The Wolf Den #397 - Santa Claus Rally?
Ethereum Becomes An Engine Of Economic Activity - 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.
Ethereum Becomes An Engine Of Economic Activity
Bitcoin is certainly not the only crypto-asset that has peaked the interest of institutions. Ethereum, along with other smart contract platforms, have attracted investment and usage through its diverse set of use-cases.
Ethereum’s ICO days are long gone, with much more than fundraising now taking place on top of its blockchain. Stablecoins, financial applications and collectibles (through NFTs) are just some of the use-cases that have blossomed in the Ethereum ecosystem.
While some of the usage of these applications can still be speculative, the magnitude of the total activity happening on top of Ethereum shows how it has successfully grown into an engine of economic activity.
Processing $2T+ for four quarters straight — The total volume processed between ETH and stablecoins alone has been consistently high in 2021.
Without the quarter being done yet, the total amount of value settled on Ethereum has tripled relative to Q4 2020, and increased five-fold versus Q4 2017
The total amount settled is likely to be as much as double the figures shown above with thousands of ERC-20 tokens and NFTs trading on Ethereum on a daily basis
As of December 22 through IntoTheBlock’s ETH fees indicators
Paying billions to use Ethereum — For better or worse, the amount paid to use Ethereum has skyrocketed in 2021.
The total amount of ETH paid in fees has grown by over 10x from $430M in Q4 2020 to $4.8B so far in Q4 2021
On the bright-side, such fees highlight the high demand and willingness to pay to use the Ethereum blockchain
However, with average transaction fees at $50 or higher at times, the Ethereum blockchain is pricing out users intending to make smaller transactions
Supply-burning engine — Ether holders have benefited from the economic activity taking place on Ethereum.
Since the implementation of EIP-1559, a high percentage of the ETH paid in fees (85% on average) is burnt, effectively removing this supply and fighting inflation.
Over 1.2 million ETH (> 1% of circulating supply) has been burnt thus far
This has reduced Ethereum’s net issuance (inflation) from 4% to just 1%
Overall, Ethereum is acting as the backbone to a myriad of applications. This activity has led Ethereum to a digital economy of its own, similar to a nation-state, as discussed in the most recent IntoTheBlock webinar on staking. Ultimately, although this growth is resulting in higher costs short-term, scaling solutions are coming to improve the infrastructure of the economic engine that Ethereum has become.
Bitcoin Thoughts And Analysis
Bitcoin has made some nice moves over the past couple of days, but none of it is particularly meaningful as price continues to range. We have very clear signals that price is likely to continue to the range highs, at which point we can start to really look at a bullish case.
DAILY CHART
Blue line broken, black line is the next key resistance. We still have work to do!
4-HOUR CHART
Beautiful price action. As discussed yesterday, Bitcoin formed a local double bottom with a neckline at $48,307. As I said was likely, we saw a perfect retest of this line as support. Basically to the dollar. After that retest, we saw price break the blue descending resistance and test THAT as support, almost to the dollar. As you can see, we still have the double bottom target of $51,200, and ultimately the break of the blue line should send price to the range highs. A trip to the top of the range should be no surprise, but also is not particularly meaningful without continuation after.
At the end of the day, Bitcoin continues to range, and these setups and lines are all price action within that range.
Altcoin Charts
ELON/USDT
I shared this setup last Thursday and it is yet to play out. Here is what I said, to reiterate, as price approaches resistance.
Frankly I am hesitant to share this chart, because this is a low cap coin that is a meme. That said, a good chart is a good chart and there’s still a strong chance that dog coins have more momentum left. To be clear this is STRICTLY A TRADE IDEA and should not be viewed in any way shape or form as an investment or long term play. You should know my thoughts on meme coins by now.
This is also RISKY. I would not dedicate any meaningful amount of money to it. Hopefully you guys get the disclaimer! Plan for it to go to zero if you decide to enter.
I am sharing because quite a few people have asked me about the coin, leading me to believe that it is starting to build a bit of buzz after the recent move up. I have friends that I trust who have apparently been accumulating, and there are rumors of future listings.
This led me to look at the chart, which is setting up for a monster move, if and ONLY IF the upper resistance is broken. This is a massive bull pennant with the potential to easily 2x or 3x (if not more). I actually started a tiny position on the coin myself, but would buy more heavily on a break of that descending line.
Keep in mind, this could have quite a bit more downside before breaking that line, if it ever does. My position is so small that this coin could go to zero without me noticing. That is intentional, because it COULD GO TO ZERO.
That plan will change if it breaks out.
MATIC/USDT
I have been posting MATIC setups since it was under 10 cents, so no surprises here. More recently, I have been posting trades with a target of the all time high at $2.70. If this level can be flipped to support, then sky is the limit, with MATIC entering price discovery. We have seen what coins like SOL, AVAX and LUNA have done when they have gone into price discovery, and I would expect the same from MATIC.
To be clear, this is only a trade if it breaks $2.70. Right now you would be buying under a major resistance! $2.70 is a target to take profit for many traders.
Is Ethereum An Altcoin?
The flippening narrative has been around for quite some time now but has grown significantly over the past few months. Ethereum’s market dominance has made significant strides in catching up to Bitcoin's. Let’s compare Ethereum’s rate of growth to Bitcoin's rate of growth this year.
On January 1st, Bitcoin’s price sat at $29,087 with a market cap of about $544B and a market dominance of about 53%. Ethereum's price on the other sat at $735 on January 1st with a market cap of about $83.4B and a market dominance of about 14%. Bitcoin is up less than 2x, while Ethereum has gone up over 5x in price.
Today, Bitcoin is worth about $49,000 with a market cap of $927B representing 40.8% of the crypto market dominance, while Ethereum is priced at $4,020 with a market cap of $478B representing 21% of the crypto market dominance.
Numbers aside, Ethereum is clearly gaining on Bitcoin. In 2021, it has definitively become a household name and institutional demand is increasing.
So what happens if Ethereum flips Bitcoin? Does Bitcoin become an altcoin? Does the concept of altcoin disappear? Will the market turn upside down?
Time will tell, but I do think that the notion of "altcoin" will dissipate as the best coins prove their worth and staying power over the long run. Coins will just be coins, serving the world and reinventing our financial system in their own unique way.
I had NOT received the analysis from IntoTheBlock shared above when I wrote this... amazing confluence.
Crypto.com Releases 2022 Predictions
If you are looking for a head start on your 2022 investing, Crypto.com has a perfect launchpad. They wrote a 25-page research report highlighting all of the trends and developments of 2021, along with their predictions for 2022. I won't spoil their 5 predictions, but I will list the headlines below. The link above includes a direct link to the report.
Global Crypto Users Reach 1 Billion By The End Of 2022
Cryptocurrencies Become A Staple In TradeFi Investment Portfolios
GameFi Fuels Crypto Adoption By The Public
Cross-Chain Protocols Become The Norm
Through DAOs, Crypto Changes The Way We Work
2021 was amazing, but 2022 is shaping up to me multitudes larger for the crypto space. Buckle up.
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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.