The Wolf Den #532 - Bitcoin Vs. Crypto - Who Will Win?
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In This Issue:
Bitcoin vs Crypto - Who Will Win?
Bitcoin Thoughts And Analysis
Legacy Markets
First Principles 101
Grayscale Sues The SEC
A Masterclass In Maximalism
The Bitcoin Reformation
OpenSea Data Breach
Former CFTC Chairman Chris Giancarlo On The Future Of The Digital Dollar
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Bitcoin vs Crypto - Who Will Win?
It’s us vs. them.
It’s Bitcoiners vs. the world.
The time has come to once again drag our peers through the mud. If you know someone that has an ever so slight difference in beliefs from you or who invests their money to the beat of their own drum, now is a good time to go attack them and attempt to ruin their life.
I am joking. This is a joke.
But there are many who seem to live by this code.
There are a number of sides to the “Bitcoin vs. crypto” debate.
First, I think it is fair to take the Fidelity approach. There is Bitcoin and "everything else." Bitcoin is a store of value, digital gold etc. Choose your narrative. The rest of the crypto space is largely tech investments, which is not a bad thing. It's just a matter of the lens that you use to look at the market.
But this approach is not dismissive of the value or mere existence of every other coin. They are all a part of the same asset class, but with vastly different value propositions depending on the coin.
When approached from the Bitcoin maximalist view, the Bitcoin vs. crypto separation is a false dichotomy because they largely dismiss everything else as a "scam." This debate is on it's last legs. The crypto landscape in 2022 is far more nuanced, so an all-or-nothing stance on Bitcoin or an altcoin is nearly indefensible. Yes, there are Bitcoiners out there that will die on their shrinking island, but there are also a ton of devout Bitcoiners who enjoy exploring other blockchains, protocols, and even coins. The horror!
The same goes for altcoiners.
So here’s the dilemma - the Bitcoin maximalists are convinced that crypto enthusiasts haven’t gone far enough down the rabbit hole and the altcoin maximalists are convinced that believers haven’t seen the light. The only thing that both sides agree on is the idea that everyone in the middle is confused.
You don't need to reach the bottom of the Bitcoin rabbit hole, and only focusing on one shade of altcoins misses the rest of the beautiful color spectrum. It's dark and lonely at the bottom of the Bitcoin rabbit hole. And it's equally depressing to stare at just your single beloved altcoin. It's like staring at the sun. In case you have never done it, it generally ends poorly. Especially if there's an eclipse. But I digress.
But also, to be clear... don't stare at the sun.
Both ends of the spectrum will drive you insane.
Those taking shelter in the middle are growing in numbers, because they accept diversity of thought, healthy competition, and they learn from each others' mistakes. This is where innovation happens and fortunes are made.
Since our space is evolving at the speed of light, it has becoming increasingly difficult to pick just one corner and deny the very existence of everything else. This was easier prior to 2017, but now it's magnitudes harder and far less popular. To some degree, Bitcoin is rightfully drawing in more users because of the current market conditions, but other non-Bitcoin ideas now also have the chance to prove themselves.
We can grow stronger together.
Change is rarely easy. Disruption requires breaking things, but it does not call for friendly fire, which is what the internal battle has evolved into.
The whole Bitcoin vs. crypto debate is a distraction from what matters, which is offering people the opportunity to opt out of broken systems.
I refuse to take part in this internal debate and hope you do as well.
I want victory on all fronts.
Bitcoin Thoughts And Analysis
WEEKLY CHART
Bitcoin is currently trading below the 2017 highs, which is a line worth watching into the weekly close on Sunday. Price is currently spending the 3rd week in a row below the 200 MA, which is something that has never happened before.
Honestly, there's very little reason to spend much time charting for now - we need to wait until the dust settles from global markets and internal contagion from Luna, Celsius and 3AC et al.
Bulls really want to see the 200 MA reclaimed, and certainly do not want to lose $19,666 on the weekly.
Legacy Markets
Every single day, global markets react to hints of new information surrounding inflation and potential recession, and analysts struggle to find new reasons to justify volatility. Bitcoin is unfortunately along for the ride. Today, stock futures are down. Tomorrow, they could be up. There's little rhyme or reason.
Even Jerome Powell seems dumbfounded, making this head scratching statement.
Yes, he really said that. The head of the Fed admitted that he now "understands that he does not understand."
No shit, Sherlock. Bitcoiners have been screaming about inflation for years.
Seems like we are not in competent hands, so buckle up.
What to watch this week:
US personal income, PCE deflator, initial jobless claims, Thursday
Eurozone CPI, Friday
US construction spending, ISM Manufacturing, Friday
This week’s MLIV Pulse survey looks at the outlook for earnings and stock prices. Click here to participate.
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 1.3% as of 9:05 a.m. London time
Futures on the S&P 500 fell 0.9%
Futures on the Nasdaq 100 fell 1.1%
Futures on the Dow Jones Industrial Average fell 0.8%
The MSCI Asia Pacific Index fell 1%
The MSCI Emerging Markets Index fell 0.7%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was unchanged at $1.0442
The Japanese yen rose 0.2% to 136.28 per dollar
The offshore yuan rose 0.2% to 6.6938 per dollar
The British pound rose 0.1% to $1.2140
Bonds
The yield on 10-year Treasuries declined three basis points to 3.06%
Germany’s 10-year yield declined seven basis points to 1.44%
Britain’s 10-year yield declined three basis points to 2.35%
Commodities
Brent crude fell 0.4% to $115.74 a barrel
Spot gold fell 0.1% to $1,815.06 an ounce
First Principles 101
By Sahil Bloom:
Many of the world’s greatest thinkers and doers tout the importance of first principles thinking. But what is “first principles thinking” and how does it work? Here’s First Principles 101!
First, a few definitions. A “first principle” is a foundational assumption or proposition - it is foundational in that it cannot be deduced from other assumptions or propositions. Think of a first principle like an element. It cannot be broken down further. It is pure.
“First principles thinking” (or “reasoning from first principles”) is a problem-solving technique that requires you to break down a complex problem into its most basic, foundational elements. The idea: to ground yourself in the foundational truths and build up from there.
When we encounter difficult problems, our tendency is to rely on base-level assumptions we have been told are true (or believe to be true). It’s quick and easy to do so. But it also leads to unimaginative, linear solutions that closely resemble all that has been done before.
This is called “reasoning by analogy” - it leads to solutions that are like something else. It can be a useful heuristic when speed is required and novel solutions are not the goal. But it falls short when dealing with complex problems in need of imaginative solutions.
Imagine the solution to a problem as a house. The foundation is the assumptions upon which the solution rests. If the foundation is shoddy, the house will collapse. If the foundation is sturdy, the house will hold up. First principles form a sturdy foundation for the house.
To illustrate the flow of first principles thinking, let’s look at a classic example. The case of Elon Musk and his original SpaceX rocket. The complex problem? Sending a rocket to Mars. The logical first step: to obtain a rocket.
Musk discovered the cost of buying a rocket was otherworldly (sorry, couldn’t resist!). Buying a rocket for $65 million was not only untenable, it was also grounded in assumptions of how rockets have always been built and what they should cost. He turned to first principles.
He asked and answered basic, foundational questions. What is a rocket made of? Aerospace-grade aluminum alloys, titanium, copper, and carbon fiber. What is the value of those materials on the open market? Just ~2% of the typical rocket price. So he decided to build his own.
Rather than accepting the “truths” he had been told about the cost of a rocket, Musk grounded his problem-solving in first principles. Today, SpaceX rockets are safely delivering humans to space and the dreams of a Mars voyage are alive. Score one for first principles!
There is no set way to establish first principles. “Socratic questioning” - a technique where you use systematic questioning to drill-down to fundamental truths - is one method. Farnam Street has a great primer on this in their article here.
Some questions you might ask… Why do I believe this to be true? How do I know this is true? How can I support this belief? What alternative viewpoints might exist? In short, become an endlessly curious child again! Question anything and everything. Ask why!
The world is filled with unimaginative, copycat solutions to problems. These (predictably) lead to linear outcomes. Leveraging first principles thinking is difficult and time-consuming, but it is also a pathway to devising creative solutions that lead to non-linear outcomes.
Aristotle defined a first principle as, “the first basis from which a thing is known.” The greatest thinkers and problem solvers agree: when solving a complex problem, ground yourself in first principles and build your solution up from there. It will not lead you astray.
So that was First Principles 101! I hope it was a helpful primer on the topic
Grayscale Sues The SEC
They said they were going to do it. Now they are doing it.
Grayscale's bid to have the first Bitcoin spot ETF was rejected yesterday by the SEC. They have been trying relentlessly to convert GBTC, a subpar product trading at a 35% discount to NAV, into an ETF, which would be far better and safer for retail.
It is clear that the SEC has no intention of approving a spot Bitcoin ETF anytime soon, and that going on the offensive is the best move for the crypto industry.
This will be interesting to watch.
A Masterclass In Maximalism
The inspiration behind today's intro comes from this story. Nic Carter was public enemy number 1 this week after he announced that his VC firm, Castle Island, participated in a private round of funding in Dynamic, a crypto wallet company. Bitcoin maximalists got their panties in a wad because the wallet does more than just support Bitcoin, it supports altcoins!!
Nic Carter's response sums up the dying breed of Bitcoin maximalists that I alluded to in the intro and expands upon the idea far better than I could.
"Ultimately, Bitcoin is not a lifestyle. Bitcoin is not a steak dinner. Bitcoin is not memes and it’s not laser eyes. Bitcoin is a profoundly useful tool. It is impregnated with some ideology, but it is not the ideology that these people profess."
The Bitcoin Reformation
Now more than ever is a good time to go back to our roots and do the homework on what matters most. Tuur Demeester, a popular Bitcoin advocate and master historian, wrote an amazing report 2 years ago about the parallels between the 16th-century Protestant Reformation and Bitcoin. It is a fascinating study about the Reformation's separation of church and state and Bitcoin’s separation of money and state. Summarizing won't do it justice, so I went ahead and linked the original report. If you can go down the rabbit hole as deep as this paper and still appreciate everything else, you are a winner.
You can read the full paper HERE.
OpenSea Data Breach
"OpenSea, the world’s largest nonfungible tokens (NFT) marketplace, has issued a warning to customers after it was discovered that an employee of Customer.io, a platform for managing email newsletters and campaigns, leaked the list of OpenSea customers’ emails to an outside party.
The breach has affected all of the users who have given their email to the marketplace, whether it's for the platform or its newsletter. Following the breach, OpenSea advised customers against potential phishing attempts."
Be careful out there.
Former CFTC Chairman Chris Giancarlo On The Future Of The Digital Dollar
Does the future of digital money free us to be our own unique selves, or does it enslave us to financial and governmental powers? Chris Giancarlo, lovingly known as “Crypto Dad,” knows it’s inevitable for our financial system to yield to an internet-based system and is encouraging regulators to be proactive instead of reactive. He believes that society has every right to experiment with the money of the future and is doing just that with The Digital Dollar Project. In this episode we cover the jurisdiction of the CFTC, CBDC activity and fears that come with it, and whether or not our government will get this right.
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