The Wolf Den #290 - Gaining Exposure
We Survived The GBTC Unlock - 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.
Is the worst over? We survived the GBTC Unlock
Since its launch in 2013, Grayscale's GBTC has been an investment vehicle for traditional finance investors to get exposure to Bitcoin. GBTC's investment trust follows Bitcoin's price due to its holdings of 654,000 Bitcoin, although it has notoriously gone from a significant premium to a discount throughout 2021.
Investors entering GBTC are subject to a six-month lock-up period for their shares. Based on data from bybt a record amountm equivalent to 40,000 BTC, is set to be unlocked throughout July, with the highest unlocking of 16,240 BTC having occurred on July 18.
Yet, it looks like the worst may be over. Prior to Sunday’s unlock, there was a lot of uncertainty in the market, poised by record searches of GBTC in google and negative funding rates in the derivatives market. But as the last big unlock on the 20th happened, it looks like the GBTC crashing narrative may be over.
As BTC gets unlocked and traders look to take their risk-free profits, they have to close their short leg of the trade in order to make the difference. This highlights the potential positive scenario from the record unlocking, where the unwinding of short positions used for the popular carry trade results in buying pressure on Bitcoin.
Since yesterday, Bitcoin experienced a remarkable boost in volume. Today, as Bitcoin breaks through the $31,000 barrier again, the Perpetual Swaps volume reached its highest number since July 8, pointing out a potential bullish shift in market sentiment.
As of July 21, using IntoTheBlock’s Bitcoin Derivatives Indicators
And because we love to mention this indicator at IntoTheBlock, it is important to note that the majority of Bitcoin holders are still in a state of profit. The Global In/Out of the Money (GIOM) classifies addresses based on if they are profiting (in the money), breaking even (at the money) or losing money (out of the money) on their positions at current price.
As of July 21, using IntoTheBlock’s Bitcoin Financial Indicators
As can be seen in the graph above, the Global In/Out of the Money indicator reveals that 69.25% of the addresses currently holding BTC are “in the money.” On the other hand, large in the money clusters indicate key price ranges on-chain where a high amount of addresses (or volume of tokens) had previously been bought and would currently realize a profit if they sold today (because price is higher than their cost of acquisition).
To complement this analysis, as the sell-off has ended, we can conclude that it came mostly from short-term holders selling at a loss. And we know this because the HODLERS indicators reveals that the number of addresses holding Bitcoin for more than 1 year is currently at an all-time high, and by contrasting it to the GIOM indicator, we see that a large cluster of addresses acquired BTC between $10,200 and $28,000.
While there’s still uncertainty and FUD in the market, the long term investment perspective remains untouched within a large range of investors.
Bitcoin Thoughts And Analysis
Bitcoin loves to confuse everyone. In classic fashion, price closed below the range lows, but immediately pumped and returned back to the range. As I mentioned, every time frame under the daily was oversold, so perhaps this bounce was just a reaction to those conditions. We are seeing potential hidden bear divs on a number of those time frames, but nothing is set in stone at all. Once again, back in the bottom of the range.
WEEKLY CHART
It is only Wednesday, so way too early to judge the weekly candle. That said, it's interesting to see that demand is once again showing up, with a potential hammer candle printing that could easily turn green if price goes up a couple hundred more dollars. Also, the 50 MA on the weekly is still well within reach as support. I still do not view that line as lost, unless we see a candle close strongly below.
DAILY CHART
When you zoom out a bit, nothing has really changed. Yes, price closed the daily below the 30K range lows, but it immediately returned back into that range (not shown here). More importantly, we are still in a clear descending blue channel.
The daily candle is currently bullishly engulfing yesterday's a bullish reversal signal.
Honestly, I think it's too early to get excited or upset. Price is still ranging again! We are, at least, seeing a bit more volume.
4-HOUR CHART
Price printed an "Inverted Bart Simpson" pattern, launching right back up to where the drop started. As you can see, a number of candles closed below the range lows, before heading back up. The last 4-hour candle was the highest volume we have seen in a month on Bitstamp, which is where whales generally trade spot.
You can see that price has returned to a cluster of price action just to the left, so this area should be strong resistance.
In theory, a successful test of the range lows, even with a deviation below, should lead to a test of the range highs, but I am nowhere near willing to call for that yet.
Bottom line - hard to know what's next. I am sure that longs are piling in once again here at local resistance, and the hourly is already overbought.
I will keep Dollar Cost Averaging in and chilling.
FEAR & GREED INDEX
The crypto fear & greed index just dropped from 19 to 10, even after the bounce. This is the most fearful that the community has been in well over a year. If you are a sentiment trader, you know that the best time to buy is when people are fearful.
Altcoin Charts
ETHEREUM
Just a quick update from yesterday. ETH bounced nicely from support, just as I thought it would. This was a good signal that the market was not as bad as it looked.
The USD pair bounced off of the range lows beautifully.
FTX Valued At 18B
There has been endless speculation about the value of FTX in the past. After a series B funding round resulting in a $900M raise, FTX has been officially valued at 18B. More than 60 investors partook in the round, including “VanEck, Circle, Coinbase Ventures, Sequoia Capital, Paradigm and so many other household names in and out of crypto.” When you dig into the details, this is really epic.
FTX was founded in 2019. Their flailing US exchange was founded even later. For perspective, Coinbase was founded in 2012, Bittrex and Gemini in 2014, and Binance in 2017. In roughly 2 years time, FTX has become one of the most talked-about names in the crypto space.
Nobody is doing it quite like Sam Bankman-Fried. With a trading background like myself, Sam has approached the industry like a trader, taking calculated risks along the way, a method we really haven’t seen from any other companies.
Tomorrow's podcast is a second conversation with SBF. We dove quickly into his plans for FTX, specifically with regard to marketing the exchange to the mainstream through sponsorships, endorsements and sports. It's very clear that he intends to make FTX a household name in the near future.
Coinbase Hit With Dog Themed Lawsuit
Cryptocurrency exchange Coinbase Global Inc. (NASDAQ:COIN)...
Dogecoin has been a favorite, not only among the retail crowd, but also with exchanges looking to capitalize on the trading volume it brings in. Unfortunately for Coinbase, they are now facing a class-action lawsuit because of a misleading campaign that encouraged users to trade the asset (which most people have now probably lost money on). The plaintiff was under the impression that he needed to trade $100 in Doge to be entered into a million-dollar sweepstakes. The catch was the entry was free.
The lawsuit is seeking more than $5M in damages for the affected users, pennies for the exchange to cough up. It’s impossible to say who was in the wrong, but this offers a reminder to focus on researching quality projects and stacking coins rather than getting caught up in promotions.
BNY Mellon And State Street Back Crypto Exchange
While the crypto community is focused on short term price action, the biggest banking institutions in the world are making huge move in the crypto space. 6 banks are backing Pure Digital, which is said to be launching within a week. The future is bright for crypto.
Ark Invest Is Buying GBTC
Cathie Wood's Ark invest has continued to buy the dip. They have added 10M worth of shares in GBTC this week. She will be speaking with Jack Dorsey and Elon Musk today at 2 PM EDT, which you can watch here.
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.