The Wolf Den #457 - Challenge Your Biases
Crypto's Institutional Appeal Continues to Grow - 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.
Crypto's Institutional Appeal Continues to Grow
The belief of crypto being an uncorrelated asset class may be fading, but it does not seem to be deterring interest from traditional finance and tech institutions. The main players in crypto are evolving and there are signs that institutional demand continues to grow, even if it is not reflected in prices.
Broad interest from multi-billion institutions arguably began in 2020 and is not showing signs of slowing down.
Currently over 99% of all Bitcoin volume comes from transactions of over $100k, dubbed as large transactions by IntoTheBlock
The dominance of institutions and change in market structure accelerated in Q3 2020
Since then, the share that large transactions volume has consistently remained above 90%
New Entrants & Existing Ones Doubling Down - the following institutional announcements have taken the crypto world by storm in 2022:
Bain Capital raise $560 for a crypto fund
Wall Street hedge funds reportedly pouring billions into crypto
GoldenTree, a $46B fund, hiring a Head of Digital Assets
Citadel Securities planning to enter crypto markets
Sequoia launching a dedicated $500M - $600M crypto fund
Pantera Capital raises $1B for crypto fund
Despite these players not yet driving prices, it could be having ripple effects on on-chain data.
Via IntoTheBlock's Bitcoin network indicators
Record Holders - The number of addresses holding crypto continues to set new records:
Bitcoin addresses with a balance reached a record of nearly 40 million
Addresses holding Ether have outpaced this, with over 70 million having a positive balance of the smart contract platform's native token
As the demand-side continues to strengthen, the supply-side of crypto is becoming less relevant.
Bitcoin Thoughts And Analysis
The current Bitcoin price action is a joke and is avoidable. Every single move up is met with immediate selling and a full retracement, whether over a couple of days or hours. This is a gauntlet designed to annihilate traders and transfer wealth from the impatient to the patient, the weak to the strong.
I would avoid trading this price action for now, zoom out, and solely wear your investor hat.
Take a quick look at what I woke up to on the hourly chart.
In two short hours, Bitcoin pumped to a high of almost 42K before dropping to $38,800 - lower than where the pump started.
Good luck trying to trade this!
BTC Bonds Are Nearly Here
El Salvador is preparing to launch their landmark Bitcoin-backed bonds. Expected to roll out between March 15th and March 20th, the country’s Minister of Finance has officially given the green light to forge ahead. Through their partnership with Blockstream, the country is looking to raise $1B to fund the Bitcoin city and buy more Bitcoin. Assuming all goes to plan, the city should pay for itself. This truly is an experiment like no other, setting the tone for other countries to follow suit if all goes to plan. The bond is the first step needed for all of this to work. If it fails, everything else will too. I am hopeful that the Bitcoin community will step up and assure that this is a success, paving the way for other governments to follow suit.
This Crypto Bill Could Be Huge
Senator Cynthia Lummis is working on a bill that would integrate digital assets into our current financial framework. An important detail of this bill was made public - the Senator is pushing for a tax exclusion for all sales of crypto under $600 (purchasing a good or service). Currently, if you use your crypto strictly as a medium of payment, the purchase is technically a sale of your coins that needs to be reported to the IRS. Senator Lummis wants the threshold to be even higher than $600, but believes that the Senate will probably compromise on a lower amount. Any amount they settle on will be significant progress, and would encourage merchants and consumers to start using their crypto for payments.
Chinese Stocks Plummet
Chinese stocks are facing a perfect storm of Omicron, geopolitics and regulatory blowback.
Macro headwinds caught up to Chinese stocks yesterday in devastating fashion. Stemming from China’s ties to Russia, the Omicron variant, possible sanctions, and large-scale tech violations, major Chinese indexes took a massive hit. Trillions of dollars were wiped out. Uncertainty is high, valuations are dropping, and it’s hard to see the positive. Will all of this eventually pass? Yes, but it can get certainly get uglier. Many believe that this signaled the "bottom," but only time will tell.
My Recommended Platforms And Tools
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On-chain and fundamental analysis, research, predictions and indicators, all in one place. Highly recommend.
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.