The Wolf Den #417 - Exponential Thinking
Ethereum On-Chain Hopium - 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 On-Chain Hopium
The mix between hope and distress has crypto markets split about what may come next. By diving into key indicators from a long-term perspective, we examine the merits of the bullish scenario, specifically for Ethereum.
Holders Continue to Grow
The number of addresses holding ETH has continued to increase despite price crashing 50% in May, 2021 and 40% since the most recent high. More impressively, since January 1, 2021, the number of ETH holders grew by 41%.
The steady growth in holders shows a healthy amount of interest remains for ETH.
As of January 19 using IntoTheBlock’s Bitcoin network indicators
On-Chain Activity Endures
The number of transactions taking place on Ethereum remains near its highs
Daily transactions on Ethereum dropped sharply in 2018 as prices dropped and speculation evaporated
Today the number of transactions sustains at a high level and is less correlated with price action
Demand to use Ether for transactions creates a floor for the asset as people also use it for its utility, not just for potential price appreciation
Number of transactions on Ethereum has still dropped since May, but this coincided with the launch of L2 solutions like Arbitrum and Optimism which are not considered in the indicator below
As of January 19 using IntoTheBlock’s Ethereum transaction stats
New supply dynamics
As of January 19 using IntoTheBlock’s Ethereum supply stats
Following the implementation of EIP-1559, the majority of ETH paid in fees gets burnt, effectively decreasing Ether’s supply
The amount of Ether burned hit a record high of nearly 20k ETH in a day last week, leading to an annualized issuance rate of -1.9% (meaning ETH is deflationary)
Such reduction in supply makes Ether more scarce, benefiting from the sustained level in transaction activity discussed
While the mechanics behind Ethereum’s supply burn is complex, one of the most simple indicators also bring positive news.
Bitcoin Thoughts And Analysis
Bitcoin is absolutely destroying short time frame leveraged traders as it chops sideways around $42,000. Twitter is attempting to assign meaning to every tiny move, when the reality is that nothing is really happening.
WEEKLY CHART
WEEKLY CHART
42K is the key for now. The levels on the weekly chart are clear, so we will watch into the close on Sunday.
After temporarily dropping below 42K, Bitcoin broke back above on the daily 8 days ago and has held it as support since. That could change, but the past 3 days we have seen attempts to push down and buyers step in and push price back above. For the moment, 42K is strong support. This is the range lows. If it holds, we should see price return to the range highs - 52K - 53K or so.
And that would still be sideways.
4-HOUR CHART
There was a signal that price was bottoming this morning - bullish divergence with RSI on the 4-hour chart. Cool, right?
Now there's a chance for hidden bearish divergence, a higher high on RSI with a lower high on price. We need to see continuation a bit higher to keep this divergence relevant.
Intel Is Creating A Bitcoin Miner
The biggest news story of the day went to Intel, a $222B tech company giant that announced plans to release their own Bitcoin mining chip. The chip is slated to be unveiled next month at a major international chip conference. The specs aren't public, but the new chip is currently being described as an "ultra-low-voltage energy-efficient Bitcoin mining ASIC." This sets Intel up to compete with Bitmain, the world's largest manufacturer of Bitcoin mining rigs based out of China. Not only will this make the Bitcoin network more robust, but it could also open the door for a stronger U.S. foothold in the mining world and for mainstream mining participation. This could also eliminate the environmental arguments surrounding mining. Very bullish in my book.
President Bukele Doesn't Give A F***
El Salvador is committed to a Bitcoin standard and continuing to buy dips. Moodys has subsequently downgraded the country's sovereign debt. According to Moody’s report, the country is down $10-20 million on their investment and “if it gets much higher, then that represents an even greater risk to repayment capacity and the fiscal profile of the issuer.” This is compounded with the fact that the IMF disavowed the Bitcoin decision, further straining the economy.
Amongst all of the commotion and criticism, president Bukele had a simple response on Twitter: “El Salvador DGAF.” Being a trailblazer is never an easy task, especially when you are fighting against deeply engrained systems. It could get worse before it gets better, but Bukele stands a strong chance of being remembered favorably when the dust settles. If Bitcoin succeeds, he will be considered a trailblazer.
USDC Flips USDT
We often talk about the flippening of Ethereum over Bitcoin - but what about USDC flipping USDT? It has already happened on the Ethereum network - there is now more supply of USDC than USDT. This came as quite a surprise to me and is definitely good news for the crypto world. There's nothing wrong with tether, but USDC is backed by dollars in a US Federally Regulated bank in New York State and is viewed as a much safer asset. This can only bring more credibility and confidence.
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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.