The Wolf Den #320 - Buy, Borrow, Die
ETH Issuance Drops Below BTC’s- 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.
ETH Issuance Drops Below Bitcoin’s
Since the implementation of EIP-1559 over three weeks ago, a portion of the fees paid in ETH in each transaction known as the basefee is removed from circulation, or burned. While the amount of inflationary rewards continue the same way, by burning part of the supply, Ether’s net issuance has decreased significantly.
Through IntoTheBlock’s upcoming ETH 2.0 metrics
For the first time, ETH’s issuance has dropped below Bitcoin’s. This has been the case over the past few days as NFT activity has driven fees higher, thus leading to more Ether being burned. OpenSea continues to be the platform burning the most ETH, with approximately 15% of the 100,000 ETH burnt since the implementation of EIP-1559 taking place in the NFT marketplace according to UltraSound.money
Ethereum’s fee burn brings into question Bitcoin’s monetary premium. Despite handling around a quarter of the number of transactions and one tenth the amount of ETH’s total fees, Bitcoin continues to have a market cap 2.4x greater than Ethereum’s.
One of the main reasons for this divergence in key metrics and valuations is theoretically Bitcoin’s greater acceptance as a store of value. This is closely linked to its predictable, decreasing inflation, leading to comparisons of digital gold and applications of its stock-to-flow.
Following EIP-1559, Ether might still have a potentially uncapped supply, but has a measure in place to regulate it based on network usage. This aligns Ether holders and Ethereum users, effectively decreasing the issuance rate as demand to use Ethereum grows. While this may be less predictable than Bitcoin’s issuance, it appears to be working as Ether’s inflation dropped below Bitcoin’s for the first time.
Moreover, following the merge between the proof of work and proof of stake chains for Ethereum, the issuance is expected to drop go negative. The potential implications this has on Ether and its monetary premium have been a driving force for ETH’s outperformance in 2021.
Through ITB’s capital markets insights
The growth in NFTs appears to be having deeper effects than one might think at first sight. With volumes on OpenSea growing remarkably, the amount of ETH it burns continues to follow suit. Ultimately, this has led to record low issuance for Ether, dropping below Bitcoin’s and raising the question about their monetary premiums.
Bitcoin Thoughts And Analysis
MONTHLY CHART
Beautiful monthly candle. It is important to always zoom out. We now have a very clear bounce off of the EQ (equilibrium, center dashed line) of the ascending channel that price has been traveling in for 8 years. We have had 4 consecutive monthly candles wick below the EQ. Flipping this mid range to support should precede a move to the top of the channel - 6 figures.
4-HOUR CHART
Bitcoin can once again be rebranded boring coin, but this never lasts long. As you can see, we have sideways action, forming a symmetrical triangle with higher lows and lower highs. The next move will likely be dictated by which line breaks first - descending resistance or ascending support. For now, focus is on the altcoin market, with little to see here.
Altcoin Charts
FTT/USDT
I had this setup cued for the newsletter but it went nuts before I had a chance to send it. It happens. Luckily, I shared an entry at $51.81 recently in the newsletter, so many of you likely caught this.
If you missed it, we are now looking for a break of the all time high and retest as support, similar to what we have seen from SOL, LUNA, ADA etc. Price is heading into resistance here, so you want to break it first or buy the dip back to $51.81 if that happens.
FTX Acquires CFTC License
FTX is ready to compete with the largest exchanges in the crypto space. Rather than apply for a CFTC license and build out the infrastructure to offer derivatives, SBF has instead acquired a company that already has these capabilities. Announced just yesterday, FTX.US has “acquired the parent company of LedgerX LLC, a Commodity and Futures Trading Association (CFTC)-regulated crypto derivatives exchange.”
LedgerX is a young company in the derivatives space with a strong foothold, offering futures, options, and swaps on both Bitcoin and Ethereum. Assuming the deal closes, FTX would pull ahead of other competing exchanges that currently don't offer derivatives, i.e., Coinbase, Gemini, Kraken, and so many others.
“Going into the derivatives market is such a natural extension...FTX International has two years of running an exchange with $500 billion monthly volume in derivatives without seeing serious liquidations or having nearly any downtime. It feels like this is clearly within our wheelhouse.” - CEO of FTX.US
Donald Trump Doubles Down On Crypto Hate
“Do you every dabble in Bitcoin or cryptos” was the question posed to former president Donald Trump in a recent Fox Business interview. His answer to this question probably won't shock you. Before I get to his response, it is important to remember what type of investor Trump is. He isn't into stocks, a large amount of his money is from an inheritance, and he specializes in real estate and brand building. He isn’t financially exploratory.
"I like the currency of the United States. The currency of this world should be the dollar. And I don't think we should have all of the Bitcoins of the world out there. I think they should regulate them very, very high. It takes the edge off of the dollar and the importance of the dollar. Who knows what they are, but they certainly are something that people don’t know very much about.” - Donald Trump
Coinbase Sponsored Mr. Beast
In a recent video challenge to win $500,000 hosed by YouTube all-star Mr. beast, Coinbase appeared as the sponsor of the video. Mr. Beast is currently the 11th ranked YouTuber, with 67.5 million subscribers, garnering about 50 million views per video - astounding numbers. The advertisement was cleverly incorporated into the video, offering the participants of the video free Bitcoin if they completed a certain task. Mr. Beast’s audience appeals to everyone from young kids to senior citizens, definitely a fun stride towards mainstream adoption.
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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.