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In This Issue:
The ‘Back Door’
Yahoo Finance Appearance
Bitcoin Thoughts And Analysis
Legacy Markets
Mayor Suarez Is Running For President
Coinbase Reduces Its Debt
Celsius Is Selling
Is Abra Insolvent?
What The US Giveth, China Taketh Away
Bitcoin & Alts Crash | Battle For Crypto
The 'Back Door'
Despite the often baffling world of cryptocurrency, the intricacies of market dynamics frequently echo the mundane human experience. For instance, in my previous newsletter, I discussed navigating the 'wall of worry.' I have also delved into terms such as 'buying on sale,' 'rising tides,' 'diversifying your portfolio,' and 'even a broken clock is right twice a day.'
These analogies are valuable for investors because they transform an unfamiliar and emotional subject into something comprehensible and rational. However, crypto is an entirely different entity, and crafting relatable, simplifying methods for investors is a demanding task. This calls for us to abandon traditional frameworks and start from scratch - the crypto markets necessitate fresh analogies. Here's an attempt.
I liken the crypto market to a revolving door. While it spins in one direction, it theoretically facilitates investors entering and exiting simultaneously. However, when circumstances become critical, one flow usually overpowers the other. If you were to visualize this door, what would you see?
From my perspective, I envision beleaguered investors jostling their way to the exit, colliding with each other, and leaving newcomers in queue for an opening. I picture a door moving not at breakneck speed but at an irksomely rapid pace, close to its maximum capacity. In this context, when the bidirectional door becomes a one-way exit, it could signify we are nearing a market bottom.
The analogy might sound disheartening initially, but the beauty of crypto lies in its ability to pivot in just a matter of moments. As those exiting dominate the traffic flow, newcomers gradually cultivate anticipation. Once the last person exits, a wave of exhilaration ensues as newcomers finally take their turn through the revolving door - this concept holds up.
The revolving door analogy is relatively simple to understand, but imagine if I told you about another door, hidden and exclusively reserved for privileged participants - let's call it the 'back door.' Unlike the revolving door, there's no waiting at the 'back door,' but the rules of entrance and exit differ. It is governed by politics and vested interests, where your connections and knowledge play crucial roles, and favorites always come out on top.
Given the relative immaturity of the crypto market, the 'back door' sometimes swings open and shut without garnering attention, while at other times it's unignorable. After last year's massive exit of crypto native firms, I suspect that in the coming years, the 'back door' will admit a significant number of carefully selected entrants, the most recent being BlackRock.
Yesterday, a CoinDesk report announced that BlackRock, the world's biggest asset manager, was nearing a Bitcoin ETF filing, partnering with Coinbase as the custodian. Shortly after, it was confirmed that BlackRock is applying for a spot Bitcoin ETF, becoming the strongest contender thus far.
It's evident that BlackRock intends to enter through the 'back door.'
Numerous ETF applications by crypto friendly companies have been rejected. Would anyone be surprised to see BlackRock move to the front of the line and get approval?
Do you remember this tweet, that I sent right after the FTX debacle?
This is an example of what I was talking about… companies that are cozy with the government will get the first crack at dominating the future of crypto.
I've discussed doors extensively, so I'll conclude here. The 'entrance door' has always exerted a stronger influence on crypto; it's the reason Bitcoin stands $25,000 above zero, and why the overall market value exceeds $1 trillion. The 'exit door' may appear more active at times, but that's merely psychological maneuvering - don't be misled.
As an investor, my decisions stem from observable phenomena. Starting with distressed sellers is a reasonable approach. While it's impossible to buy the last exiter's position, patient decisions based on flow are achievable. Also, I may never fully understand the 'back door' operations, but speculation and significant announcements are excellent indicators.
The crypto market is truly a unique phenomenon - everyone has a shot, but only a few will succeed. I hope you have a fantastic weekend, and I eagerly anticipate engaging with you all at the upcoming Crypto Town Hall. This is an exciting time in the world of cryptocurrency, and I look forward to navigating these uncharted waters together. Let's seize the opportunities that this dynamic market offers, and remember, even the revolving door of crypto swings both ways - every exit could be a potential entrance. Stay vigilant, stay informed, and most importantly, keep revolving!
In case you missed it, I went live yesterday on Yahoo Finance to talk about BlackRock, the SEC, and Gary Gensler. I pulled no punches. Crypto’s shining moment is coming soon. The bricks are being laid and the road is being paved.
Bitcoin Thoughts And Analysis
Yesterday provided bulls with a sign of relief, but we are not out of the woods yet.
For now, BTC is back above $25,212, a nice retest of this area as support that I have been watching for months. As you know, I bought that level when it hit two days ago.
The inverse head and shoulders drawn is now truly in play if this retest holds. I know it sounds nuts, but the target is around $41,000.
Also, this appears to be a likely higher low in the new bullish trend, shown by the blue checkmarks.
The daily had a nice move on decent volume back above support at $25,212. Where did the bounce occur? Right at the top of the demand zone discussed yesterday.
Too early to celebrate, but looking pretty good here for a reversal.
Legacy Markets
Global stocks are heading towards their best week in over two months, fueled by expectations of Chinese stimulus and enthusiasm around artificial intelligence companies. The MSCI World Index has seen a 3% increase this week, marking its largest rise since the end of March. Asian stocks rallied broadly on Friday, European equities ascended, and US futures remained steady as the S&P 500 finished its sixth consecutive day of gains. Speculation that the Federal Reserve might conclude its tightening cycle sooner after this week's pause in interest rate hikes has enhanced the appetite for riskier assets. Concurrently, there is growing anticipation that the Chinese government will augment spending, boosting sectors such as mining, energy, and luxury stocks.
The market will face a significant challenge with the expiry of a substantial number of options contracts tied to stocks and indexes on Friday, known as OpEx. This event usually results in portfolio adjustments, leading to a surge in volume and sudden price swings. Consumer shares led the gains in Europe, with significant contributions from LVMH and Asos Plc. Meanwhile, in the US, Adobe Inc. experienced a rise in shares following earnings that exceeded expectations, and Apple Inc. maintained stability as it approaches a $3 trillion market cap. Treasury yields and the dollar saw an increase, while the euro remained steady after the European Central Bank's decision to increase interest rates by another quarter-point.
Key events this week:
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.1% as of 4:58 a.m. New York time
Nasdaq 100 futures rose 0.2%
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 0.6%
The MSCI World index rose 0.3%
The MSCI Asia Pacific Index rose 0.9%
The MSCI Emerging Markets Index rose 0.7%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0954
The British pound was little changed at $1.2796
The Japanese yen fell 0.5% to 141.03 per dollar
The offshore yuan was little changed at 7.1148 per dollar
Cryptocurrencies
Bitcoin was little changed at $25,523.5
Ether was little changed at $1,668.75
Bonds
The yield on 10-year Treasuries advanced two basis points to 3.74%
Germany’s 10-year yield was little changed at 2.50%
Britain’s 10-year yield declined three basis points to 4.36%
Commodities
West Texas Intermediate crude was little changed
Gold futures rose 0.3% to $1,975.80 an ounce
Mayor Suarez Is Running For President
We now have a third (fourth?) pro-crypto candidate for the imminent 2024 presidential election. Mayor Suarez, in his announcement video—available for viewing HERE—did not explicitly mention crypto or Bitcoin. However, his stance on the subject is well-known. Despite Miami's rocky relationship with crypto, marked by FTX's impact and the departure of the Bitcoin conference, it remains a significant hub for technology and crypto. The promotional video released by Mayor Suarez for his presidential bid is highly commendable. Although it's still too early for me to decide on a preferred candidate, I'm eager to see Mayor Suarez gain some momentum in the race.
“When I was elected, the city was broke and broken, but we came together…In Miami, we stopped waiting for Washington to lead. America's so-called leaders confuse being loud with actual leading. All Washington wants to do is fight with each other, instead of fighting for the people that put them in office. My dad taught me that you get to choose your battles and I am choosing the biggest one of my life. I am going to run for president, I am going to run for your children and mine. Let’s give them the future they deserve. It’s time to take things into our own hands, it’s time to get things started.”
Coinbase Reduces Its Debt
Coinbase managed to purchase notes originally due in 2026 at a 29% discount, effectively accounting for 0.5% of its total debt. At first glance, this move might seem puzzling, given that repurchasing only 0.5% of the debt barely scratches the surface of its obligations. Even with the completion of these purchases, Coinbase will still have a significant $1.37 billion principal amount left on its outstanding notes. Unless Coinbase manages to buy back a more substantial portion of its debt, say 5% or even 25%, there won't be any substantial change in its financial situation. In other words, Coinbase still has a significant journey ahead to reduce its liabilities
Celsius Is Selling
The recent news about the Celsius Network selling off its assets is rather baffling, especially given the current precarious state of the market. Based on my analysis, Celsius's total altcoin holdings stand around $215m, with the primary constituents being CEL token ($70m), Matic ($52m), Cardano ($26m), Chainlink ($17m), and Litecoin ($14m). This decision isn't just a disappointment for creditors hoping for a comparable return, but also adds to the existing slump in the altcoin sector. The motivation behind Celsius's decision to disclose this information remains puzzling, as the evident advantages are nebulous. What we do know is that these assets will be converted into Bitcoin (BTC) and Ethereum (ETH).
Is Abra Insolvent?
The speculation is running rampant - there's talk of Tether on the precipice of de-pegging, DeFi on the verge of collapse, Abra implicated in transferring funds to Binance, and now, allegations of Abra's insolvency. While it's difficult to discern fact from fiction in the current scenario, one thing I can confirm is that I'm not directly impacted by any of these rumors.
Up to this point, the most concrete information we have regarding Abra pertains to an emergency cease-and-desist order issued against them by the Texas State Securities Board, citing insolvency and securities fraud. The charges allege that Abra has outstanding debts with Genesis and 3AC, exacerbating their financial woes. As this is a developing story, we'll need to stay tuned to see how it unfolds.
What The US Giveth, China Taketh Away
The Hong Kong Monetary Authority (HKMA) is encouraging major banks, including HSBC, Standard Chartered, and Bank of China, to provide services to cryptocurrency exchanges. This initiative is part of Hong Kong's aim to establish itself as a global cryptocurrency hub. However, traditional banks have been hesitant due to legal concerns related to potential scams. The HKMA is urging these banks to adhere to a risk-based approach for customer risk management. While HSBC and Standard Chartered confirmed ongoing discussions on the matter, Bank of China has not responded yet.
Insane. I never thought that the US would crackdown so hard that China would see an opportunity to pick up the slack.
Bitcoin & Alts Crash | Battle For Crypto
Live panel with Noelle Acheson, Dan Gunsberg and Steven McClurg.
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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