The Wolf Den #562 - Let's Run The Numbers
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In This Issue:
Let's Run The Numbers
Bitcoin Thoughts And Analysis
Legacy Markets
Another Stablecoin Bites The Dust
The CME Capitalizes On The Merge
ENS Names In High Demand
My Recommended Platforms And Tools
Let's Run The Numbers
There has been endless chatter around a possible “flippening." Did you know that the phenomenon almost happened back in 2017 at the early stages of the bull run? When the ICO craze was at its peak, Ethereum almost passed Bitcoin for the number one spot by market capitalization. Bitcoin still remains king to this day, but Ethereum is still a viable contender for the largest coin by marketcap.
The “flippening” is little more than a meme with community bragging rights on the line. Bitcoin remains the most important asset ever created, and I view the market as Bitcoin and everything else. That said, the flippening narrative speaks to the direction of the spot market and where investors predict future value lies.
I wanted to take a closer look at the numbers and compare current receipts with the time when Ethereum almost passed Bitcoin (June 17, 2017). This may give us some perspective on the possibility of such an event taking place today.
Yesterday’s Numbers: (Not Perfect But Close)
Bitcoin’s Price - $22,800
Ethereum’s price - $1,815
Bitcoin’s Market Capitalization - $436 Billion
Ethereum’s Market Capitalization - $221 Billion
Bitcoin’s Market Dominance - 40.3%
Ethereum’s Market Dominance - 20.4%
What Bitcoin Needs To Lose To Fall Below Ethereum - 0.50x or -50%
What Ethereum Needs To Gain To Surpass Bitcoin - 1.97x or +97%
Progress For Bitcoin To Flip Ethereum - 197%
Progress For Ethereum To Flip Bitcoin - 51%
June 17, 2017 Numbers: Priced At The Daily Highs
Bitcoin’s Price - $2,685
Ethereum’s Price - $379
Bitcoin’s Market Capitalization - $43.5 Billion
Ethereum’s Market Capitalization - $35.1 Billion
Bitcoin’s Market Dominance - 38.69%
Ethereum's Market Dominance - 31.22%
What Bitcoin needs to lose to Fall Below Ethereum - 0.81x or -19%
What Ethereum needs to Gain to Surpass Bitcoin - 1.24x or +24%
Progress For Bitcoin To Flip Ethereum - 124%
Progress For Ethereum To Flip Bitcoin - 81%
From the napkin math above, I calculated that Ethereum needs to gain about 49% today to pass Bitcoin, whereas it only needed 19% to do so back in 2017, assuming its counterpart didn't move in price (which wouldn't happen).
Also, it is one thing for Ethereum to temporarily flip Bitcoin by market cap. It's entirely another for ETH to establish itself as the number one coin by market cap long term. Can the merge make this happen?
If the absolute peak of the ICO craze couldn't get ETH over the hump, then I am not sure that the merge alone will be enough. But, I think there are two short-term variables that could do the trick to really push Ethereum over the edge. A) stakers pile in big-time post-merge for the "safe yield," and/or B) the Fed turns dovish and starts printing again. Option B would also likely send Bitcoin flying.
Current figures indicate that roughly 12% of the Ethereum supply is staked. This pales in comparison to competing chains, some of which have 60% to +70% of the total supply staked. That’s a lot of coins which are unable to be sold. If stakers pile in, it will drive a strong bullish narrative. As for option B, it’s become apparent that Ethereum is just a higher beta play on Bitcoin, which is a higher beta play on equities, which is dependent on what the Fed does behind closed doors. If the Fed decides to shift its focus from inflation to growth and QE kicks in, Ethereum has massive tailwinds to help it continue to outperform Bitcoin.
Here are the scenarios:
Successful Ethereum Merge + Stakers Pile In + QE = Flippening: Likely
Successful Ethereum Merge + No Stakers + QE = Flippening: Maybe
Successful Ethereum Merge + Stakers Pile In + No QE = Flippening: Maybe
Successful Ethereum Merge + No Stakers + No QE = Flippening: Below Maybe
In addition to these scenarios, there are also variations with an unsuccessful merge, which would eliminate the flippening narrative forever. Even a delay will lower the chances. If all of the stars align, the possibility of a flip is there, especially as Ethereum continues to upgrade post-merge as it improves scalability.
Considering all possible scenarios though (including the odds of an unsuccessful merge), I believe the odds of a flippening in the short term are long.
More importantly - it does not matter. It's better for everyone if both Bitcoin and Ethereum remain viable assets and technologies into the distant future.
Bitcoin Thoughts And Analysis
This report is written by Daniel Ferraro.
After experiencing a substantial rally, the bearish sentiment takes hold as BTC price action returns to an area not seen since late July. Bitcoin now changes hands at around $21,785 a piece, down 6.7% over the past 24 hours.
Amid the bearish price action driven by a possible rate hike next month, leverage traders suffered massive liquidations as more than $550 million was wiped out from the market, affecting more than 157,000 traders
As many analysts are expecting a retest of the recent lows, using the IntoTheBlock’s IOMAP indicator, we can provide an idea of the following support and resistance levels for Bitcoin.
Via IntoTheBlock’s BTC financial indicators
Key Price Levels — Bitcoin was unable to break $25k thus far since recovering and faces substantial concentration of selling pressure just below this level
1.16 million addresses previously bought 828k BTC at approximately $23,000, making this an area of high trading activity acting as resistance
On the support side, buying activity has been concentrated around the $21,000 level, where 253k BTC was previously acquired, making this the price to watch out for.
Breaking below 21,000 could lead BTC to revisit the recent lows around the $19k level.
As the price action is still uncertain, we can provide one interesting on-chain fact about the current holders distribution in Bitcoin.
The UTXO Age indicator measures the volume of transactions being created and classifies these by time frames. By doing so, the UTXO Age Indicator segments the number of tokens according to the time it has been since they last moved from one address to another.
Typical of market cycles, we can use the UTXO Age to analyze the distribution of coins that has been dormant for +1 year to determine patterns in accumulation.
Via IntoTheBlock’s BTC UTXO indicators
Coin Maturity Expansion: As has been experienced in the past, accumulation cycles are typical of bear market activity, as the HODLER practice remains the main dynamic.
The % of BTC that hasn’t been moved for +1 year is approaching its previous ATH of May 2021 as it currently sits at 65.5%.
This could potentially lead to a top formation, and also indicates how the buyers following the great mining migration and early 2022 buyers have refused to sell at the lows.
Long term holders have been steadily holding and they decreased their position by a short amount since November 2021, remaining unfazed to the recent capitulation and even the Luna crash
Legacy Markets
Some of the main moves in markets:
Stocks
Futures on the S&P 500 fell 0.9% as of 7:45 a.m. New York time
Futures on the Nasdaq 100 fell 1%
Futures on the Dow Jones Industrial Average fell 0.7%
The Stoxx Europe 600 fell 0.3%
The MSCI World index fell 0.3%
Currencies
The Bloomberg Dollar Spot Index rose 0.5%
The euro fell 0.3% to $1.0055
The British pound fell 0.8% to $1.1832
The Japanese yen fell 0.8% to 137.02 per dollar
Bonds
The yield on 10-year Treasuries advanced six basis points to 2.94%
Germany’s 10-year yield advanced 12 basis points to 1.22%
Britain’s 10-year yield advanced 14 basis points to 2.45%
Commodities
West Texas Intermediate crude fell 2.1% to $88.56 a barrel
Gold futures fell 0.3% to $1,766.30 an ounce
Another Stablecoin Bites The Dust
If you have money in a lesser known stablecoin, then you are playing with fire... afteralready seeing your friends get burned. Huobi's $HUSD is the latest coin to face liquidity issues and lose parity with the dollar, now added to the long list of failed experiments. Liquidity problems for $HUSD started back in 2019, forcing Paxos to delist the token and then FTX to follow suit. This April, Huobi ceased its backing of the coin and now for the first time, the price is catching up to the fundamentals… shocker.
Having felt responsible for its failed product, Huobi said this on Twitter, “we are aware of the current liquidity issues associated with the HUSD stablecoin, which is issued by Stable Universal Limited and built on the Ethereum network. #Huobi has always prioritized the safety of our customers' assets, and will work together with HUSD's issuer to find a solution and restore its stability as soon as possible.”
They can try, but rescuing a failed stablecoin is like throwing money into a toilet.
The CME Capitalizes On The Merge
This is the CME’s line of thinking: Oh the merge is coming, let’s finally release an Ethereum product to capitalize.
On September 12th, just a few days before the merge, the CME will be launching options on the Ether futures market. The new contract will be sized at 50 ether and is currently pending regulatory review. If you thought I was joking above, read this excerpt from the official press release below.
“As we approach the highly anticipated Ethereum Merge next month, we continue to see market participants turn to CME Group to manage ether price risk. Our new Ether options will offer a wide array of clients greater flexibility and added precision to manage their ether exposure ahead of market-moving events.”
It is worth noting that the 2017 Bitcoin top coincided with the exact day that the Bitcoin futures product was launched.
ENS Names In High Demand
Another reason to be long-term bullish on Ethereum. Names are special to people and being able to brag about your one-of-a-kind name on Web3 is in high demand. It's free marketing too. Let's see if the explosion of naming continues.
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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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