The Wolf Den #746 - Times Are Changing
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The Wolf Den #746 - Times Are Changing
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In This Issue:
Times Are Changing
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
The Musical Chairs Of Money
How High Can #Bitcoin Price Go?
VC Money Is Creeping Back
It’s Time To DeFi
Will China Start The New Crypto Bull Run? | Live Panel With David Duong & Marshall Long
Times Are Changing
We have seen many hype cycles around different technological advancements fall a bit flat over the past few years. The year 2021 brought a slew of exciting possibilities - NFTs, the metaverse, leaps in vehicle automation, VR technology, and the allure of 5G connectivity. Yet, these advancements felt like overpromises underdelivered.
NFTs, though a success in the art world, didn't find extensive applicability; the metaverse remained an elusive concept; Tesla battled continuous criticism; VR couldn't enchant the gaming world as expected; and 5G's promised connectivity revolution largely disappointed. The ideas were indeed appealing, but the execution and practical implementation lacked the luster we craved. Perhaps it was just early.
Yet, as the saying goes, bear markets are fertile ground for building. And build we did. The year 2022 had its fair share of surprises, and 2023 has been nothing short of mind-blowing. As someone who's typically measured in his excitement about tech advancements, I find myself giddy with anticipation at what we're seeing in AI.
Take ChatGPT, for instance. Sure, having a virtual assistant explain concepts is impressive, but the real game-changer is the integration of APIs, enabling experimentation beyond mere conversation. We're only a few months in, and already the results are staggering.
Then there's Generative Fill, the new AI tool in Photoshop. Have you seen what it can do? We're finally uncovering the hidden context behind memes, as seen below!
And it doesn't stop with art. The music industry is poised to be the next frontier for AI. Picture a brand new Beatles album, or a new Prince hit, all produced by AI. The thought may divide music enthusiasts, but it's likely on the horizon, like it or not.
In the realm of automation, Tesla has secured its position as the world's most valuable automotive brand, with the Model Y now the world's best-selling car. The naysayers may continue to doubt Tesla's full self-driving capabilities, but mark my words, it's happening.
On the crypto front, we're on the brink of our next big thing since the NFT boom. Ordinals and Layer 2s are showing promise, quietly progressing under the radar. And thanks to Twitter Spaces and the rise of citizen journalism, when the breakthrough does occur, its echo will resound across the globe quicker than ever before.
Our own Crypto Town Hall (hosted by Ran, Mario, and myself) is already drawing in viewership comparable to prime-time CNN and Fox - and we've only just begun. I believe Twitter Spaces remains an underappreciated gem, largely unknown to non-Twitter users. Yahoo Finance encapsulated this sentiment well in an article about us:
Moreover, Fox made an insightful point about the potential impact of Spaces on the upcoming elections:
We're standing on an unprecedented platform - Spaces is the killer feature Twitter needed, and we plan to exploit it to the fullest.
In short, it's an exhilarating time for technology. The S&P 500 and DJIA have room to grow, AI is having its moment in the spotlight, and crypto is poised for its next viral sensation. My advice? Don't just jump on the bandwagon when it happens. If you believe in the tech behind crypto, stay faithful - innovation is just around the corner. The future is bright, and it's ours for the taking.
Here's to an exciting weekend. Do tune into Crypto Town Hall tomorrow at 10:15 am EST - it promises to be an unforgettable event.
Bitcoin Thoughts And Analysis
I am posting a chart, but I should be posting the famous meme below….
Bitcoin remains fully sideways. Not a bad thing if we can see some altcoin action before it makes the next move. Still holding the red 200 MA.
Altcoin Charts
ETH has quietly been in an uptrend against Bitcoin since 2019. After breaking the black downtrend line in 2021, it moved up and has now effectively chopped sideways for two years.
While this requires patience, that breakout through the descending black line alone should eventually take this back to the all time high vs. Bitcoin. I share this pair because Ethereum against Bitcoin is often viewed as a weathervane for the entire altcoin market.
As you can see, price is currently in a (blue) descending wedge. There is NOTHING to do now, but if we get a break out from the wedge, we should see a move back to .085, the top of the wedge. Above that, we should target the “golden pocket” between the 61.8% Fibonacci retracement and the 65% (not a Fib) level. These Fibs are pulled from the all time high to the 2019 low.
This is a weekly chart, so nothing is happening fast. This is a very long term idea.
I have long believed that ETH will outperform BTC in price, and this adds to that thought.
I am watching for the breakout.
In case you missed this stream on Wednesday, Chris Inks and I reviewed a number of Metaverse coins, sharing potential setups, some of which are starting to move. Easier to share the video so you can revisit and learn our process. Take a closer look at $INJ and $OCEAN.
Legacy Markets
Global stocks have seen a positive surge after the debt-ceiling deal successfully passed through Congress, with traders eagerly anticipating Friday's US jobs data, which could provide clarity on the Federal Reserve’s future policies. US equities are predicted to build on their recent strong gains, as the S&P 500 and Nasdaq 100 futures rise. Notably, Nasdaq may be on track for a sixth consecutive weekly advance. These gains were boosted by reports that China is considering new stimulus measures to revitalize its struggling economy.
In Europe, the Stoxx Europe 600 index mirrored Asian markets with an upward trajectory. Luxury goods makers LVMH and Richemont were amongst the leading gainers, a result of a rally in Chinese stocks. Miners and energy companies also rose following rebounds in crude oil and industrial metals prices. Among individual movers, Puma SE and Adidas AG rose more than 4% each, following Lululemon Athletica Inc.'s impressive results. Dechra Pharmaceuticals Plc saw a significant surge after EQT AB made a firm offer for the UK-based veterinary drugmaker.
Tech giants continue to drive most of the stock market’s advance, with Apple Inc. nearing a record and Nvidia Corp. climbing more than 5% on Thursday. The sector accounted for more than half the $14.8 billion of inflows into US equity funds last week. Aside from the AI obsession driving mega-cap stocks up 17% in May, the industry also benefited from sliding bond yields and better-than-expected sales at Dell Technologies Inc.
The monthly US jobs report is anticipated to indicate a moderate hiring pace, a sign that the Fed could pause its tightening cycle, which could further stimulate the rally. Although this is not a certainty, dovish comments from Fed officials have endorsed this view.
Despite the optimism, there is a sense of caution as there is still a risk of a reversal in the stock market if the jobs data unexpectedly reports strong numbers. The market's next moves will depend largely on clarity about the Fed's policy direction.
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.5% as of 5:31 a.m. New York time
Nasdaq 100 futures rose 0.6%
Futures on the Dow Jones Industrial Average rose 0.5%
The Stoxx Europe 600 rose 1%
The MSCI World index rose 0.6%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro was little changed at $1.0764
The British pound was little changed at $1.2532
The Japanese yen was little changed at 138.89 per dollar
Cryptocurrencies
Bitcoin rose 1% to $27,127
Ether rose 1.2% to $1,891.68
Bonds
The yield on 10-year Treasuries advanced two basis points to 3.62%
Germany’s 10-year yield advanced four basis points to 2.29%
Britain’s 10-year yield advanced three basis points to 4.15%
Commodities
West Texas Intermediate crude rose 1.9% to $71.44 a barrel
Gold futures were little changed
The Musical Chairs Of Money - A Short Story On Fractional Reserve Banking
In a bustling town, three friends – Mia, Noah, and Lily – decided to each deposit a cool million dollars into the brand new local bank. Their deposits bumped up the bank's liabilities to a hefty $3 million.
The bank, always playing by the book, set aside a tidy $300,000 as reserves, following the rule of fractional reserve banking. This left $2.7 million on the table, ready for lending to some dream chasers in the town.
Enter Alex, a visionary car maker with a head full of dreams but pockets full of lint. He approached the bank for a $1 million loan. The bank, liking Alex's moxie and business plan, agreed to the loan. Bingo! Alex's account was suddenly $1 million heavier. At the same time, the bank's balance sheet got a makeover – liabilities ramped up to $4 million (don't forget Mia, Noah, Lily, and now Alex's loan), and a brand new $1 million asset made its debut (Alex's IOU to the bank).
Now with the cash, Alex was all set to bring his dream cars to life. He bought $1 million worth of raw materials from Sarah, his reliable steel supplier.
Sarah, thrilled with her new fortune, decided to treat her star employee, Emily, with a generous $50,000 paycheck. Emily, with dreams of her own, deposited her pay into the same bank.
Emily's dream? To own one of Alex's shiny new cars! She used her $50,000 to buy one, passing the money back to Alex – a full circle within the same bank.
This merry-go-round of money, from deposit to loan to pay to purchase, demonstrates the magic of banking – it's like creating money out of thin air! But just like any magic trick, there's a risk if the illusion shatters.
Just as the bank, Mia, Noah, Lily, and Alex are all enjoying the prosperity of their financial dance, a storm of economic uncertainty gathers on the horizon. Startled by unsettling rumors, Mia, Noah, and Lily decide to withdraw their $1 million deposits simultaneously, totaling $3 million.
However, the bank finds itself in a precarious situation. Remember, Alex hasn't repaid his loan yet, and the bank still has $1.7 million from the original deposits that were never loaned out. Adding to the $300,000 in reserves, the bank only has access to $2 million.
Despite not loaning out all its available funds, the bank faces a shortfall. It's short by $1 million, which reveals the vulnerability of fractional reserve banking. When the music stops, the bank finds itself playing a nerve-wracking game of musical chairs, and there simply aren't enough chairs for everyone. This intriguing plot twist underlines the delicate dance of the fractional reserve banking system and its inherent risk.
How High Can Bitcoin Price Go?
Have you ever pondered over the potential value of Bitcoin if it managed to capture just 1% of the total global value? Considering a long-term timeline, this aspiration doesn't seem too far-fetched. Interestingly, there was a period when gold constituted 5% of global financial assets - back in 1960. Now, based on my rough calculations, that number hovers around 1.5%. To sum it up, while bullish projections can be intriguing, it's crucial not to view them with absolute seriousness. Below, you'll find the Bitcoin valuation details from the original post
“Bitcoin has properties which make it superior to all other assets that are used to store value, so over time BTC is very likely to account for more and more of the total assets pie chart.
If BTC captures...
1% of total assets value: $450,000 per coin
5% of total assets value: $2,200,000 per coin
20% of total assets value: $9,000,000 per coin”
VC Money Is Creeping Back
A reliable signal that the bull market is on the horizon is venture capital (VC) activity. In a bear market, if a VC firm doesn't go extinct, they are usually too wary to dip their toes into crypto. However, in a bull market, VC firms engage in fierce bidding wars, often leading to inflated valuations - right now, we seem to be in a transitional phase. The latest news in the VC world is from Tribe Capital, which is reportedly aiming to raise $100 million.
We recently observed Worldcoin secure funding swiftly from prominent names, indicating a reassuring sign that investors are poised to jump into the fray. It's important to remember, though, that the majority of VC-backed crypto projects will not succeed. The mere presence of 'VC' in a project's description is far from a guarantee of success.
It’s Time To DeFi
If you found DeFi transactions prohibitively expensive a month ago, fortune has swung your way. Ethereum transaction fees have retreated to more palatable levels (around $5) from their annual peak (approximately $14). The swell in fees was predominantly due to meme coins, implying we can resume normal DeFi activities. In other Ethereum updates, ETH supply on exchanges has hit a record low of 10.3%, as self-custody gains further traction. It seems we're finally embracing prudence after years of laxity.
Will China Start The New Crypto Bull Run? | Live Panel With David Duong & Marshall Long
Hong Kong is set to open up its economy to cryptocurrencies, allowing retail traders to buy and sell digital assets starting Thursday, June 1. Some analysts have regarded this move as a positive indication, suggesting that China is demonstrating its support for the crypto industry. To delve deeper into the implications of this development, I have invited two esteemed guests to share their insights. Joining us are David Duong, Head of Institutional Research at Coinbase, and Marshall Long, Head of Architecture at Rhodium Enterprises. Together, they will provide their analysis and perspectives on the significance of Hong Kong's embrace of cryptocurrencies.
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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