The Wolf Den #560 - Michelangelo And The Fed
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In This Issue:
Michelangelo And The Fed
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Don’t Do This During The Merge!
The SEC Is On A Suing Spree
Scams Are Slowing Down
My Recommended Platforms And Tools
Michelangelo And The Fed
One of the most famous works of art ever created rests on the ceiling of the Sistine Chapel - Michelangelo’s, "The Creation Of Adam." It was painted between 1508-1512 and depicts God and Adam with outstretched arms, nearly touching fingertips.
This masterpiece is a metaphor for the relationship between the Fed and the crypto space, with their spheres of influence now just millimeters away.
This Monday, the Fed published its final guidance for novel financial institutions (including crypto institutions and other FinTech entities) to have reserve account access. The guidance “provides a consistent and transparent process to evaluate requests for Federal Reserve accounts and access to payment services in order to support a safe, inclusive, and innovative payment system.” In other words, compliant crypto banks that have been applying for master accounts and federal reserve services now have a fighting chance and a defined process. After years of applications and lawsuits, the door is finally open.
Crypto banking has been on the back burner for years. In September of 2020, Wyoming granted Kraken a special purpose bank charter. Kraken Financial became Kraken Bank, making it the first regulated American bank to provide banking services to the crypto world. Kraken was the first bridge between the crypto economy and the traditional economy, even having a physical location for customers to walk into to do "real" banking.
The caveat was that Kraken had to function through intermediary banks - it had no direct relationship with the Fed. It operates on an island.
Under the new guidance, there is a clear-cut path for crypto banks and the central bank to finally come together. On Monday, the Fed released a 3-tiered framework to assess and grant access to reserve accounts and payment services.
Tier 1 - Eligible institutions that are federally-insured
Tier 2 - Eligible institutions that are not federally insured but (i) are subject (by statute) to prudential supervision by a federal banking agency; and (ii) any holding company of which would be subject to Federal Reserve oversight (by statute or by commitments).
Tier 3 - Eligible institutions that are not federally insured and not subject to prudential supervision by a federal banking agency at the institution or holding company level.
With more access (the higher tier) comes less scrutiny. Tier 1 is said to have “streamlined scrutiny” whereas tiers 2 and 3 have “intermediate and high scrutiny.” It pays to play the Fed’s game. Based on this guidance, we can expect Kraken and Custodia Bank (who is suing the Fed) to continue their pursuit of tier 1 access, although they will likely be treated like tier 3. Crypto companies will have to overcome endless obstacles and additional vetting to be approved. Both Kraken and Custodia have already applied multiple times and have been doing so for years, so they are at the front of the line.
They are going to make history when the fingers of Adam and God finally touch.
Institutions that we have watched grow for years finally have a fair shot on the largest stage. Crypto banks that receive master accounts will have access to the Fed’s liquidity and will have a stamp of legitimacy. There will be no more excuses for institutions to avoid doing business with the crypto world. This is the equivalent of the SEC approving a spot ETF.
It’s a big deal.
The meeting of old policy with new policy and the old economy with the new economy isn't going to happen overnight. The old guard is stuck in their ways, while the new guard is moving too fast, breaking things as they go. Future regulation will likely follow a similar timeline as the story above. The government will reach out, the crypto world will reach out, compromises will be made, and they will meet somewhere in the middle.
In our case, the painting is on the wall.
Or the ceiling.
Bitcoin Thoughts And Analysis
WEEKLY CHART
SIDEWAYS CHOP! Nothing has changed. No reason to be watching this chart at the moment.
Altcoin Charts
I do NOT share signals in this section. I share setups and charts that I am watching, in an effort to help show you how I view a chart and what criteria would be necessary for me to consider taking a trade. NEVER blindly buy something because it is listed in a newsletter or posted on twitter. You need to have a plan when you enter a trade. These are just ideas, and are almost always “if, then” scenarios. If a certain set of things happen, then I would consider a trade.
Today I am going back to charting on YouTube! Instead of listing any here, I will look at the top 10 coins by market cap today as an educational exercise. You can watch me chart them live, which should show how I view charts. It's at 9:30 AM EST, but you can watch it back any time.
Legacy Markets
Here are some key events to watch this week:
Federal Reserve July minutes, Wednesday
UK CPI, US retail sales, Wednesday
Australia unemployment, Thursday
U.S. existing home sales, initial jobless claims, Conference Board leading index, Thursday
Fed’s Esther George, Neel Kashkari speak at separate events, Thursday
Some of the main moves in markets:
Stocks
Futures on the S&P 500 fell 0.8% as of 7:19 a.m. New York time
Futures on the Nasdaq 100 fell 0.9%
Futures on the Dow Jones Industrial Average fell 0.6%
The Stoxx Europe 600 fell 0.5%
The MSCI World index was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro was little changed at $1.0164
The British pound fell 0.1% to $1.2083
The Japanese yen fell 0.7% to 135.10 per dollar
Bonds
The yield on 10-year Treasuries advanced seven basis points to 2.87%
Germany’s 10-year yield advanced 12 basis points to 1.09%
Britain’s 10-year yield advanced 14 basis points to 2.26%
Commodities
West Texas Intermediate crude fell 0.2% to $86.35 a barrel
Gold futures fell 0.4% to $1,782.70 an ounce
Don’t Do This During The Merge!
While Ethereum transfers from proof-of-stake to proof-of-work, it’s important that you don't make these two mistakes. First, don’t make any Ethereum transactions during the merge. Coinbase has already announced its plan to halt transactions during the merge and other major service providers will likely do the same. Don't be tempted to make last-minute transactions to scoop up new ETHPoW tokens. Make those arrangements ahead of time. Second (I hope this one is obvious), you don't need to send your Ethereum to a specific person or place to have it upgraded. It will happen automatically. The last thing you want to fall for is a sketchy person or entity offering to convert your Ethereum early. They are going to steal your coins.
The SEC Is On A Suing Spree
If the projects with 2017 ICOs weren’t already in enough trouble, the SEC is coming down with some hard-hitting lawsuits to put the final nail in the coffin. Dragonchain, a popular ICO during the 2017 heyday, is being labeled an unregistered security by the commission leading the SEC to demand disgorgement (a remedy requiring a party who profits from illegal or wrongful acts to give up any profits) and penalties for all involved. According to the filing, $16.5 million was raised from the presale and ICO along with additional millions to further market the coin (that was already a scam). Considering the coin has lost 99.6%, I imagine there isn't a lot of value to extract aside from whatever the founders profited. RIP.
Scams Are Slowing Down
According to a report from blockchain intelligence firm Chainalysis, "illicit volumes are down just 15% year over year." It is worth noting that legitimate volume is reported to be down 36%.
Further, while the number of scams has decreased, the amount of money stolen has increased. Dramatically.
We can continue to work hard to educate people on the common scams to help keep the number dropping.
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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.
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