same chart, different day. The main thing that I am watching is the darker red channel. Otherwise, very little to see on this chart but sideways chop between 36K and 30K.
Altcoin Charts
ETH/BTC AND ETH/USD
This is not a trade, I am just taking a look at ETH at the moment for you to see what I am watching. Notably, ETH made the trip from overbought to oversold - and back. It bounced nicely from oversold and right at local support, which is a decent sign. You likely remember the beautiful trade we just had from the range lows to the EQ - the rejection there was a good sign that a drop was coming.
There is no bullish divergence here, so I will be watching for one more drop of price and for RSI to potentially make a higher low.
The ETH/USD pair looks almost the same, also hitting oversold on the 4 hour. and bouncing off of support. You can see on this chart that bottom and tops were predicted by oversold and overbought bullish divergences.
The S&P Is Offering A Clearer Look At Crypto Markets
S&P Digital Market Indices has revealed four additional crypto-focused benchmarks.
Back in May, I reported that the S&P Dow Jones Indices went live with three basic crypto indices tracking Bitcoin, Ethereum, and a combination of the two assets. Peter Roffman, the global head of innovation and strategy at the firm said this - “with digital assets such as cryptocurrencies becoming a rapidly emerging asset class, the time is right for independent, reliable and user-friendly benchmarks.”
Living up to that statement, the S&P Dow Jones Indices has now released 5 more crypto products with a more macro focus for institutions. One of the 5 indexes, “includes more than 240 coins at launch” but the specifics of the coins tracked are not made public. This time around, Peter Roffman had this to say about the new products - “the expansion of our Digital Market Indices family gives one of the broadest snapshots yet of this rapidly growing asset class with the ability to slice and dice by market cap. We’re excited to bring this significant level of additional transparency to the cryptocurrency market.”
Despite the current shakiness of the market, it is bullish to see tools such as these indices being launched with such enthusiasm. "Bull" and "bear" are just temporary terms used to describe a growing market poised to take over the world.
Ethereum ETF Approved In Brazil
Where Bitcoin goes, Ethereum follows. Back in March of this year, Brazil’s SEC approved the first Bitcoin ETF in the country, which successfully debuted last month. The Ethereum ETF has now received approval, 4 short months later from the same regulatory agency. This means it should go live within the next 3 months. While it is exciting to see Latin America continue to hit home runs in the crypto sector, the world continues to wait for an SEC approved U.S. ETF. In the race to ETF approval, every little bit of money and time counts.
Brazil's movement adds more pressure for the United States to step up and approve a Bitcoin ETF. You can also count on the fact that an approved Bitcoin ETF in the U.S. will likely result in an approved Ethereum ETF.
Ethereum Whales Are Stacking Coins
The Top 10 Ethereum wallets have been buying aggressively of late, adding 2% to their stacks. They now own over 20% of the total supply. Like we have seen with Bitcoin, all on-chain metrics point to the fact that short term speculators have been selling into the hands of willing whales who are buying.
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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.