The Wolf Den #432 - Bitfinex Hackers Brought To Justice
Bot Driven Crypto Market - 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.
Bot Driven Crypto Market
Macro conditions have been dominating the short-term outlook for crypto markets. Rising global uncertainty — starting with the Omicron variant, then the fed’s outlook as inflation grew and now also a potential conflict between Russia and Ukraine — has led to increasing short term correlations across markets.
Particularly, we’ve seen Bitcoin and crypto broadly move closer to risk-on assets such as tech stocks in moments of volatility.
Through IntoTheBlock’s capital markets insights
Highest since Covid — Bitcoin’s correlation vs the Nasdaq 100 reached its highest level since April 2020.
Here are few similarities and differences with that time in the market:
In 2020, Covid fears led to the evaporation of buyers as the world headed into a recession and the outlook for all markets turned grim; then war-like money printing brought renewed buying interest through the rest of the year and 2021.
Now that artificially high monetary conditions are coming to an end, uncertainty is growing and buying interest is fading in anticipation of rate hikes and quantitative tightening.
Last time the Fed raised rates was in Q4 2018, where both equities and crypto crashed. This time the market appears to be front running Fed policy in anticipation that it will “break something.”
This fear is thus decreasing buyers in the market (especially those from the traditional finance world) and pushing correlations higher, similar to what took place in 2020.
Due to these reasons, the market has shifted to a regime dominated less by narratives and more by bots, particularly those trading based on correlations.
Source: TradingView
Tech earnings steering crypto — traditional markets are going through a volatile earnings season, and it is causing ripple effects across crypto.
Bitcoin crashed 2.6% within the hour following Meta’s disappointing earnings report, which send the company’s shares down over 20%
As Amazon beat earning expectations, pushing the stock 14% higher, Bitcoin climbed as well
This could be coincidence, as there have been plae of times of late that Bitcoin did not react to stock moves. This week has been largely uncorrelated.
This concerning and somewhat comical sequence of events is evidence of the bot-driven market currently shaping short-term price moves.
Bitcoin Thoughts And Analysis
DAILY CHART
After being cleanly rejected at resistance, yesterday's daily candle ended up a spinning top or doji, depending on how you look at it. This is a candle with long wicks up and down and a small body, showing indecision. Incredibly, the candle reached perfectly to resistance, then came back and bottomed exactly at the 50 MA a key level for many traders and algorithms. The flip of the 50 MA to support is considered a bullish retest and very positive signal.
The next bullish signal would be a flip of the $45,500 area to support, as now we are trading between levels (42K not shown as well).
4-HOUR CHART
As anticipated, clear overbought bearish divergence has been replaced by hidden bullish divergence. That effectively cancels the bear div and is a signal of likely continuation to the upside.
Wells Fargo Is Wildly Bullish
One of the world's largest banks just published a crypto report arguing that we are still early. Wells Fargo's crypto report titled, “Cryptocurrencies, too early or too late?” is wildly bullish, making the case that investors are in fact, not late. The report, which can be read HERE, makes the concise and well-supported claim that crypto adoption today is mirroring that of the internet in the mid-to-late 1990s - something I have been saying for a long time now. I transcribed the most important points below for you to read.
Crypto appears to be near a “hyper-adoption phase,” similar to that of the internet during the mid-to-late 1990s.
Today’s publication is not about the technology, but a common point of confusion regarding the future of cryptocurrencies as investments. The confusion is - some investors think that it is too early to invest while others think that it may be too late. Our conviction is that cryptocurrencies are viable investments today but that it is still early in the cryptocurrency investment evolution.
We understand the “too late” to invest argument but we don't subscribe to it.
Cryptocurrencies are in the “early but not too early” investment stage.
Cryptocurrency adoption rates look to be following the path of earlier advanced technologies, particularly the internet. If this trend continues, cryptocurrencies could soon exit the early adoption phase and enter an inflection point of hyper-adoption… where adoption rates begin to rise and don't look back.
WGMI Receives Regulatory Green Light
The Valkyrie Bitcoin Mining ETF, cleverly named WGMI (We're Gonna Make It), paying homage to the popular crypto saying shared amongst determined retail traders, has officially been approved and is trading on the NASDAQ. According to Valkyrie, the fund is fully focused on mining, and is set to invest “80% into securities of firms that are generating a majority of their revenue or profit from crypto mining, or from hardware and/or software related to crypto mining and 20% of allocated towards firms that hold a significant portion of their net assets in crypto.” The WGMI fund marks Valkyrie’s third approved crypto ETF. The fund's holdings boast a 77% renewable energy rate, about double the average of listed companies.
I am an early investor in Valkyrie and a huge champion of their efforts. My hope is that one day we will see a Bitcoin Spot ETF.
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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.