The Wolf Den #682 - When Friendsies Turn To ‘Frenemies’
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In This Issue:
When Friendsies Turn To ‘Frenemies’
Bitcoin Thoughts And Analysis
Legacy Markets
Discover The Infinite Garden
Galois Capital Is Shutting Down
Tokenizing The Titanic
SEC Commissioner Hester Peirce: Come Help Us Create Better Crypto Regulation
When Friendsies Turn To ‘Frenemies’
Talking about NFTs used to be fun and owning one was a badge of honor. Before 2022, you could become an overnight sensation with just a few rocks, penguins, or squiggles. NFT holders were either envied as digital art collectors or hailed as savvy gazillionaire trendsetters. Prices were soaring and NFTs were selling for more than some of the world’s most renowned art pieces. It was all good vibes, and no one imagined anything could possibly go wrong.
That’s usually when things go wrong.
Holding an NFT now is like begging to be repeatedly punched in the face. For 99% of investors, getting back even a fraction of their initial investment would be considered lucky. Many have experienced rug pulls, joined class action lawsuits, or ended up in full-body casts, depending on the NFT they bought. No offense, but if I had to guess, this is what I imagine most NFT holders look like these days.
Jokes aside, let's talk about the slow bleed happening across the NFT space. Last week, I posted some positive takes on Ordinals, the novel new approach to NFTs on the Bitcoin network. This week, it's time to cover some of the negativity. So, wrap yourself in bubble wrap, football pads or body armor, because this is about to get ugly.
Let's start with a recent collapse to understand what's going on. Over the past few months, Friendsie NFT holders have been worried, due to the founders' absence and silence. Friendsies is a 10,000 cartoon NFT collection created by FriendsWithYou that got off to a hot start in 2021. Huge promises were made to the community, but unfortunately, fears materialized this Monday when the silence was broken, and a 'pause' was announced.
Here's the message the community received on Monday - "As the project founders, we have decided it would be best to put a pause on Friendsies and all future digital goods for the time being." The message carried on with more nonsense, blaming "market volatility," but we all know what this really means - it was another way of saying 'this is a rug pull.'
The collection started off strong and earned the attention of multiple legitimate groups - it was supposed to succeed. HypeBeast reported on the collection, and Christie's Auction House partnered with Friendsies to release nine early-access mint passes. The first Friendsie sold on OpenSea for $425,000, and the auction of the pieces started at 3.33 ETH each. This was not a cheap project, and investors appreciated and respected it for that.
Unfortunately, this story isn't unique because they all start to sound the same.
Logan Paul was just named as a defendant in a class action lawsuit for his NFT collection CryptoZoo, in which it's estimated that investors lost $7.7m. Like Friendsies, CryptoZoo was another popular NFT collection built on failed promises. There never was a functional ecosystem, and a P2E game was never delivered. The 'rug' was pulled. The CryptoZoo story goes really deep. Regardless of whether or not you blame Logan Paul or believe CofeeZilla, this project, like many others, shares a similar story and trajectory.
There's something to be learned here.
Let's point out some of the recurring issues in the NFT space. First, the 'art' is usually subpar. Call me ignorant or uncultured, but if the art looks like it was made by a distracted 4 year old, then the NFT has that much more making-up to do in other areas. A basic digital avatar or hybrid animal is not automatically a valuable piece of art. There has to be more substance than mediocre visuals.
Second, the NFT space is riddled with failed promises because neither tech nor interest is there yet. If it was easy to build out a functional NFT game, creators would rather do so than risk death threats and selling the bottom when they realize their promises can't be kept. Building a game is not easy, which is why AAA development studios have multimillion-dollar budgets and lengthy timelines to deliver a working product. A small NFT project claiming to produce a game, marketplace, currency, and ecosystem is almost always in over its head.
Last but not least, emotions within an NFT community are higher than anywhere else in crypto. For NFTs to work, there has to be a coordinated community that performs well together. Cryptocurrencies like Bitcoin and Ethereum are sufficiently decentralized, so there are tokens that at least are “sorta” decentralized. Then there are NFTs, which are extremely dependent on all members of the community. This unintentionally creates a cult-like atmosphere. Criticism is neither accepted nor tolerated - a glaring sign you should get out. And getting into the community often requires willingly submitting yourself to a crowd with pitchforks. There is a lack of diversity in thought in NFTs right now, and that's damaging.
I know I was harsh, but the reality is millions of dollars are being lost, and something has to be said. I know many of you will read this and think your project is different, but like crypto, 99% of projects will fail. That means for yours to succeed, 99 other hopeful NFT investors will lose their shirts.
So, let's learn from these stories and avoid ending up like the guy in the picture above or having your Friendsies turn into 'frenemies.' Walk away before you have to roll away. The NFT space has the potential for greatness, but we have to acknowledge and address the recurring issues to move forward and succeed.
Bitcoin Thoughts And Analysis
I mentioned yesterday that we had bearish divergence on most time frames and that $25,212 continues to be very strong resistance, with a few wicks on candles slightly above. This is going to be a very tough nut to crack, and often we want to see price drop and reset before a real push up. This retracement is no surprise for now, and nothing has happened to indicate we have to go “much” lower, but I am still eventually expecting a bigger move down before the push up.
I have no crystal ball, so your guess is as good as mine.
It is only Wednesday, but the weekly chart is showing potential tweezer tops right into key resistance. Closing the week like this would be a sign that there is more downside to come, as this is a clear “top signal.” These signals don’t always play out, but those are the rules.
The 50 and 200 MAs are still clear resistance here. This area has horizontal and 2 MA resistances - not easy.
We also have some potential bearish divergence here with RSI, with a very slightly lower high on RSI. We want to see a push to close this week and cancel all of these bearish signals.
Legacy Markets
Investors are waiting for the release of the Federal Reserve minutes to gain insight into the US central bank's expectations on how much further interest rates might rise. US equity-index futures and Treasuries rose, with the S&P 500 and Nasdaq 100 indexes rising over 0.3%, while shorter-term Treasuries led gains. The release of disappointing earnings projections and growing geopolitical tensions has negatively affected the mood, outweighing any optimism about China's reopening. Meanwhile, Europe's Stoxx 600 index headed for a second-day loss, with Lloyds Banking Group Plc dropping, weighing on the FTSE 100 Index, after results and guidance for 2023 came in below analyst estimates, despite announcing a £2 billion ($2.4 billion) share buyback.
Disappointing earnings projections are reported everywhere, and only 68% of S&P 500 companies reporting results this season have beaten estimates, compared with about 80% seen during recent quarters. CoStar plunged 13% in early New York trading after its annual guidance disappointed analysts, and News Corp. said it’s no longer involved in discussions to sell its Move subsidiary to the real estate information and services company. Geopolitical tensions have also added to the negative sentiment, with Russia's suspension of its observation of the New START nuclear weapons treaty with the US and President Joe Biden's response adding to the uncertainty.
Key events this week:
US MBA mortgage applications, Wednesday
Federal Reserve releases minutes from its latest policy meeting, Wednesday
Eurozone CPI, Thursday
US GDP, initial jobless claims, Thursday
Atlanta Fed President Raphael Bostic speaks, Thursday
BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house, Friday
US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment, Friday
Russia’s invasion of Ukraine hits the one-year mark, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.3% as of 8:01 a.m. New York time
Nasdaq 100 futures rose 0.4%
Futures on the Dow Jones Industrial Average rose 0.2%
The Stoxx Europe 600 fell 0.3%
The MSCI World index fell 0.3%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was unchanged at $1.0648
The British pound was little changed at $1.2107
The Japanese yen rose 0.4% to 134.44 per dollar
Cryptocurrencies
Bitcoin fell 0.2% to $24,139.72
Ether rose 0.2% to $1,644.92
Bonds
The yield on 10-year Treasuries declined three basis points to 3.93%
Germany’s 10-year yield was little changed at 2.52%
Britain’s 10-year yield advanced two basis points to 3.63%
Commodities
West Texas Intermediate crude fell 0.5% to $75.95 a barrel
Gold futures rose 0.4% to $1,849.60 an ounce
Discover The Infinite Garden
Have you seen the Ethereum Foundation’s landing page? If you haven't explored it yet, you are missing out. It’s a work of art that poetically explains the foundation's role in the Ethereum ecosystem. While scrolling through the philosophy, you might have missed the EF blog or EF report which offers a more robust approach to visitors. I quoted below the remainder of the description of the “Infinite Garden.”
Have you seen the Ethereum Foundation's landing page? If you haven't explored it yet, you're missing out. It's a work of art that poetically explains the foundation's role in the Ethereum ecosystem. While scrolling through the philosophy, you might have missed the EF blog or the EF report, which offers a more robust approach to visitors. Below, I've quoted the remainder of the description of the "Infinite Garden."
“Ethereum is a protocol for human coordination. Coordination is a game, but not one that is played to win. Coordination is more like tending to a garden where one works only so that the garden may continue to thrive.”
“The Infinite Garden is an embodiment of the spirit of the Ethereum Foundation as one gardener in a vast ecosystem -- nurture and grow, but do not control, and continue to play.”
Galois Capital Is Shutting Down
The lingering effects of the contagion are far from over. Crypto hedge fund Galois Capital has ceased all trading activities, closed all open positions, and started refunding customers their assets. According to Galois Capital co-founder Kevin Zhou, “the severity of the FTX situation made it untenable to continue operating the fund both financially and culturally.”
The Financial Times reported that about half of the hedge fund's assets were lost on FTX, and the team decided to sell their claim for $0.16 on the dollar. As for other funds not tied to FTX, Galois' creditors will receive about 90% of the remaining funds, and despite the FTX loss, the firm's returns are still positive. At least the situation isn't completely awful.
Tokenizing The Titanic
A partnership between RMS Titanic Inc, Artifact Labs and Hong Kong-based Venture Smart Financial Holdings is aiming to tokenize select artifacts from the wreckage of the Titanic using blockchain technology. These non-fungible tokens (NFTs) would allow for shared ownership of the artifacts to the wider general public, while also unlocking Web3 functionalities. Venture Smart Financial Holdings will structure the tokenization of intellectual property linked to the artifacts while Artifact Labs will create NFTs for recovered artifacts using its NFT blockchain system. The NFTs will provide exclusive benefits to collectors such as VIP events and exhibitions, seminars with historians, and other exclusive experiences.
This initiative is aimed at preserving the Titanic's legacy and artifacts through digital innovations like NFTs and blockchain technology, while moving into the digital space allows a broader audience with quality programming that educates and inspires. The Titanic DAO will also be established to allow members to participate in various initiatives and proposals for future exhibitions to the Titanic site. The DAO will facilitate the development of educational programs, digital content and documentaries, research, partnerships, and events. The treasury of the Titanic DAO will be managed by members using governance tokens and funded through proceeds of NFT sales.
“I'll never let go of my NFT, Jack. I'll never let go.” — Rose.
SEC Commissioner Hester Peirce: Come Help Us Create Better Crypto Regulation
Commissioner Hester Peirce needs no intro: everyone in crypto knows her as a Crypto Mom. She is the voice of the people and often defends the true ideas of decentralization. Today, in the midst of a regulatory crisis and attacks on stablecoins and staking, we need her voice to sound strong and we should support her work on defending our industry.
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.