The Wolf Den #631 - Vitalik Presents The Case For Ethereum
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In This Issue:
Vitalik Presents The Case For Ethereum
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Circle Is No Longer Going Public
Nexo Announces Departure From US
Goblin Mode
My Recommended Platforms And Tools
Vitalik Presents The Case For Ethereum
Vitalik Buterin is a Russian-Canadian programmer and cryptocurrency researcher best known for his work on Ethereum, a decentralized platform that runs smart contracts.
Buterin first became interested in cryptocurrencies in 2011, when he was just 17 years old. He began writing articles for Bitcoin Magazine, where he shared his thoughts on the potential of blockchain technology and its applications beyond just a digital currency.
In 2013, Buterin co-founded Ethereum with a group of other programmers. The platform, which is based on blockchain technology, enables developers to build and deploy decentralized applications (also known as dapps) that can be used for a wide range of purposes, from supply chain management to voting systems.
Buterin has been an influential figure in the cryptocurrency world, and his work on Ethereum has helped to advance the development and adoption of blockchain technology.
Despite his success, Buterin remains humble and dedicated to his work. He continues to be an active member of the Ethereum community and is always looking for new ways to improve the platform and make it more accessible to a wider audience.
Vitalik is also one of the most prolific writers in the space. Part of the allure of his commentary is his relentless pursuit of honesty, even if the truth results in potential backlash or harm.
Vitalik released an enormous BLOG post, outlining exactly where he believes Ethereum is heading in the future. The blog is organized into 5 main applications, which I have summarized below.
"My excitement about Ethereum is now no longer based in the potential for undiscovered unknowns, but rather in a few specific categories of applications that are proving themselves already and are only getting stronger. What are these applications, and which applications am I no longer optimistic about? That is what this post will be about."
Application 1: Money
Bitcoiners have always argued that Ethereum is not a suitable form of money. They used to be right. This argument holds less water after the merge. While the excitement around the merge has long passed, the technological impact has barely been felt. People in developing countries can use Ethereum to mitigate the pain of inflation. Ethereum is now arguably more deflationary than Bitcoin. For investors and users in wealthy nations, Vitalik argues that Ethereum is a great alternative for donations, it serves as private money, and is valuable as a competitor to payment processors.
Ethereum is also the dominant chain for stablecoins - digital versions of fiat money. Vitalik outlines the three different categories of stables: “centralized stablecoins, DAO-governed real-world-asset backed stablecoins, and governance-minimized crypto-backed stablecoins.”
According to the ETH community, Ethereum is ultrasound money.
Application 2: DeFi
“Decentralized finance is, in my view, a category that started off honorable but limited, turned into somewhat of an overcapitalized monster that relied on unsustainable forms of yield farming, and is now in the early stages of setting down into a stable medium, improving security and refocusing on a few applications that are particularly valuable.”
The promise of DeFi is a global financial system that allows users to opt out of legacy systems, and gives access to products that they lack in their home countries.
But that's not everything.
Prediction markets are a new innovation in DeFi. Polymarket, Augur, and Metaculus are becoming popular. Vitalik also discusses “synthetic assets” such as tokenized stocks and real estate. This is arguably the most compelling use case in DeFi - tokenizing the world.
Application 3: The Identity Ecosystem
“For a long time, I have been bullish on ‘blockchain identity’ but bearish on ‘blockchain identity platforms.’ But what will not work is an attempt to create a centralized platform to achieve all of these tasks from scratch. What more likely will work is an organic approach, with many projects working on specific tasks that are individually valuable, and adding more and more interoperability over time.”
ENS, ZK-Snarks, and SIWE (sign-in with Ethereum) are a few of the technologies that Vitalik mentions. The ideal outcome is that the masses end up using these technologies without realizing it. We aren't there yet, but this is the direction in which we are headed.
Application 4: DAOs
DAOs are an interesting concept, but they do not "solve everything." Vitalik poses two questions:
What kinds of governance structures make sense, and for what use cases?
Does it make sense to implement those structures as a DAO, or through regular incorporation and legal contracts?
Vitalik outlines his thoughts on how DAOs can account for, “robustness, efficiency, interoperability, and fancy new governance mechanisms.”
Application 5: Hybrid Applications
According to Vitalik, there is a long list of applications “that are not entirely on-chain, but that take advantage of both blockchains and other systems to improve their trust models.”
Voting is arguably the most compelling application - no system needs privacy and accountability more. There are also, “government registries, corporate accounting, games, supply chains, etc.” I know that these ideas don’t sound sexy, but they are practical. And practical is what we need.
Vitalik had the following to say in conclusion:
“Many of the more stable and boring applications do not get built because there is less excitement and less short-term profit to be earned around them. But it is these applications that will be most valuable for the ecosystem in the long term, and that will bring the most lasting value to both their users and those who build and support them.”
Bitcoin Thoughts And Analysis
DAILY CHART
Bitcoin is sideways with dampened volatility, as shown by the tightening Bollinger Bands on the daily chart. Price made it almost to the key resistance at $17,592, but is yet to actually attack that level. We will see if it was front run or if the asset takes a shot at resistance.
4-HOUR CHART
I was tracking a potential bearish divergence with overbought RSI yesterday, but did not include it in the newsletter because it was unconfirmed and the candle had not closed yet. As you can see, the first attempt at confirmation resulted in RSI and price being flat - no clear elbow to confirm the divergence.
I should have included it. It confirmed 4 hours later and we saw a drop.
That said, price only dropped a few hundred dollars, which reset RSI all of the way back to 45. A huge drop in RSI with a small price drop. That is encouraging.
Now we have confirmed hidden bullish divergence, so the bear div is invalidated. We do know that RSI will eventually return to oversold now.
Legacy Markets
"Markets struggled for direction Tuesday as traders weighed prospects for a slowdown in the pace of US rate hikes against data that shows tighter policy may be needed for longer.
A resilient US economy and sticky inflation is countering optimism about a reopening in China, with money market futures and economists suggesting the Fed will need to push rates to a higher peak than previously expected.
“I think we are still not through the volatility we are going to see,” Hannah Gooch Peters, global equity investment analyst at Sanlam UK, said in an interview with Bloomberg TV. “Inflation is not under control yet.”
The S&P 500 remains on course for its biggest fourth-quarter gain since 1999, but gains have been receding in December after a stellar rally. The benchmark index has now traded lower for three consecutive days, with losses amounting to about 2% so far this month.
Key events this week:
US trade, Tuesday
EIA crude oil inventory report, Wednesday
Euro zone GDP, Wednesday
US MBA mortgage applications, Wednesday
ECB President Christine Lagarde speaks, Thursday
US initial jobless claims, Thursday
US PPI, wholesale inventories, University of Michigan consumer sentiment, Friday
MLIV PULSE SURVEYWho is right about the outlook for the US economy: JPMorgan, Morgan Stanley or Dr. Doom? And which investor has the best tweets? Let us know, fill out our latest MLIV Pulse survey.
Some of the main moves in markets:
Stocks
Futures on the S&P 500 were little changed as of 5:33 a.m. New York time
Futures on the Nasdaq 100 were little changed
Futures on the Dow Jones Industrial Average fell 0.1%
The Stoxx Europe 600 fell 0.6%
The MSCI World index fell 0.3%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.0506
The British pound was little changed at $1.2178
The Japanese yen was little changed at 136.65 per dollar
Cryptocurrencies
Bitcoin was little changed at $16,970.6
Ether fell 0.5% to $1,253.58
Bonds
The yield on 10-year Treasuries was little changed at 3.57%
Germany’s 10-year yield declined one basis point to 1.87%
Britain’s 10-year yield was little changed at 3.10%
Commodities
West Texas Intermediate crude fell 1.4% to $75.82 a barrel
Gold futures rose 0.2% to $1,785.30 an ounce"
Circle Is No Longer Going Public
The firm ends SPAC deal under which it would have become a listed company.
Circle announced plans to go public in July, 2021, targeting a $4.5b valuation (which later doubled) via a special-purpose acquisition company.
However, it has now been reported that the two companies have mutually agreed to terminate the merger agreement.
Despite the decision not to go public, Circle is still a major player in the cryptocurrency industry. The company operates a popular cryptocurrency trading platform, Circle Trade, and has also developed its own stablecoin, USDC, which is pegged to the value of the US dollar.
The news that Circle is not going public is likely to be met with some disappointment from investors and industry observers who were looking forward to seeing the company become a publicly traded entity. However, it is important to remember that the decision not to go public does not necessarily reflect poorly on the company or its prospects. Circle remains a leading player in the cryptocurrency space and will no doubt continue to innovate and drive the industry forward.
CEO Jeremy Allaire had this to say: “while there are a lot of challenges within the crypto and blockchain industry, I am of the very firm conviction that we are going to decisively leave the speculative value phase and enter the utility value phase, and stablecoins such as USDC will play a huge part.”
Nexo Announces Departure From US
Nexo has announced that it will be leaving the United States market. The company cited regulatory uncertainty as the main reason for its decision, stating that the current environment in the US makes it difficult for companies like Nexo to operate and serve their customers effectively.
Nexo has been a popular choice for US customers looking to borrow against their cryptocurrency holdings, offering loans with competitive interest rates and no credit checks. The company has also been expanding into other areas of the financial services industry, launching a high-yield savings account and a debit card that allows users to spend their cryptocurrency holdings directly.
After the collapse of Voyager, BlockFi, Vauld and almost every other CeFi lender, it is no surprise that Nexo is looking to avoid further scrutiny.
Goblin Mode
I can’t say I expected ‘goblin mode’ to take 1st place over ‘metaverse’ for the 2022 Oxford word of the year. But then again, I'm a boomer and still don't really even know what Goblin Mode means.
The decision to name goblin mode as the word of the year instead of the widely-predicted metaverse, was met with surprise and controversy. Critics argue that goblin mode is a niche term that is only relevant to a small group of users, while the metaverse is a concept with much broader implications and significance.
Try again next year.
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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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