The Wolf Den #350 - Digital Gold > Gold
Bitcoin Thoughts And Analysis
As I said yesterday, not much is happening on the Bitcoin chart except for sideways chop designed to make sure that everyone attempting to trade it loses money before the next big move. There was quite a bit of panic when price dropped yesterday, but now it has retraced the entire move and is back near the highs. Really nothing to see here.
WEEKLY CHART
I remember people talking about the weekly shooting star candle like it was yesterday. Because... it was yesterday. What a difference a day makes. This is why you have to wait until a candle close. What looked like an ugly shooting star now looks like a nice big bullish candle pushing deeper into resistance.
On most time frames, there are massive obstacles from here until 60K. I still expect friction in this area, and for it to be a tough area to push through. Sometimes you still have to go back down to gain strength to go up, so don't be surprised if that happens.
4-HOUR CHART
The blue support that I drew yesterday worked out nicely, in confluence with the 50 MA that is pushing up hard. We now have potential bearish divergence with RSI on the 4-hour (not shown), but it is far from overbought so a bit less of a concern. Still, we should eventually see 40hour hit oversold.
4 Key Insights Into NFTs - 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.
4 Key Insights Into NFTs
Non-fungible tokens (NFTs) have burst into the mainstream in 2021. First going through a hype cycle in February & March, the NFT space drew the attention of many upon Beeple’s $69 million sale for Everydays: The First 5000 Days. Soon after, the NFT market cooled down then surged back to new highs in what many are referring to as “NFT Summer.” Analyzing on-chain and market data obtained by IntoTheBlock, we obtain four fascinating insights behind the remarkable rise of NFTs and their impact on the Ethereum blockchain.
1. The NFT Market has grown over 3,000x year over year
OpenSea has quickly become the largest marketplace for NFTs. Aggregating all public ERC-721 and ERC-1155 tokens on Ethereum and Polygon, OpenSea is the entry point for the vast world of NFTs.
As demand for NFTs has rocketed, OpenSea has benefited tremendously. In 2021 alone, they raised $123 million between their series A and series B financing rounds, giving the marketplace a most recent valuation of $1.5 billion. Both rounds were led by renowned venture capital firm a16z and included reputable investors such as Founders Fund, Coinbase Ventures and individual investors like Mark Cuban and Kevin Durant.
The concentration of noteworthy investors in OpenSea is understandable based on the sheer growth it has seen, with monthly volumes in its marketplace blowing past $3 billion.
August 2021 has so far been the month with the highest activity in NFTs. As such, OpenSea recorded a whopping 3,600x increase year over year from under $1 million in August 2020 to over $3.4 billion this past month.
2. Investors are flooding in and spending more
Although it is unclear if demand is coming from people looking to collect NFTs or simply from speculation on JPEGs (and even .txt files!?), it is evident that investors cannot get enough.
Over 200,000 addresses bought at least one NFT on OpenSea in August 2021, growing 100x year over year. On average, each address bought 7.6 NFTs the past month, another record high.
The volume spent per address has also grown exponentially. The average address spent over $15,000 in NFTs on OpenSea throughout August, increasing 35x.
3. Gas prices spike consistently during NFT drops
The increasing NFT prices have likely led interest into the space. Along with it, gas prices on Ethereum have spiked significantly.
More and more NFT releases are leading to sudden spikes in gas prices. This is the case as projects releasing NFTs typically charge a relatively low fee for users to mint a fixed number of pieces that can then be resold. As prices of NFTs have increased, many appear to be looking to mint these NFTs hoping to sell them at a higher price, increasing the willingness to spend for higher gas fees.
4. NFTs are leading Ether to become deflationary
Even though NFTs may be pricing out usage of Ethereum, it is arguably benefitting Ethereum holders. This is the case not only because it drives demand for ETH to pay for NFTs, but also because following the implementation of EIP-1559, part of transaction fees are burned, effectively reducing ETH’s net issuance.
The high amount of transaction activity surrounding NFTs has led the amount of ETH being burned to surpass the total amount issued in two days, and largely decreased Ether’s issuance rate.
Overall, the NFT space has recorded a breakout year with increases in multiples that may be hard to fathom. While a significant portion of the activity appears to be speculative following price increases, it is likely that there is substance behind the space as it drives more users and savvy investors into crypto. Finally, it is worth considering both the positive and negative outcomes arising from the recent NFT mania. Ultimately, time will tell if the reduced ETH issuance led by NFTs will make up for the incredibly high gas costs they spur.
Altcoin Charts
IOTA/USDT
It is not technically accurate to call this a cup and handle pattern for a few reasons. 1) Price never returned to the all time high to complete the cup. 2) The handle retraced more than 50% of the depth of the cup.
That said, I have seen these cup and handle variants play out successfully before, and regardless of whether it qualifies or not, we still have a clear breakout from a blue descending wedge and retest as support. The target of that descending wedge is the top of the pattern, around $2.08. Above that is the all time high resistance. If that breaks, price heads into price discovery and much higher targets.
If I was trading this, I would be scaling out at both resistances above (if it goes up!) and then saving some in case of price discovery.
Legacy Markets
XAG (SILVER)
The entry at the bottom of the range was an absolute beauty, as the recent show of dollar strength sent the price of silver plummeting to those lows. The risk/reward of a position there was a great, because a clear breakdown of the range would be a signal of much more long term downside for silver.
Assuming you missed that entry, we have another opportunity now, although a bit riskier and more of a quick trade than an investment.
We have a clear inverse head and shoulders pattern on the 4-hour, with a breakout through the blue neckline, which is considered confirmation. The target is shown based on the depth of the pattern, and is close to a very clear level or resistance at $24.872. This would also bring price almost back to the EQ of the green channel on the daily chart above, the next natural target from the first entry.
Chart Requests
I had a great time looking at charts with all of you yesterday on the livestream! Here are your requests:
Major Upgrade For DOT On The Way
DOT investors should be excited. The highly anticipated parachain upgrade is officially coming this November. DOT saw a 20% price increase on the announcement, reflecting the community's support for what’s coming. For those unfamiliar with DOT, it has risen the ranks to top 10 status and is often referred to as the “The Internet of Blockchain.” DOT is aiming to make sure that blockchains can communicate with each other and grow together, rather than in separate silos.
The parachain upgrade is solidifying DOT’s goal of true interoperability, which is just a fancy word for shared communication and connection of separate blockchains. This improvement will bring about two separate auctions, where blockchains compete to be a part of DOT’s network. This should almost certainly bring about more bullish announcements and further price increases.
Stripe Returns To Crypto
“Crypto is a brand new team at Stripe,” one job post says.
What comes around goes around, which happens to be the case with $31 billion payments giant Stripe. Stripe was one of the first major institutions to show interest in Bitcoin back in 2014, only to abandon crypto entirely in 2018. After a quiet period of nearly 3 years, Stripe has now announced that they are ready to return in a serious way. Currently, the firm processes, “hundreds of billions of dollars in e-commerce annually; that 90% of American adults have utilized it; and its API is used hundreds of millions of times a day.” In a response to the announcement, Stripe said, “this gives us a massive opportunity to be at the forefront of a new wave of innovation.”
U.S. Becomes Hashrate King
After China’s widespread shutdown of Bitcoin mining, the United States has emerged as the new mining leader, topping out at 35.4% of the global hashrate. Coming in second is Khazikstan with a total of 18.1%, almost half of U.S. output. The report from Cambridge also revealed that China’s hash rate has dropped to zero, a huge, missed opportunity.
The Wolf Of All Streets Podcast Ft. Senator Cynthia Lummis
Senator Cynthia Lummis is a gift to the crypto community. She bought her first Bitcoin in 2013 and has been a staunch supporter ever since. Senator Lummis now works tirelessly for the advancement of safe and supportive legislation of crypto. In this episode, Senator Lummis details the legislative bill she is writing and shares her thoughts regarding other prominent regulatory figures in the space. Most importantly, she leaves us with hope and optimism surrounding the future of cryptocurrencies and regulation in the United States.
In this episode, Senator Cynthia Lummis and I discussed:
Do 1930’s securities laws work today?
Who in government is in charge?
Will the infrastructure bill be resolved?
Janet Yellen wants everything reported
The dollar is going digital
Why is Cynthia Lummis a Bitcoiner?
Raising the debt ceiling and regulating
The Senator thanks you!
How you can get involved
This episode is sponsored by ARCULUS and KAVA.
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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.