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In This Issue:
#FireGaryGensler
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Coinbase Invests In The Projects They List
Galaxy Had A “Clean Termination Right”
Binance Is Building A Defense
Wall Street Clash: Bond Titans Predict Recession Despite Bullish Market | Macro Monday
#FireGaryGensler
The SEC has stirred up a massive dust cloud, compelling prominent industry figures to publicly comment on the storm. Keeping tabs on each person's statements has turned into a game of Whac-A-Mole, and trying to analyze everything is akin to drinking from a firehose. With this in mind, I've decided to rapidly summarize the most significant statements to ensure we don't miss anything crucial. It's worth mentioning that I've saved the best for last, so avoid skimming through! Check below for a spoiler alert.
Cathie Wood
Cathie Wood's investment in Coinbase is like a movie. In her commentary, she adopts a profit-first standpoint. She isn't necessarily opposing Binance; instead, she highlights the influence of the Binance case on Coinbase. Take a look for yourself.
Binance is under increasing regulatory scrutiny for more criminal activities, fraud being one of them. Therefore, the competition to Coinbase is disappearing, this is a good thing long-term for Coinbase.
The interviewer then went on to ask the following question: Are you still confident in your million-dollar prediction for Bitcoin? Her answer follows.
Yes, the more uncertainty and volatility there is in the global economies, the more our confidence increases in Bitcoin. One of the reasons is we just went through an inflationary scare, we think it was very much supply-chain driven. Bitcoin was and is a hedge against inflation. We believe the bigger risk now is deflation, not inflation. Why would Bitcoin do well in this circumstance? It would do well because it is an antidote to counterparty risk in the traditional system.
Click HERE to listen in full. Whether you agree with Wood or not, it’s fascinating to watch a public display of conviction this deep. Michael Saylor is another great example of deep-rooted Bitcoin conviction.
Brian Armstrong
In this segment, Brian Armstrong is interviewed on CNBC, expressing his views on the SEC's actions. Armstrong has maintained clarity and conciseness throughout the process; his remarks may not be groundbreaking, but they provide a solid glimpse into what Coinbase's initial argument might resemble in court.
The issue, in this case, is that we are getting conflicting statements from the CTFC head and the SEC head. The statements from the SEC are such an outlier, they are saying everything other than Bitcoin is a security. That’s not our interpretation of the law, that's now what the law says. That’s not the position of every other country around the world and their regulators are taking. I don't think we had a choice, we had to go to court. Otherwise, this industry wouldn't exist in the U.S. We have met with the SEC 30 times in the last year, and they never gave us a single piece of feedback. We received silence.
Gary Gensler
During the Piper Sandler Global Exchange & Fintech Conference, Chairman Gensler delivered a speech titled "We've Seen This Story Before." I won't spend time dissecting Gensler's views, but I do believe it's important to comprehend his perspective. As Sun Tzu once articulated, "If you know the enemy and know yourself, you need not fear the result of a hundred battles."
When crypto asset market participants go on Twitter or TV and say they lacked “fair notice” that their conduct could be illegal, don’t believe it. They may have made a calculated economic decision to take the risk of enforcement as the cost of doing business.
In fact, in that famous Howey decision, the Supreme Court wrote that, if the investment contract test is satisfied, “it is immaterial whether the enterprise is speculative or nonspeculative, or whether there is a sale of property with or without intrinsic value.”
[Compliance] It’s not just a matter of “paying lip service to [the] desire to comply with applicable laws” or seeking a bunch of meetings with the SEC during which you’re unwilling to make the changes needed to comply with the securities laws.
Let me be clear: These types of misconduct and bankruptcies are more likely to happen in markets whose issuers and intermediaries fail to comply with foundational laws. Even when we might not find fraud or such blatant misconduct, investors need proper disclosure, segregation of their hard-earned assets, and confidence that they are not trading against the house.
United States Representative Warren Davidson
Now, for the eagerly awaited moment — yesterday afternoon, Representative Warren Davidson (R-OH 8th District) and Majority Whip Representative Tom Emmer (R-MN 6th District) filed the SEC Stabilization Act. This Act is designed to overhaul the SEC. The bill encompasses: the addition of a sixth commissioner, assurance that no single political party controls more than three seats, creation of an executive director position, and the dismissal of Gary Gensler. The bill is ingenious, and I plan to vigorously advocate for it. Here is an excerpt from Rep. Davidson's introductory remarks.
American investors and industry deserve clear and consistent oversight, not political gamesmanship. The SEC Stabilization Act will make common-sense changes to ensure that the SEC’s priorities are with the investors they are charged to protect and not the whims of its reckless Chair.
U.S. capital markets must be protected from a tyrannical Chairman, including the current one. That's why I am introducing legislation to fix the ongoing abuse of power and ensure protection that is in the best interest of the market for years to come. It’s time for real reform and to fire Gary Gensler as chair of the SEC.
I have been tweeting #FireGaryGensler for days, and the Congressmen shared this hashtag in their tweets as well. It is now trending. More importantly, Congressman Warren Davidson will be on Crypto Town Hall TODAY at 10:15 AM EST to discuss the bill!
I want to conclude this segment with a few final observations. Firstly, irrespective of our political beliefs, we need to rally in support of this bill. Its passage may be unlikely, but demonstrating our ability to push back against Gary Gensler is paramount. Secondly, while there are discussions suggesting the crypto market requires some kind of 'next' innovation to escape the bear market, what's more critical is establishing clear guidelines in the U.S. and internationally. Once the fear of legal repercussions diminishes, I have no doubt that the industry will innovate, as it always has.
My promise to you all is to continue casting a wide net to capture all essential developments, so you can make the most informed decisions. Prioritizing our protection and challenging the SEC is our primary objective; the rest will naturally follow.
REMINDER! All of the following events are happening TODAY!
SEC ordered to respond to Coinbase's rulemaking request by Tuesday.
US District Court in DC to hold 2pm hearing on SEC's temporary restraining order request against Binance.US.
Internal SEC documents and communications regarding Bill Hinman's 2018 speech on Ethereum's decentralization expected to be unsealed in Ripple case, revealing further reasoning behind Ethereum not being considered a security.
House Financial Services Committee to hold 2pm hearing titled "The Future of Digital Assets – Providing Clarity for the Digital Asset Ecosystem."
Public comment period closing for SEC's proposed changes to "exchange" definition under the Exchange Act, potentially impacting decentralized finance applications.
Bitcoin Thoughts And Analysis
Amid all of the bad news that can possibly be thrown at the market, Bitcoin continues to hold support at $25,212 and range.
Not much to do here or see, but encouraging that things have held so strong.
I added the blue descending line, which can give us a clue where the market is headed. A break above would be a nice signal that this retracement is likely ending.
Altcoin Charts
During Macro Monday on YouTube yesterday, I had a bit of an awakening about Bitcoin Dominance, a chart that I shared yesterday.
I have said many times in the past that charing Dominance is a bit of a joke. Chart patterns are generally created by traders buying and selling and asset. Bitcoin Dominance is not traded, so the chart is iffy at best.
Then I started considering the very notion of Dominance.
I tweeted this, to much controversy.
“Bitcoin Dominance is a stupid metric in 2023. Past cycles did not have stablecoins, or stablecoins were a small part of the market. Now:
Total Crypto Market Cap = 1.05 T
BTC + ETH = 710B
STABLES = 126B
EVERYTHING ELSE = 214B
Altcoins are only 20% of the entire market!”
Add to this the fact that in previous cycles, you HAD to exit to Bitcoin because stablecoins did not exist or were a tiny part of the market. Now people can exit straight to stablecoins and fiat without passing through Bitcoin.
You can take a look at Bitcoin Dominance minus stablecoins, but still to me this is a reactive chart. Bitcoin Dominance moves AFTER altcoins crash or Bitcoin makes a move. It is not a forward looking indicator, but rather a visualization of what just happened.
For these reason, I will be using it less.
Legacy Markets
The stock market continues its upward trajectory, driven by hopes of decreased US inflation and economic stimulus from China. This has increased the demand for technology and basic resources stocks in Europe. Meanwhile, US futures climbed as investors sold bonds and the dollar weakened, betting on a pause in Federal Reserve's tightening campaign.
The market expects the US consumer price index reading, due Tuesday, to show cooled pressures allowing the Federal Reserve to halt their rate hike, which would be the first pause after 10 consecutive hikes since March 2022.
Asian equities rose by over 1% amidst reports that China is considering comprehensive stimulus measures. Speculation on cuts to China’s longer-term policy rates increased after the central bank unexpectedly lowered its seven-day reverse repurchase rate.
US-listed Chinese stocks, such as Alibaba Group Holding Ltd and Baidu Inc, saw a premarket rise. However, tech giant Apple Inc slipped after a downgrade from UBS Group AG.
According to a Bank of America Corp survey, investors are predominantly leaning towards tech stocks amid the artificial intelligence buzz. The pound strengthened and UK gilts fell following reports of a tightening labor market in Britain in April. In commodities, oil recovered from a significant drop on Monday, and iron ore rallied due to the potential Chinese stimulus measures.
Key events this week:
US CPI, Tuesday
Eurozone industrial production, Wednesday
US PPI, Wednesday
Federal Reserve rate decision, updated economic forecasts, Jerome Powell’s press conference, Wednesday
IEA oil market report, Wednesday
China property prices, retail sales, industrial production, Thursday
China central bank meeting to decide on one-year policy loan rate, Thursday
European Central Bank President Christine Lagarde holds press conference following the rate decision, Thursday
US initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production, Thursday
Bank of Japan rate decision, Friday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.2% as of 10:40 a.m. London time
S&P 500 futures rose 0.2%
Nasdaq 100 futures rose 0.4%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 1.1%
The MSCI Emerging Markets Index rose 1%
Currencies
The Bloomberg Dollar Spot Index fell 0.3%
The euro rose 0.4% to $1.0805
The Japanese yen was little changed at 139.55 per dollar
The offshore yuan was little changed at 7.1631 per dollar
The British pound rose 0.5% to $1.2569
Cryptocurrencies
Bitcoin rose 0.8% to $26,114.23
Ether rose 0.5% to $1,746.96
Bonds
The yield on 10-year Treasuries was little changed at 3.73%
Germany’s 10-year yield declined two basis points to 2.37%
Britain’s 10-year yield advanced three basis points to 4.37%
Commodities
Brent crude rose 1.4% to $72.87 a barrel
Spot gold rose 0.3% to $1,963.20 an ounce
Coinbase Invests In The Projects They List?
I've noticed a contentious concept circulating on the internet, so let's delve into it. First off, it's typical for most major financial entities to have a venture arm — it's simply part of doing business. For instance, Binance, Kraken, Circle, PayPal, and Nasdaq all have publicly advertised venture arms for their investment needs. Although I didn't find a public venture arm for Tether during my brief search, we know that Tether makes investment decisions within the industry, as evidenced by their recent investment in El Salvador's volcano project. It's standard for every major company to have a team of investors to deploy capital into the markets they understand and operate within.
As I am not a lawyer and lack detailed knowledge of 'financial conflicts of interest' laws, I won't delve deeply into this. However, the claim made above is that Coinbase invests directly into the projects it lists. On a superficial level, this seems true, but it's not a cause for major alarm. Coinbase Ventures' portfolio contains hundreds of investments—355 according to online sources. I haven't crunched the numbers myself, but the projects Coinbase has both invested in and listed number around 30. Intuitively, this seems like a conflict, but Coinbase asserts that they manage a rigorous listing process, and we aren't privy to the protocol Coinbase follows when a portfolio company is listed.
If you want to watch the entire 28-minute interview, you can do so HERE.
Galaxy Had A “Clean Termination Right”
The legal dispute between Bitgo and Galaxy has officially concluded. To recap briefly, Galaxy Digital intended to acquire Bitgo but called off the deal, prompting Bitgo to seek damages in court. Galaxy's defense claimed that Bitgo failed to provide financial documents, while Bitgo argued that the merger agreement still had time remaining - who can say for sure? Regardless, the important takeaway is that crypto companies, funds, and projects need to minimize court appearances if this industry is to thrive. The SEC taking a crypto company to court is one issue, but intra-industry lawsuits represent a no-win situation - this must stop.
Binance Is Building A Defense
At this stage, it's fairly apparent that a criminal lawsuit is looming for Binance. Let's aim to prevent this from further dividing the community and maintain optimism regarding Binance's potential innocence of the alleged charges. That said, it wouldn't be prudent to defend Binance blindly, nor would it be fair to attack them without cause. My hope is that Binance gives the SEC a significant challenge, as under Gensler's leadership, the SEC's conduct appears more questionable than Binance's.
Wall Street Clash: Bond Titans Predict Recession Despite Bullish Market | Macro Monday
Mike McGlone and Dave Weisberger discuss the possibility of a recession in the US.
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.