The Wolf Den #641 - HODLers Are On The Naughty List
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In This Issue:
HODLers Are On The Naughty List
Bitcoin Thoughts And Analysis
Legacy Markets
Ethereum After The Merge
Jim Cramer Gave Us A Bottom Signal
RIP Scott Minerd
Should DeFi Be Regulated? Why Germany Is Crypto Friendly | Timo Lehes, Swarm
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HODLers Are On The Naughty List
It's no secret that the past five years have been a rollercoaster ride for Bitcoin and its devout HODLers. Starting in late 2017, the cryptocurrency saw a dramatic round trip in price, leaving many investors feeling empty-handed as they wound up right back where they started. This wasn't exactly the outcome anyone had in mind when they first invested in the beloved asset.
But the irony of this situation is that Bitcoin is not alone in its struggles. There's no denying that HODLers of many assets have had a tough go of it this holiday season, with a lot of coal being passed around.
So, let's take a look at Santa's "Naughty or Nice List" to see how some other assets have fared over the past few years.
The Naughty List
Zoom - Took a 3.5-year round trip
PayPal - Took a 5-year round trip
Bitcoin - Took a 5-year round trip
Shopify - Took a 4-year round trip
Meta - Took a 6-year round trip
Tesla - Driving off a cliff, on a 2-year round trip
Amazon - Also falling off a cliff, on a 4-year round trip
The Nice List
Microsoft - Took a 1.5-year round trip
Alphabet - Took a 2-year round trip
Apple - Small correction and no trip
Gold - Staying put
Oil Stocks - Up, up, and up
Pfizer - On a trip to the moon
It's important to note that this list is not exhaustive, but it does provide a good snapshot of how some assets have performed over the past few years. It's clear that equity markets have not been impressing lately, and broader markets seem to be following their own tune. Plus, let's not forget about the impact of inflation - it's a force that can't be escaped. Just because gold has fluctuated over the past decade doesn't mean holding onto it has been a good investment, and not everyone who bought a house is in good shape. In the coming years, it will be tough for those who overpaid.
So, does this mean that we should have been bearish over the past half decade in order to come out ahead or unscathed? Probably not. The reality is that absolute strategies like being a "perma bear" or "perma bull" tend to have extreme results in the short term but predictably trend in a certain direction over the long term. While this year may not have been our year, there's always hope for the future. Markets have a tendency to trend upwards, and as HODLers, we can take comfort in knowing that we will eventually make it onto the Nice List, while bears will ultimately be left with nothing.
Of course, it's important to remember that HODLing the wrong asset over time guarantees a loss, and shorting the right asset over time can be profitable. But by betting on the wider market, HODLers tend to come out on top over time.
So, the question remains: will Bitcoin be the asset that bears can successfully short over the long haul, or will it follow the wider market and see HODLers eventually come out on top? I personally believe it will be the latter, despite the fact that we just took a 5-year round trip. Bitcoin may be a meme right now, but traditional financial systems have plenty of flaws too.
Bitcoin Thoughts And Analysis
DAILY CHART
Holy boring, Batman. Bitcoin has been trading in a range of roughly $1000 for almost a week, and within a few hundred for the past few days.
Not a surprise during Christmas.
There's little to see here. It is worth noting that the daily 50 MA is creaming down and is not acting as resistance once again. Last time price tested it was closer to $18,000, less than two weeks ago.
Legacy Markets
Key events this week:
China industrial profits, Tuesday
US wholesale inventories, Tuesday
BOJ summary of opinions of Dec. 19-20 meeting, Wednesday
US initial jobless claims, Thursday
ECB publishes economic bulletin, Thursday
Some of the main moves in markets:
Stocks
Japan’s Topix rose 0.2% as of 3:50 p.m. Tokyo time
South Korea’s Kospi rose 0.2%
The Shanghai Composite rose 0.6%
India’s Nifty 50 rose 1.1%
The S&P 500 closed 0.6% higher on Friday while the Nasdaq 100 rose 0.3%
Currencies
The euro rose 0.1% to $1.0631
The Japanese yen rose 0.2% to 132.68 per dollar
The offshore yuan rose 0.2% to 6.9865 per dollar
The Australian dollar was unchanged at $0.6721
Cryptocurrencies
Bitcoin rose 0.2% to $16,855.79
Ether was little changed at $1,218.58
Bonds
Japan’s 10-year yield rose seven-and-a-half basis points to 0.445%
The yield on 10-year Treasuries advanced seven basis points to 3.75% on Friday
Commodities
West Texas Intermediate crude rose 2.7% to $79.56 a barrel on Friday
Spot gold rose 0.3% to $1,798.20 an ounce on Friday
Ethereum After The Merge
watch ETH become ultra sound money
It's been 102 days since Ethereum made the transition from proof-of-work to proof-of-stake, and the differences between then and now are starting to become apparent. If Ethereum had stayed on proof-of-work, the supply would have increased by 3.585% per year. However, under the new proof-of-stake model, the supply is on track to increase by just 0.010% per year. In other words, Ethereum is on the verge of a deflationary supply model.
To put these percentages into perspective, if Ethereum had remained on proof-of-work, the supply would have increased by 1.2 million coins. Instead, under the proof-of-stake model, the supply has only increased by 3,720 coins. While it's understandable that these numbers don't impress you because price has not risen, it's important to remember that the market is being held down by a much greater weight at the moment. Our time will come.
When the next bull market arrives, it's likely that these statistics will not go unnoticed, particularly as the model continues to improve. In addition to the economic benefits, Ethereum has also achieved a 99% reduction in CO2 emissions, which is a major selling point for institutions concerned about environmental issues. It's also worth noting that Ethereum is about 50% of the way to flipping Bitcoin, which seems like a very achievable goal in the next bull run.
However, there are also some potential drawbacks to consider. There has been a lot of talk about the Shanghai upgrade, where coins can be un-staked and "dumped" on the market. While it's true that this could potentially happen, it's important to remember that Ethereum's new economic model will likely counteract any additional selling and ensure that all is well. As always, it's important to approach these things with a measured, long-term perspective and not get caught up in fear, uncertainty, and doubt (FUD).
Jim Cramer Gave Us A Bottom Signal
It's no secret that Jim Cramer's views on cryptocurrency can be polarizing, and it's important to take what he says with a grain of salt. That being said, it's worth noting that when he advises people to "sell," it's often a good time to consider buying. Last week, Cramer made some strong statements about crypto on his show, saying that he "would not touch crypto in a million years" because he doesn't trust the deposit banks and believes that the creation of money by "cretins" should be stopped. He also stated that he thinks the Securities and Exchange Commission (SEC) should do a "big sweep" to prevent people from creating money.
While Cramer's views are certainly not the only factor to consider when making investment decisions, it's worth keeping an eye on his commentary. It's possible that the bottom is getting closer, and some investors may see Cramer's negative comments as a buying opportunity.
RIP Scott Minerd
Minerd, who was a founding partner at the firm, was a prolific commentator and renowned investor.
It is with great sadness that we report the unexpected passing of legendary investor Scott Minerd on Wednesday. Minerd was one of the first to join Guggenheim Partners at its inception and helped grow it into the $285 billion asset manager it is today. He was a pioneer in the investment world, rising from humble beginnings to become an expert in fixed income and a highly respected figure on Wall Street. Minerd was also known for his athleticism as a high-level weightlifter and for being openly gay. His ability to understand and manage risk was unmatched, and he will be greatly missed. Our thoughts go out to his family and loved ones.
“I think real success is being motivated by trying to create something that will live on beyond you. Something that really will make a difference and impact society. I don’t know that I’ve reached it. I don’t think I have. I think that’s the real definition of success.” - Scott Minerd
Should DeFi Be Regulated? Why Germany Is Crypto Friendly | Timo Lehes, Swarm
I sat down with Timo Lehes of Swarm to discuss regulated decentralized finance (DeFi) and why after 10 years in Silicon Valley, Timo decided to move Swarm to Germany. Listen to learn about crypto regulation for DeFi in different countries, what Timo is building with Swarm and why he believes in total tokenization.
In this episode with Timo, we discussed:
Regulated defi
German crypto regulation
Pursuing licenses
Centralization problem
Crypto is a huge market
Why Germany likes crypto
Doing business in the US
Tokenization of everything
How to avoid hacks and scams
Ethereum and other POS protocols
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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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