The Wolf Den #663 - Centralized Finance Is Broken
A "Glitch" On The NYSE Caused Over Eight-Figures Of Faulty Trades
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In This Issue:
Centralized Finance Is Broken
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Nuclear Energy Is Coming To Bitcoin
Binance Has The Hiccups
Artificial Intelligence Is Going Mainstream
Why Ophelia Snyder Of 21Shares Is Excited About Crypto & Expects Massive Price Action In 2024
Centralized Finance Is Broken
Yesterday morning, a technical issue occurred on the NYSE opening that caused a massive ripple effect across markets. The unexplained glitch resulted in more than 80 stocks undergoing wild price swings and widespread halts in trading. Orders on the NYSE auto-cancelled when they should have been filled, and estimates of the damage range in the eight-figure range.
It was a shit show.
Affected stocks included high-profile names such as Morgan Stanley, Verizon, AT&T, Nike, and McDonald's. The aftermath on the charts was a steep inverted "V" shape, causing the NYSE to suggest that affected traders file erroneous trade claims. An investigation is underway, but it is uncertain if any action will be taken.
This highlights the need for decentralization.
In 2022 alone, internet shutdowns cost the global economy $24 billion from 114 major outages across 23 countries. As an example, Twitter suffered 21,650 hours of disruption, 56% more than Instagram and 64% more than Facebook, over the course of eight shutdowns. WhatsApp and YouTube were also affected.
Modern technology is in desperate need of a system that doesn't have a single point of failure. This is why Bitcoin is such a critical experiment that other disciplines should draw inspiration from. Since first being used in 2009, Bitcoin has had virtually 100% uptime. It has never been hacked or shut down, and the likelihood of either of those two outcomes is exponentially decreasing.
The closest Bitcoin ever came to failure was in 2018 when there was an hour gap between blocks 532,146 and 532,147. Normally, in the span of that time, six blocks would have been produced, but there was a massive backlog of transactions in the mempool. So, the worst thing that ever happened to Bitcoin's uptime was a temporary slowdown. Plus, with the advancement of the Lightning Network, the second layer should greatly improve upon Bitcoin's scalability.
However, it's important to acknowledge that crypto is not perfect. Cryptocurrency as a whole is nowhere near the size of the internet in terms of traffic, and some blockchains might have worse uptime performances when compared to centralized finance or other internet platforms. Many of these issues boil down to balancing and solving the blockchain trilemma. Major financial platforms (the NYSE) fail in the decentralization category where protocols like Bitcoin and Ethereum succeed. When it comes to scalability, crypto shows promise, but traditional finance is probably still winning. And as for security, some platforms on both sides fail in that category, but Bitcoin and Ethereum have remained very secure.
In conclusion, the future of finance and the internet will eventually break away from random pauses in the market and downtimes caused by "glitches." Systems built with single points of failure will become a thing of the past, and scalability will be achieved. One way to look at crypto is to see it as the first true attempt to solve the mistakes traditional finance folks have ignored in the past century. And so far, it's going well. If you aren't bullish on the technology over the next decade because of issues like what happened yesterday, you are going to miss out. Blockchain is the solution, and we are only beginning to discover that.
Bitcoin Thoughts And Analysis
I have been anticipating a drop. While we got a small one, I still believe we will get more correction.
My idea was that the 200 MA would be retested as support. That said, going back over my own ideas, we know that it took 100s of days for the 200 MA to be retested as resistance, so that test could come much later at a very different price.
Either way, we still have massively overbought bearish divergence, much like we saw with Ethereum. Anything can happen, but I am looking for a meaningful dip to buy before more upside.
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.
ETH finally fell off the cliff, as I was expecting. While I made a profit on the short, I did not hold it long enough. That's fine. The bearish divergence on multiple time frames has played out now, with the 4-hour almost hitting overold on the move. The daily, which is shown, has now exited overbought and has some potential hidden bullish divergence. That is not confirmed. For now, I am staying away to see what comes next.
My bias is still for a market wide correction.
Legacy Markets
US equity futures fell on Wednesday after Microsoft Corp and other major firms forecast slower earnings, and fears grew that Berlin’s decision to approve the re-export of German-made tanks would provoke an escalation in the Ukraine war. Nasdaq 100 contracts fell more than 1%, after a two-day rally in the underlying index came to a halt on Tuesday when Microsoft warned of decelerating revenue growth in its cloud-computing business. Earnings reports from companies such as 3M Co and Texas Instruments also reinforced concerns about the health of corporate America, adding to investors’ jitters as they await updates from the likes of Tesla and IBM.
Key events this week:
Earnings for the week include: Abbott Laboratories, ASML Holding, AT&T, Boeing, International Business Machines, NextEra Energy, Tesla (Wednesday); American Airlines, Blackstone, Comcast, Diageo, Intel, LVMH Moet Hennessy Louis Vuitton, Mastercard, SAP, Southwest Airlines, Visa (Thursday); American Express, Charter Communications, Chevron, HCA Healthcare (Friday)
US MBA mortgage applications, Philadelphia Fed non-manufacturing activity, Wednesday
US fourth-quarter GDP, new home sales, initial jobless claims, Thursday
US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday
Stocks
The Stoxx Europe 600 fell 0.4% as of 11:14 a.m. London time
S&P 500 futures fell 0.7%
Nasdaq 100 futures fell 1.1%
Futures on the Dow Jones Industrial Average fell 0.5%
The MSCI Asia Pacific Index rose 0.3%
The MSCI Emerging Markets Index was little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.2% to $1.0862
The Japanese yen rose 0.3% to 129.81 per dollar
The offshore yuan was little changed at 6.7805 per dollar
The British pound fell 0.2% to $1.2309
Cryptocurrencies
Bitcoin fell 1.2% to $22,621.21
Ether fell 3.1% to $1,548.63
Bonds
The yield on 10-year Treasuries declined two basis points to 3.43%
Germany’s 10-year yield declined four basis points to 2.11%
Britain’s 10-year yield declined six basis points to 3.21%
Commodities
Brent crude fell 0.3% to $85.89 a barrel
Spot gold fell 0.6% to $1,925.11 an ounce
Nuclear Energy Is Coming To Bitcoin
Cumulus Data is a nuclear-powered 1,200-acre campus that plans to host Bitcoin mining and cloud computing services. It is the first of its kind in the USA to do so, and it has the advantage of "no intermediation by legacy electric transmission and distribution utilities." Located in Susquehanna, Pennsylvania, operations are set to begin in Q1 of this year and will be 100% carbon-free. The success at Cumulus is important because it will pave the way for other nuclear plants to siphon excess energy to Bitcoin mining. As a zero-carbon energy source, nuclear power will be a winning option moving forward in the Bitcoin mining space.
Binance Has The Hiccups
Binance seems to be having trouble catching its breath, no matter how hard it tries. This time, Binance mistakenly mixed customer funds with collateral for some of the crypto assets it issues in the same wallet. The mistake was noticed when the wallet that was supposed to be holding 1:1 reserves was way over-collateralized, prompting questions from the community. The mistake is now being fixed, but this type of error can lead to liquidity issues down the line, which is not a good look for Binance internally.
The second Binance story is that the exchange processed almost $346 million in BTC for Bitzlato. Binance was among Bitzlato's top three counterparties by the amount of BTC received between 2018 and 2022. Fortunately, a Binance spokesperson said via email that the exchange "provided substantial assistance" to law enforcement's investigation of Bitzlato. Neither of these stories is a big deal, but they may call more unwanted attention onto Binance if there isn't already enough.
Artificial Intelligence Is Going Mainstream
This news isn't crypto-related, but I feel it is meaningful enough to be shared here. Microsoft has made an investment in OpenAI, marking the third phase of their investment, following previous investments in 2019 and 2021. The amount of the investment was not disclosed, but rumors suggest it could be as high as $10 billion. In other news, ChatGPT has passed a Wharton MBA exam, along with the Bar and other medical exams. Alongside crypto, we are witnessing AI progress at a light-speed pace.
Why Ophelia Snyder Of 21Shares Is Excited About Crypto & Expects Massive Price Action In 2024
Ophelia Snyder studied Earth Science in college. In 2014, her mom discovered Bitcoin, but could not find a safe way to buy one. Ophelia decided to build an easier way to buy Bitcoin for her mom. Today, 21shares has over $1 billion in AUM and Cathie Wood on its board. Listen to this incredible interview with one of the leaders in the institutional crypto space.
In this episode with Ophelia Snyder we discussed:
Bear market
No institutional pushback
Crypto in Europe
FTX
How to build trust
Getting into crypto
Crypto ETP
Tokenization
21shares & Cathie Wood
Building proofs of concepts
Exciting 2023
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.