The Wolf Den #418 - Moving Forward
The Bear Case For Crypto In 2022 - 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.
The Bear Case For Crypto In 2022
2022 started with palpable strength from sellers. Much of this backdrop has come in light of a more hawkish federal reserve. For those unfamiliar with macro lingo, this essentially means that the central bank is likely to increase interest rates more or faster than initially anticipated, and potentially even decrease the monetary supply through quantitative tightening.
While Bitcoin’s price managed to continue growing in 2017 despite three rate hikes, it stumbled in 2018 as the fed introduced quantitative tightening. This is reflected in the money supply (M1) decreasing briefly early in 2018 before proceeding to grow at a slower rate.
Quantitative tightening explained — To fight rising inflation of 7% in the U.S. the federal reserve is discussing “balance sheet normalization,” referring to quantitative tightening (QT).
Just like the federal reserve “prints” money by buying securities and bonds to stimulate the economy (quantitative easing), it can sell these to decrease inflationary pressures (quantitative tightening).
The graph above shows how Bitcoin grew along with M1 supply during QE in 2016 and 2017 (green line), but dropped as QT began in early 2018 (orange line).
The correlation between BTC’s price change and M1 supply change is at a high level of 0.77, pointing to strong statistical relationship between the two. The high correlation between the two implies a negative outlook for Bitcoin if the fed moves ahead with QT and raises rates aggressively.
These fears have been leading the recent crash in prices across equities and crypto alike as it would mean less potential inflows going into risk assets.
Bitcoin Thoughts And Analysis
I have become somewhat known for my tweets stating bullish Bitcoin price, an example being "42K All Day."
I think we can now change it to "42K Every Day."
There was a time not so long ago that we joked that the price of Bitcoin was seemingly always $7,777. We have come a long way.
Still, NOTHING has changed on the charts, fundamentals etc. We are just chopping sideways around 42K for now.
DAILY CHART
The only thing that I can think to share today is the fact that yesterday's daily candle closed below 42K, rather than above. Now it is technically resistance, rather than support. But really, price is just trading around it. Boring, but never stays that way for too long.
Yawn.
Chart Requests
Here are your chart requests from yesterday - the charts were looking rough!
Google Is Getting Into Crypto
According to a Bloomberg report, Google is entering the crypto space in a serious way, by partnering with Coinbase and Bitpay. The tech giant plans to leverage the partnership to build out their payments division and offer cards that store and spend crypto. According to Google’s president of commerce, Bill Ready, “crypto is something we pay a lot of attention to. As user demand and merchant demand evolves, we’ll evolve with it.” Google is a subsidiary of Alphabet, the world’s 4th largest company by market cap. This is a serious partnership in every way possible. Huge.
Microsoft Makes Moves Into The Metaverse
Metaverse gaming just had a huge level up with the announcement that Microsoft is acquiring Activision. In my opinion, the biggest barrier to metaverse gaming success is that companies with 0 game creation experience are trying to merge their vision of tokenomics, cryptocurrencies, NFTs, and blockchains into a playable metaverse game. What ends up happening is a really cool economic model and no actual game. These so-called "games" are just fancy markets you can click on and move money. This is about to change.
What will likely happen is that major gaming and tech companies like Microsoft and Activision will continue to build in the metaverse and partner with different crypto teams to make it a reality. The end result is a high-functioning game with an incredible economy. Microsoft even framed the deal as "strengthening the company’s hand in the so-called metaverse." Seeing this come to fruition will drastically change the gaming industry, which is long overdue for an upgrade.
CEO Of Charles Schwab Says Crypto "Hard To Ignore"
This will continue to be the story, as financial giants acknowledge the importance of crypto, while hedging their statements with regulatory concerns. My feeling is that most of these companies are on the sidelines, eager to enter but waiting for clarity from regulators to make sure that they do it in a compliant manner and that the asset class will not be crushed by irrational lawmakers.
It's huge that we are on the radar - not something that was the case only a year or two ago.
The Wolf Of All Streets Podcast Ft. Kevin O’Leary
Legendary investor Kevin O’Leary loves money, in all of its forms. Once known as a vocal Bitcoin skeptic, Kevin has done a 180° and is now an outspoken crypto advocate. His journey didn't end at Bitcoin. Kevin has gone deep down the crypto rabbit hole, investing in protocols and projects across Web3. Kevin believes digital assets are the “12th sector of the S&P” and has positioned himself to be a bridge between traditional finance and the newest innovations of our digital age.
In this episode with Kevin O'Leary we discussed:
From Skeptic To Believer
Understanding The Regulators
Institutions Are Not Skeptical
Why Did Kevin Invest In Crypto?
Kevin Purchases Bitbuy
Reaching Sovereign Wealth And Pensions
The Bitcoin Spot ETF Is The Final Boss
The Truth Behind ESGs
Kevin O’Leary’s Investment Lesson
In-Depth Portfolio Analyses
Kevin’s Alternative Investments
Watches, Cameras, Guitars, And Bitcoin
This episode is sponsored by: HBAR FOUNDATION and BULLISH
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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.