The Wolf Den #402 - Stacking Is The Name Of The Game
Bitcoin Thoughts And Analysis
Up, down, all around. Bitcoin continues to chop, making big moves and ending up back in the same place, over and over again. Nothing unexpected, right? It's almost pointless to look at the charts for now, as my expectation is that we will remain sideways until there is a catalyst in either direction. That could happen soon, but price action in the mid 40Ks is almost meaningless. I will share a few charts, but there's not much to see!
WEEKLY CHART
It is only Wednesday, so we have days until the close. That said, price is testing the 50 MA once again. We still have a higher low, we still have the descending blue line as support. We still need to see a move to 53K and beyond to start to see anything meaningful.
DAILY CHART
Here's a solid reminder that charts are simply ideas. This was a confirmed descending resistance, with 3 perfect touches. Price broke back down through it as if it was not there... not uncommon, because charts are risk management tools and not crystal balls.
Price is back below the 200 MA once again, but trading right around it. Let's see if it holds.
Blockworks Breaks Down The Market
My good friends over at Blockworks have been killing it at everything they touch. They also noticed stagnation in market activity that I mentioned yesterday, but they managed to dig up some interesting facts I wanted to share here with you - credit to them!
Did you know that “the number of BTC wallet addresses holding 10 or more BTC has been in a downtrend since the end of 2020?” - This is likely due to increasing price over time and profit-taking at higher levels. Achieving a 10 Bitcoin portfolio will only ever get harder over time.
Or that, “active addresses on the Bitcoin network are down from 1.2 million at the beginning of 2021 to 995,000 today.” - this is likely due to the fact that excitement Q1 of this year was really high. Price is up since the beginning of January, but the sentiment is down. I think investors are primarily just waiting for the storm to pass right now.
From Raoul Pal in the article, “we are still digesting a large loss of active wallets from China and non-China growth, therefore, [the addition of new wallets needs to be greater than the loss of active wallets from China] to exceed that loss of accounts for the network to re-grow too. Likely a matter of time. Additionally, I didn’t mention that institutional rebalancing, tax-related selling, and hedgies squaring books have also added to year-end weakness. This is more temporary, most likely.” China’s ban may be out of the news, but the lingering side effects are still very real and existent. As for tax-related selling? I do not believe that is having a major effect on the market, because volume is nearly non existent.
Raoul Pal Addresses Market Stagnation
Raoul Pal's recent Twitter thread is a great summary of 2021. As much as it feels like our space has matured and grown the past year, it also feels like we are actually still at the starting line. According to Pal, as institutions began to join us, retail began to disappear at an equal pace. The data shared supports this assessment and Raoul Pal, with all of the facts linked above. Here are some spoilers below that summarize his main points. I highly suggest you read the thread in its entirety.
"But with no net real new capital flowing into the space, attention moves to other chains which also have PoS but earlier network adoption, taking volumes away from both BTC and ETH. This is creating the rapid rotations as people already in the space shift assets around looking for returns - DeFi then NFT's then L1's. Lots of churn, net net, no new meaningful increase in market cap - an overall sideways market."
"The best advice I got was from Paul Tudor Jones who once told me the best investors he knew are those whose investment time horizon matches their idea time horizon. If your model is based on Metcalfe's Law for all DAs, then you need to be thinking in years, not weeks or months."
Marathon Buys $900M Worth Of Miners
Marathon purchased 78,000 Bitmain Antminer S-19 XP machines, which will be delivered throughout 2022 and should increase Marathon's has rate to 23.3 EH/s by 2023. The market may be stagnant for the moment, but the big players are investing heavily in the future of Bitcoin. The Chinese mining migration was a huge opportunity for miners in the US and beyond, and they are still taking advantage of it.
The Power Of Dollar Cost Averaging
The core of any investor's strategy should be blindly dollar cost averaging into a rising market. In the stock market, most investors choose a mutual fund or index that tracks the market and buy monthly for their retirement. Bitcoin is effectively an index fund for the entire crypto market, and should be the core of any crypto enthusiast's portfolio.
Simply buying $10 worth of Bitcoin each month for the past 6 years would have yielded a 1,043% return, turning $610 into $6978. Astounding. Now imagine the same strategy for 60 years...
DeFi Grew Massively In 2021
Total value locked (TVL) in DeFi rose over 1,200% in 2021, surpassing $240B. Relative to other markets, this is still a small number, but the growth proves the idea that people are looking for places to earn yield and to opt out of inferior legacy systems.
Notably, Ethereum continues to dominate DeFi, with 63% of the total TVL. No other chain even comes close, even after all of ETHs problems with speed and fees.
"In general, the total value locked (TVL) is an essential indicator that measures the overall growth rate of DeFi. TVL reflects the value of funds users have collectively locked into DeFi projects. DeFi refers to a blockchain-based form of finance that does depend on central financial intermediaries like brokerages, exchanges, or banks to offer traditional financial products and instead leverages smart contracts on blockchains."
My Recommended Platforms And Tools
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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.