The Wolf Den #765 - It's Time To Read Between The Lines
Headlines Can't Be Trusted
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In This Issue:
It’s Time To Read Between The Lines
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
The History Of The Bitcoin ETF
Mastercard Is Making Its Move
Vitalik Shares Why He Barely Stakes His ETH
The Dark Side Of Technology: How Your Privacy Is Being Invaded And How To Stop It | Seth For Privacy
It’s Time To Read Between The Lines
This past Friday, the Wall Street Journal spun a confusing web with their headline, "SEC Says Spot Bitcoin ETF Filings Are Inadequate," leading investors to prematurely assume the ETF race had come to a screeching halt. As an immediate reaction, Bitcoin nosedived $1,000, and skeptical investors appeared ready to hit the road. However, for someone like me, peeling back the layers of this news only served to solidify my belief that we're gradually getting closer to an approval.
Given that the Wall Street Journal isn't necessarily the go-to for most when it comes to subscriptions, I decided to enlist the help of my reliable accomplice, ChatGPT, to bypass the paywall and break down the article for us. What you'll see next is ChatGPT's interpretation of the piece.
The SEC's main concern with the applications was that they did not provide enough clarity and detail on their surveillance arrangements. The commission returned the applications because they didn't identify the spot bitcoin exchange with which they were expected to have a "surveillance-sharing agreement". Moreover, they didn't provide enough information about the details of those surveillance arrangements.
The SEC's decision, however, does not spell the end for these Bitcoin ETFs. The commission has indicated that asset managers can update their filings and refile them to address these surveillance issues. Some industry watchers had previously predicted that BlackRock’s filing would appease the SEC’s concerns through an agreement to share “surveillance” of a spot bitcoin-trading platform with Nasdaq, which would list the ETF.
In essence, an insider suggests that the SEC is requesting specific amendments and re-submissions to filings, which indicates several key points to me: the SEC is thoroughly reviewing the filings, they're not dismissing the applications, and the surveillance-sharing agreement could be the critical factor. Historically, the SEC's modus operandi when dealing with spot ETF filings has been to delay ad infinitum without any substantial justification and subsequently deny with minimal explanation. But, this time, it appears to be a different ball game.
There's a slim chance that the SEC is pulling our leg to create an illusion of taking the ETF push seriously, but I'm inclined to believe that the SEC is genuinely contemplating approval of these filings. If their goal was to stave off a spot Bitcoin ETF approval, it would be more logical for them to refrain from early suggestions, as opposed to taking pains to address the filings within a brief period. I view this as a positive sign.
Having said that, even if you concur that this is a progressive development, there's one lingering question: what will be the SEC's response to Coinbase being designated as the custodian and potentially the primary exchange for the surveillance-sharing agreement?
If the SEC approves of Coinbase in these roles, could this decision undermine their case against Coinbase? I'm no expert in making these legal assessments, but I'm certain that there are professionals at the SEC, Coinbase, and Wall Street who are taking these concerns very seriously.
Don't hold me to this – I reserve the right to change my mind – but at present, I'm approximately 70% certain that a spot Bitcoin ETF will receive approval from this batch of applications. Worst-case scenario, even if the ETFs are rejected this time around, I'm virtually convinced that a spot Bitcoin ETF is in the cards—it just makes too much sense.
Before I wrap up this newsletter, I'd like to quickly address the current market structure and narrative, and where the "max pain" point might be.
The prevalent belief among 'crypto insiders' currently is that Bitcoin will witness a significant bull market sometime between late 2024 and 2025. In my opinion, this is a somewhat guarded prediction that we'll see a bull market soon. As for those outside the crypto bubble, I surmise that traditional investors largely maintain their negative view of crypto following 2022—if they possess any knowledge about it at all.
The maximum discomfort for both these groups would be a sharp surge in Bitcoin this year, potentially triggered by an ETF approval and a resultant digital gold rush on Wall Street. I can also envision a short-term scenario where the SEC reinforces its anti-crypto stance and expresses additional concerns about Coinbase, but I assign a lower probability to this.
To sum it up, it seems as though the SEC might be extending a lifeline to us. We won't have any certainty until the SEC publicizes their commentary, but I interpret their suggestions as a sign of gradual progression within the industry.
Reading between the lines is never straightforward, but my gut feeling says we're gaining ground. It's a nuanced game we're participating in, but my optimism remains intact. Regardless, a spot ETF is a sure thing in the future, so plan accordingly.
Bitcoin Thoughts And Analysis
There are a million reasons to feel bearish about markets right now, but that is not the case when you simply look at the chart.
The monthly candle bullishly engulfed the past two candles. Only May was actually a down candle. $25,000 support was successfully tested and price is squarely back in the major range from the all time high down to $28,600. Holding that level is important now, as it puts the low $40,000s in play at the mid range. This area is also the target of the weekly inverse head and shoulders that I have shared many times.
The weekly continues to look good, although we had a doji candle last week which generally indicates a pause. We also have two weekly wicks through the $31,000 area of resistance, which is the next level we need to watch.
Price has confirmed the last higher low now that it made a higher high, so the bullish trend is very much intact. That remains the case unless we see a lower low in this sequence, back down below $25,000.
Things still look great, just need to get above $31,000 and avoid seeing bearish SFPs. SFP, also known as swing failure pattern, is when you have a wick above resistance (or below support), which shows that liquidity has been grabbed for a reversal.
Altcoin Charts
This is an update from last week. As you can see, Litecoin has performed well, and managed to break through multiple areas of resistance in a single daily candle, on massively increased volume. It has also retested the $107 former resistance as support twice already, which is a good sign. The last two daily candles closed and then opened on that exact level, which is the entry we discussed.
Zooming out to the weekly, the levels are a bit harder to discern, but this looks like it should easily head up to the $130 area before seeing any issues. I think it will go much higher. Last week had huge volume and a monster bullish candle, closing right near the highs of the week. A breakout like that on big volume should see continuation.
Legacy Markets
The new quarter started positively for stocks, with Tesla Inc. and BYD Co. seeing a rise due to record quarterly sales. Tesla enjoyed a 6.3% surge in premarket trading, with BYD also performing strongly. This success also lifted shares in battery suppliers. The Nasdaq 100 contracts also increased following its best-ever first half of the year.
European gains were led by banks and miners, and in Japan, the Topix index reached levels not seen since the mid-1990s due to heightened confidence among large manufacturers. Pakistan's main stock index also saw a significant surge, the most substantial in over three years, following the agreement of an initial $3 billion loan from the International Monetary Fund, allaying default concerns.
However, investors are moderating their stock expectations after a stronger-than-anticipated first half. Central banks continue their hawkish stance, but signs of US inflation slowing have led to significant gains in technology shares. Traders now look towards the upcoming earnings season and data, such as Friday's nonfarm payrolls, for indicators of the economy's health.
Nikolaos Panigirtzoglou, a global market strategist at JPMorgan Chase & Co, said that stocks performed well in the first half due to the absence of a US recession. He added that if a US recession does occur, the market could face a rather abrupt repricing.
In other news, a Monday report on Chinese manufacturing revealed continued struggles in economic recovery, while Italy's factories experienced their worst month since early 2020 Covid-19 lockdowns. US Treasury Secretary Janet Yellen's Beijing trip from July 6-9 will also be watched closely as the two largest economies attempt to repair relations after a period of bilateral tensions.
On Monday, the dollar slightly increased, and oil fell after Brent crude ended a sequence of four quarterly losses last week.
Key events this week:
US construction spending, ISM Manufacturing, light vehicle sales, Monday
Australia interest rate decision, Tuesday
US Independence Day national holiday. Financial markets closed, Tuesday
China Caixin services and composite PMI, Wednesday
Eurozone S&P Global Eurozone services PMI, PPI, Wednesday
OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday
FOMC issues minutes on June policy meeting, Wednesday
New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday
US initial jobless claims, trade, ISM services, job openings, Thursday
Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday
US unemployment rate, nonfarm payrolls, Friday
ECB’s Christine Lagarde addresses an event in France, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.2% as of 9:43 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures rose 0.3%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 1.3%
The MSCI Emerging Markets Index rose 1.4%
Currencies
The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.2% to $1.0885
The Japanese yen fell 0.3% to 144.79 per dollar
The offshore yuan was little changed at 7.2615 per dollar
The British pound fell 0.3% to $1.2661
Cryptocurrencies
Bitcoin rose 0.1% to $30,631.22
Ether rose 2.2% to $1,960.16
Bonds
The yield on 10-year Treasuries was little changed at 3.84%
Germany’s 10-year yield declined one basis point to 2.38%
Britain’s 10-year yield was little changed at 4.39%
Commodities
Brent crude fell 0.8% to $74.80 a barrel
Spot gold fell 0.3% to $1,912.69 an ounce
The History Of The Bitcoin ETF
We've come a long way since the Winklevoss Twins first filed for a spot Bitcoin ETF in 2013—a whole decade, in fact. Contemplating the potential fallout that could have been avoided if the SEC had greenlit a spot ETF years ago is rather thought-provoking. Now, with BlackRock joining the ranks and the pressure mounting on the SEC, we are closer than ever before. The approval of a spot ETF is not a matter of 'if', but 'when.'
Mastercard Is Making Its Move
Last Friday also saw another significant news release that was largely eclipsed by the developments I discussed earlier—it could easily have stolen the day's limelight. The news pertains to Mastercard's plans to launch the Mastercard Multi Token Network (MTN) in the UK in the upcoming months. Initially, a beta version will be released that incorporates a private Ethereum-based blockchain designed for developers to construct regulated financial applications. In some respects, the MTN bears similarities to Coinbase’s Base product. While I wholeheartedly support genuine crypto developers creating innovative solutions, I maintain the belief that the most successful applications will be birthed through more conventional or regulated institutions, or at least in partnership with them.
Vitalik Shares Why He Barely Stakes His ETH
Vitalik has always taken a cautionary approach to building in crypto. Yes, Ethereum was designed to “move fast and break things,” but Vitalik has never shied away from openly discussing riss. When asked about his thoughts on staking, Vitalik had an interesting answer that caused some discomfort in the community. Read below.
“The biggest reason why I personally am not staking all of my ETH but instead staking a fairly small portion is because if you stake your ETH the keys that access it have to be public on some system that’s online. For safety, it has to be a multi-sig and multi-sigs for staking are still fairly difficult to set up and it gets complicated in a bunch of ways.”
Does this raise a red flag? Personally, I don't believe so, although I can see how some stakers might feel uneasy. Let's not forget that staking any cryptocurrency involves risk—that's the very essence of yield. Furthermore, Vitalik's stance on online wallets being safest when they're multi-sig is a valid one, despite the fact that a simple form for this doesn't yet exist for ETH staking. The choice to stake ultimately boils down to one's risk tolerance. Vitalik's caution isn't hard to comprehend in this light.
Another aspect to ponder upon is that if Vitalik was advocating for ETH holders to stake, it might potentially create an impression of centralization. It would be somewhat akin to Satoshi making a comeback and advising Bitcoin miners on their operations. In any case, these decisions should be left to the market, without the interference of any centralized influence.
The Dark Side Of Technology: How Your Privacy Is Being Invaded And How To Stop It | Seth For Privacy
Privacy is the ultimate passion of Seth For Privacy (due to privacy issues Seth does not disclose his last name). In this episode of the Wolf Of All Streets podcast we cover everything privacy related: from how privacy is abused, to practical tips on how you can take it back. This is a very important episode, and I hope you watch it and learn as much as I did.
In this episode with Seth, we discussed:
Ledger Recover flaws
Difficulty of self custody is overblown
Solutions to self custody
MPC
Seth’s passion for privacy
Monero
Privacy with Bitcoin
Giving up privacy
How to protect your privacy
How to buy Bitcoin without KYC
Is there a way to regain privacy?
CBD
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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.
A great post yesterday! Happy 4th of July! (If you're in the US) I have been reading this newsletter for the past few months and I really appreciate your work. Keep up the quality work and it's exciting to see someone else using ChatGPT in conjunction with their own analysis.