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In This Issue:
Stakes Are High
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Cathie Wood Might Be Right
FTX Part Deux?
Twitter Launching Crypto And Stock Trading With eToro
Stakes Are High
There was a time when all staking served a valuable purpose in the world of cryptocurrency. It involved investors willingly risking their collateral, committing to work, and securing the network or protocol. However, much of today's staking has diverged from this original intent, and this shift can negatively impact your portfolio, the longevity of the coin, and the entire crypto ecosystem.
In the early days, coins like Peercoin (the pioneer of Proof of Stake) established a high standard for staking. As it became more popular, some teams exploited the model for their own gain, deviating from what once made staking legitimate. Let's take a look at a recent event in the staking world to better understand these changes.
XRP holders on Coinbase finally received their Flare tokens after a long wait. Although I didn't receive Flare tokens myself and am not an expert on the Flare Network, I will provide fair criticism of the rise of modern staking to help you form your own opinions.
Flare is the native token of the Flare crypto ecosystem, distributed to XRP holders who had the token on participating platforms in December 2020. With a total supply of 100 billion, XRP holders were promised at least 1 FLR per XRP they held, but there was a catch.
Instead of receiving a 1-to-1 ratio of the token, Flare token recipients got 15% of the total they were owed. To receive the remaining 85%, they must wrap their tokens, stake, and wait 35 months. This tactic is not new; staking today often serves as a way for value to be quietly transferred from late investors to early investors and insiders, as may be the case with Flare.
Let's examine Flare's situation with some math: 28.5 billion FLR of the 100 billion will be distributed directly to community members over 36 months. Since 15% is given upfront, that means 4.275 billion (4.2%) of the total supply is initially distributed to the community. The remaining 85% is only distributed if recipients commit not to sell by staking their initial 15%. After 36 months, the community will receive an additional 24 billion. This approach may be a contributing factor to why many altcoins struggle to gain value over multiple cycles, presenting investors with a seemingly insurmountable challenge.
If you plan to stake, it's crucial to take into account the vesting schedule, annual inflation, and supply distribution. These factors constantly work against the dollar value of your holdings, which means that the value of Flare must increase at a rate faster than its dilution. From the outset, it's an ongoing struggle to stay ahead of these factors working against you. Below, I've included an explanation of the tokenomics from the Flare blog, which details how the distribution process functions.
“The 28,524,921,372 FLR public distribution will be split into two parts. The first 15%, which equates to 4,278,738,206 FLR, will be distributed during the Token Distribution Event (TDE) to wallets that held XRP on 12.12.20. The remaining 85% or 24,246,183,166 FLR will then be distributed in 36 monthly amounts directly to token holders who have wrapped their FLR into WFLR. There will be 35 monthly distributions of 2.37% of the total (676,040,637 FLR) and a final distribution of the remaining 2.05% of the total (584,760,871 FLR) in month 36.”
And below are a couple of images I pulled from the official blog to help you visualize how the ‘staking’ and distribution works.
The paragraph below is quoted from Cobie. I generally agree with him on his analysis of staking.
“Somehow, over time, the word ‘staking’ has been repurposed and redefined. Instead of receiving rewards for contributing to chain security with collateral at stake, modern “staking” just seems to mean idk we give you more coins as a reward if you don’t sell your current coins lol. These modern staking mechanisms do not have any function in the ecosystem to which they belong. They don’t do anything in any practical or technical sense. They don’t make an ecosystem more robust. They are a shell game, using the name of a different thing to obfuscate their actual purpose, which is to encourage less selling.”
Even CryptoGPT has 'staking,' where users can earn "capsule NFTs" for bonuses in their lifestyle apps. With that said, let's take a look at what's happening with Ethereum staking so we can conclude on a positive note.
First and foremost, the Shanghai upgrade was a success! Additionally, current indicators suggest that concerns of a mass sell-off and exodus were greatly exaggerated. Tracking the network's status in terms of exits and entrants is somewhat challenging since it's still in the early stages, but this article by Galaxy Research serves as an excellent starting point to explore some initial trackers.
From the available information, it appears that most selling will be front-loaded over the next few days. However, since the exits and selling exceeded expectations, we might witness a boost in confidence that either increases the price or at least maintains it. It's difficult to determine what the market has priced in over the past few months, so it's all speculative at this point. Once the situation becomes clearer, I'll provide more information here. For now, everything seems promising. Barring any negative news, a little alt season should be just around the corner – fingers crossed.
Bitcoin Thoughts And Analysis
Bitcoin did drop a bit on the bearish divergence right after the momentary push after CPI. Now we are back to the exact same price, still with more likely bearish divergence forming.
Bitcoin pushes up through these things all the time, but odds are in my mind that we do see a chance to buy again at $28,600, at the very least. Feels like eyes should be on alt coins now that Bitcoin is above resistance and stable.
Altcoin Charts
Dominance looks likely to be rejected at resistance, with overbought RSI and bearish divergence once again. Too early to tell, but it does appear that alt coins are set to outperform Bitcoin in the short term. I shared this earlier this week.
Now that Bitcoin is somewhat stable above key resistance levels, we can potentially see the alt market do exceptionally well… until the next big Bitcoin move.
Always proceed with caution, but things are looking decent for the crypto market.
The $BNB $FTM and $SOL ideas I shared are all up and doing well, so they are worth revisiting.
Ethereum is in a very interesting spot. A break above $2000 would be a key psychological level, but is also an area of key resistance. That said, it should be an easy quick move to $2,159. A break of that send it up to around $2500 with minimal resistance.
All eyes on ETH with a successful upgrade and a solid narrative.
Legacy Markets
European equities and US equity futures rose on Thursday as investors assessed inflation data and policymakers' comments regarding the end of aggressive rate hikes by global central banks. The Stoxx Europe 600 Index experienced modest gains after European Central Bank member Francois Villeroy de Galhau stated that most interest-rate increases have been completed. US stocks showed signs of recovery following the latest US inflation report. Despite the year-on-year headline figure falling, core prices edged higher. Markets still expect a quarter-point hike by the Federal Reserve in May, and traders are betting on faster interest rate cuts by the end of the year. Fed officials forecast a mild recession starting later in 2023 due to recent banking-sector developments.
Key events this week:
US PPI, initial jobless claim, Thursday
US retail sales, business inventories, industrial production, University of Michigan consumer sentiment, Friday
Major US banks JPMorgan Chase, Wells Fargo and Citigroup report earnings, Friday
Some of the main market moves:
Stocks
S&P 500 futures rose 0.2% as of 6:06 a.m. New York time
Nasdaq 100 futures rose 0.3%
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 0.2%
The MSCI World index rose 0.2%
Currencies
The Bloomberg Dollar Spot Index fell 0.3%
The euro rose 0.3% to $1.1024
The British pound rose 0.2% to $1.2515
The Japanese yen was little changed at 133.23 per dollar
Cryptocurrencies
Bitcoin rose 0.9% to $30,242.62
Ether rose 4% to $1,984.51
Bonds
The yield on 10-year Treasuries advanced three basis points to 3.42%
Germany’s 10-year yield advanced two basis points to 2.39%
Britain’s 10-year yield advanced one basis point to 3.59%
Commodities
West Texas Intermediate crude fell 0.2% to $83.11 a barrel
Gold futures rose 0.8% to $2,041.10 an ounce
Cathie Wood Might Be Right
Dow rises more than 100 points after cooler-than-expected March inflation report: Live updates
Similar to a poorly-performing cryptocurrency, overall inflation has experienced a significant drop, alleviating concerns that inflation would worsen as the year progressed. Despite the Federal Reserve recently launching a $25 billion bank back stop program, which effectively turned on the money printer, it appears that the tightening measures are working. This development supports Cathie Wood's prediction that deflation may be on the horizon.
For March, consumer prices overall increased by 5% compared to a year earlier, down from 6% in February. As for core inflation, the results were not as favorable, with a 0.4% increase from February, following a 0.5% rise in the previous month. However, supporting Wood's argument, the CME FedWatch Tool indicates that the market is pricing in another rate hike in early May. If Wood's prediction proves accurate, this move would further accelerate the deflationary trend.
“We do think inflation is coming down now. It always seems like it could come down faster, but we do believe it's on its way down. This reminds me of early in my career in the early 80s. It was the same thing, but those who bet on lower inflation and interest rates long-term were the winners. Inflation isn’t embedded and deflation is a much bigger risk than inflation. I have never seen markets this dislocated.”
FTX Part Deux?
Crypto Exchange FTX Could Reopen, Its Attorney Says; Firm’s FTT Token Surges
I still can’t believe what I reading, but apparently, during an FTX court hearing, it was said that one of the options being considered is reopening the exchange. A lot was tossed around and nothing is for sure, but lead attorney Andy Dietderich shared with the court multiple options in which creditors may even receive a position in the exchange going forward.
Dietderich did say that capital would need to be raised if this is the decided on path, which I am sure Kevin O’Leary would love to be a part of, but anyway, this is absurd. I can’t imagine FTX just getting a reboot and everyone jumping back on board. But then again, it’s crypto and FTX was a good product (aside from the massive scam) so maybe that just turns out to be the case and everyone wins. On the news, FTT shot up like a rocket, but I doubt the pump sustains unless FTX follows up and continues the news.
Twitter Launching Crypto And Stock Trading With eToro
Things are about to get very weird on crypto twitter.
Twitter is set to introduce a new feature enabling users to trade cryptocurrencies and stocks in partnership with fintech firm eToro. This expands on Twitter's "cashtags" feature, allowing users to view market charts and trade assets through eToro's platform. This partnership marks the first significant deal since Elon Musk became CEO and aims to attract new audiences to the platform. Musk envisions Twitter as the world's largest financial institution and has proposed transforming it into a "super app" that offers various online services in one place.
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.