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In This Issue:
Don’t Shoot The Messenger
On-Chain Analysis of Bitcoin’s Q1 And Its Potential Forecast - IntoTheBlock
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Here Comes The CBDC
Almost Nobody Reported Their Crypto Taxes
RIP Bob Lee
Don’t Shoot The Messenger
Allow me to invoke the time-honored adage: "Don't shoot the messenger!" Today, I metaphorically don my Kevlar vest as I relay various insights gleaned from the ever-evolving realm of cryptocurrency. You may already have a sense of the direction this will take if you've skimmed ahead, but assuming you are a conscientious line-by-line reader, I shall present a pertinent disclaimer.
Foremost, it is crucial to recognize that "past performance is no guarantee of future results." To put it simply, every image and statement following this paragraph should be treated with skepticism until corroborated by actual market prices. Price prediction models serve as imaginative conceptual tools to supplement your own thought processes. They are not intended as definitive evidence and must never be relied upon as financial advice.
Consider yourself warned.
The inspiration for this introduction struck me as I browsed Twitter and came across a model by PlanB. Regardless of your personal opinion on him, PlanB was once the most highly-regarded "chart guy" in the cryptocurrency realm. Although his models eventually faltered, it doesn't diminish his ability to present thought-provoking concepts for our consideration. His latest chart, which you can see below, caught my eye and I find it intriguing.
Each dot in the chart above symbolizes a single month. While it's impossible to predict the exact duration of each phase, historical trends suggest that we may have a few months remaining before entering the red zone, where the majority of Bitcoin's gains occur. If you can mentally pinpoint the halving events (which are not marked on this chart), you'll see that they generally precede the red phase. Interestingly, the next halving is anticipated to occur in precisely one year. Exciting times ahead!
Check out this Bitcoin Halving Clock if you are bored.
Moving on.
The thought-provoking stages chart by PlanB led me to reflect on other famous charts and what insights we might glean as we approach the next halving. This brought me back to the Bitcoin Rainbow Chart by Holger. This chart is less technical and more visually appealing, embracing the notion that simplicity is often superior. According to the Rainbow Chart, Bitcoin's price currently sits at the lower end of the "accumulate" phase, nestled between "still cheap" and "BUY!" One significant advantage of this chart is that it incorporates halving events, enabling you to observe how the price has historically responded after each halving.
Enthusiasts of the Bitcoin Rainbow Chart know that the only fitting counterpart to this masterpiece is the Ethereum Rainbow Chart. Upon examination, you'll observe that the price appears to be at the very bottom. This might be attributed to a slight scaling discrepancy, but the chart remains visually engaging. My intuition suggests that Ethereum's price likely falls between the "undervalued" and "accumulate" phases, although it's hard to say for sure. With the Bitcoin halving just one year away, let's now delve into some relevant statistics to better understand its potential impact.
Below are some tables from ZenLedger with some statistics about past and future halvings.
Considering Bitcoin's price in the context of halvings can significantly expand your time horizon. Historically, purchasing Bitcoin at one halving and holding until the next has proven to be a successful strategy 100% of the time. Many people inquire about my predictions for Bitcoin's price in 6 months or 1 year, but I generally cannot provide a specific estimate. However, if asked about its potential value at the fifth or sixth halvings, I can confidently assert that the price should be considerably higher. Now, let's examine how Bitcoin has performed following each halving.
2012 Bitcoin Halving Price - $12.35
150 Days Later - $127.00
2016 Bitcoin Halving Price - $650.63
150 Days Later - $758.81
2020 Bitcoin Halving Price - $8,821
150 Days Later - $10,943
One doesn't need to be a genius to observe that Bitcoin's price has consistently risen with each halving. Assuming Bitcoin continues to exist, this trend is likely to persist – it's not rocket science. Furthermore, the aggressive increase in hash power indicates that Bitcoin is well-positioned for growth as the fourth halving approaches and concludes. At this point, I'll cautiously set aside my protective Kevlar vest and shift the focus to other topics.
Remember, don’t shoot the messenger – consider investing in Bitcoin and practicing patience.
On-Chain Analysis of Bitcoin’s Q1 And Its Potential Forecast - IntoTheBlock
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB). ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data.
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.
On-Chain Analysis of Bitcoin’s Q1 And Its Potential Forecast
In the first quarter of 2023, the cryptocurrency market witnessed a remarkable recovery, with Bitcoin recording its highest quarterly price surge since Q1 2021. This uptick in prices followed a period of heightened selling pressure, instigated by the collapse of FTX. The market's upward momentum was further bolstered by a more favorable macroeconomic outlook for riskier assets, as well as encouraging factors anticipated to benefit the crypto industry in the near term.
Source: IntoTheBlock’s Capital Markets
Amidst the banking crisis and central bank intervention in the United States and some parts of Europe, Bitcoin's value increased by more than 20%, surpassing the majority of other assets and elevating its correlation to gold.
In the first quarter of 2023, Bitcoin was one of the top-performing assets, outpacing the majority of other investments.
The recent rally in price was fueled by the banking crisis, which is in line with the original purpose behind Bitcoin's creation.
Increased traction in the market may be a sign of acceptance for the digital asset as a store of value theory.
Finally, its correlation with gold prices rose from -0.3 at the start of the year to 0.9 by the end of the quarter.
Source: IntoTheBlock’s Bitcoin Indicators
Investors with a long-term outlook are accumulating Bitcoin, as the amount held by "hodlers" (those who hold on to their coins rather than trading them frequently) has reached new record highs.
In 2023, addresses that held onto Bitcoin for over a year increased their holdings by $13.4 billion.
Based on past bull markets, it is expected that these addresses are unlikely to sell their holdings until the price of Bitcoin approaches the previous all-time high.
From a network perspective, long-term holders provide stability to the Bitcoin network. They help to reduce volatility by keeping large amounts of Bitcoin off the market, which can otherwise cause price fluctuations.
Bitcoin Thoughts And Analysis
Rejected again at $28,600. The 10th attempt to close above that line.
What else is there to watch???
Altcoin Charts
I did an entire stream yesterday looking at Bitcoin and alt coins. My overwhelming summary was… soon, but not yet. That has played out in the past 24 hours or so, but there are plenty of trade ideas if we see certain criteria met. Watch the video.
Legacy Markets
Treasury yields extended their slump, and US equity-index futures fluctuated as concerns about a sharper global economic slowdown outweighed inflation and monetary tightening fears. The two-year US rate slid for a fifth consecutive day, and a gauge of global stocks headed for a weekly loss. Signs of slower economic activity and bank failures have raised concerns about the financial system, with economists now assigning a 65% probability of a US recession. Money markets see only a 44% chance that the Federal Reserve will raise interest rates by 25 basis points in May. European stocks rose, with the benchmark Stoxx 600 ending a three-day slide, while Indian shares advanced after the central bank paused its rate hikes.
Key events this week:
US initial jobless claims, Thursday
St. Louis Fed President James Bullard speaks, Thursday
US unemployment, nonfarm payrolls, Friday
Good Friday. US stock markets closed, bond markets close for part of the day
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.4% as of 10:14 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures fell 0.2%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 0.7%
The MSCI Emerging Markets Index fell 0.4%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0899
The Japanese yen was little changed at 131.28 per dollar
The offshore yuan was little changed at 6.8791 per dollar
The British pound was little changed at $1.2467
Cryptocurrencies
Bitcoin fell 0.7% to $27,973.87
Ether fell 1.3% to $1,881.26
Bonds
The yield on 10-year Treasuries declined four basis points to 3.28%
Germany’s 10-year yield declined five basis points to 2.14%
Britain’s 10-year yield declined four basis points to 3.39%
Commodities
Brent crude fell 0.4% to $84.61 a barrel
Spot gold fell 0.1% to $2,018.63 an ounce
Here Comes The CBDC
Fasten your seatbelts – the Federal Reserve's Central Bank digital currency is on its way! Announced yesterday, the "FedNow" system is set to launch in July, marking "the beginning of the reality of truly modern payments in the U.S." Although not technically a CBDC, this platform will eventually facilitate one. According to the linked CNN article, "the system will enable bill payments, money transfers such as paychecks and disbursements from the government, as well as a variety of other consumer activities, to proceed more swiftly and at a lower cost, in line with the program's objectives."
Despite its seemingly authoritarian nature, the development of a CBDC will likely be a double-edged sword. I've always maintained that the greatest advertisement for Bitcoin will be a CBDC that starkly contrasts with our core values. While the world will ultimately recognize this, I anticipate a contentious battle ahead. To illustrate the situation perfectly, I've included a Twitter post below from Robert Kennedy that captures the essence of what's unfolding.
“The Fed just announced it will introduce its “FedNow” Central Bank Digital Currency (CBDC) in July. CBDCs grease the slippery slope to financial slavery and political tyranny.
While cash transactions are anonymous, a #CBDC will allow the government to surveil all our private financial affairs. The central bank will have the power to enforce dollar limits on our transactions restricting where you can send money, where you can spend it, and when money expires.
A CBDC tied to digital ID and social credit score will allow the government to freeze your assets or limit your spending to approved vendors if you fail to comply with arbitrary diktats, i.e. vaccine mandates.
The Fed will initially limit its CBDC to interbank transactions but we should not be blind to the obvious danger that this is the first step in banning and seizing bitcoin as the Treasury did with gold 90 years ago today in 1933.
Watch as governments, which never let a good crisis go to waste, use Covid-19 and the banking crisis to usher in a new wave of CBDCs as a safe haven from germ-laden paper currencies or as protection against bank runs.”
Almost Nobody Reported Their Crypto Taxes
There are two possible explanations for a mere 1.62% of U.S. crypto holders reporting their crypto holdings: (a) many investors lost money and decided not to declare their losses, or (b) people simply don't fear the consequences from Uncle Sam. Given the market's performance in 2022, there might be some validity to option (a), but my intuition suggests that these numbers are considerably lower than the actual figures. Moreover, since wash sale rules don't apply to crypto, there's even more incentive to report losses in a down year. While there may be some errors in the data collection process, it's striking how astonishingly low these numbers are across the board.
If you care to read more about how the data was collected, you can read the report here.
RIP Bob Lee
The tech community is mourning the passing of Bob Lee, the brilliant mind behind the development of Cash App. A father, former CTO of Square, and creator of Cash App, as well as the CTO of Mobile Coin, Bob made a significant impact on many lives. Here are some words from his father, “Bob would give you the shirt off his back. He would never look down on anyone and adhere to a strict no-judgment philosophy.” Though I didn't know Bob personally, his immense influence and contributions to the tech community prompted me to share this news here. We can only hope that justice will be served.
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.