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In This Issue:
Grayscale Wins
Bitcoin Pumps On Grayscale News
Altcoin Thoughts
Inflation Is Sticky In Europe
A Bad Take
Genesis and DCG Reach A Crappy Deal For Creditors
Crypto Is Coming To X
Binance May Be In Trouble Soon
Bitcoin's Longest Bear Market? When Will It End?
Grayscale Wins
We just scored a major victory. Enjoy it while it lasts.
Back in mid-2022, Grayscale elected to dig its feet into the sand (for all of us) and sue the SEC for rejecting its application to convert its Grayscale Bitcoin Trust into an ETF. Grayscale’s argument was simple - the SEC was arbitrarily picking winners and losers on what gets the stamp of approval to become an ETF. For those who don't know, Grayscale has the longest-standing and largest Bitcoin trust, yet couldn't earn spot ETF approval. It made zero sense.
Well, that era is over because Grayscale Investments has achieved a major legal victory over the SEC in its attempt to convert its Grayscale Bitcoin Trust from an over-the-counter product to a listed Bitcoin exchange-traded fund. The SEC had initially rejected the application, citing lies regarding the prevention of fraudulent activities. Grayscale contested the decision in court and has successfully overturned it - a deadly blow to the Gensler regime.
Take a look at Judge Rao’s rationale below, it’s a sight to behold.
Just to reiterate a point I continue to make: this decision doesn't guarantee a listing of a Grayscale spot Bitcoin ETF. Instead, it highlights the SEC's need for more substantial justifications - which don’t exist. There is no guarantee that the SEC doesn’t propose a new line of garbage to deny a spot ETF approval, but doing so would be costly to the SEC considering their reputation in crypto is already falling apart. They could even retroactively delist futures ETFs if they want to go with a scorched earth policy, but I would be surprised to see them make a move so damaging to their reputation.
To read the full United States Court of Appeals decision, click HERE. Now let’s get to the fun stuff.
To begin, it's crucial to note that the court's decision carries weight beyond Grayscale's triumph. The court has ruled that the SEC's denial of the ETF also constitutes a violation of the Administrative Procedure Act (APA), which outlines the guidelines for federal agencies. Uncovering such a breach is a significant blow to the federal administration's credibility. It's undoubtedly an unfavorable day to be Gary Gensler.
We have seen Gensler overreach time and time again, with little to no repercussions or push back. That is over. The SEC is consistently losing in court, further proof that the law is the law, regardless of the opinion of an overzealous and power hungry regulator.
Turning our attention to the market's response, the news triggered an immediate 5% uptick in Bitcoin's value, acting as a catalyst that quickly elevated the entire market. GBTC, not one to be left behind, surged an impressive 17% at my last check. The discount to Net Asset Value (NAV) is fast disappearing – yesterday's mid-20s figure is now steadily approaching the mid-teens mark, a promising indicator of the trust's health. GBTC has been the “easiest” trade of the year, capturing not only the upside of Bitcoin, but also of the closing discount.
The impact rippled across other industry stocks as well. COIN saw a substantial 15% surge in the wake of the news, while mining stocks also made a remarkable leap. Looking at Coinbase, Grayscale's legal victory isn't solely a win against the SEC; it bodes well for business too, since an ETF approval benefits Coinbase due to its SSA with the filers. Other crypto stocks likely soared due to both correlation and renewed investor confidence.
Shifting gears, the upcoming matter at hand is this Friday's deadline for the SEC to address the first deadline for filers’ submissions. Though this victory doesn't guarantee approval, it undoubtedly enhances the likelihood. While it wouldn't be out of character for the SEC to postpone decisions, Gary Gensler has the chance to ease some pressure off his shoulders by reconsidering his stance.
The SEC has backed itself into a corner with limited options – either concede or counterattack, the latter of which rarely ends favorably. That being said, it's also conceivable that the SEC devises a new garbage pretext for delay or denial. I am of the belief that we're edging closer to a scenario where the SEC bows its head, acknowledges its disagreement, and adheres to the rule of law. In some regard, this would represent a form of redemption, albeit incomplete. The community won't forget the truth behind the original hesitations.
Lastly, let's delve into the broader implications of an ETF for the industry. While I've covered this extensively, it bears reiterating that the ETF will usher in gradual investments, not instantaneous capital influx. Nevertheless, upon ETF approval, a colossal price surge is on the horizon – potentially the most substantial hourly and daily candlesticks that the crypto space has ever witnessed. The only news capable of rivaling such an event would likely involve a major nation-state significantly purchasing Bitcoin – a narrative perhaps reserved for a future cycle.
My optimism remains steadfast as we navigate through the rest of this cycle, eagerly awaiting to see how the game plays out. While there are lingering challenges yet to be addressed, such as the Binance and DOJ situation, as well as a wave of bankruptcies, we're equally poised for some monumental victories on the horizon. Notably, the impending halvening, the bull cycle tied to the U.S. presidential election, the emergence of ETH futures ETFs, and the highly awaited Bitcoin spot ETF all hold incredible promise. Let's keep our fingers crossed and maintain hope that the SEC makes the right moves in the near future – it would be the perfect way to initiate Q4.
Keep in mind, should these decisions encounter delays, it wouldn't be unexpected to witness a retracement of yesterday's gains – a typical reminder that in the world of crypto, nothing comes easily without a cost or challenge.
Bitcoin Pumps On Grayscale News
What a move.
Bitcoin is currently printing a large green weekly candle, which would be the perfect follow-up to last week’s doji candle (or spinning top). Price has still held the key support level of $25,214 and is looking likely to be reversing.
That said, price is also still under the 200 MA, which is acting as strong resistance on this move.
Also, we had bearish divergence that I pointed out ages ago when RSI almost hit overbought. Now we have likely hidden bullish divergence, which is a somewhat weak signal of continuation to the upside. At least it cancels the bearish signal.
We need to see how the week closes, but it is looking good so far.
The daily managed to break above the 200 MA and is now testing it as support. RSI also made a huge move above 50, considered bullish, which is also now being tested as support.
To me, the most notable fact remains the holding of support at $25,214. That said, nothing really huge has happened here yet, because the resistance remains around $28,500. If you recall, that level was also the low between the 65K and 69K highs of the last bull market.
The Grayscale pump is amazing, but has yet to even retrace the entire dump that happened recently in a single hour. We still have a lot of work to do.
Did I expect to print oversold bullish divergence at some point? Yes. Did I expect it to happen yesterday with one massive candle yesterday? No. I did not catch it. Those who played the lower time frame divergences last week and sat with patience and waited likely did. That was not me.
Interesting though that a single news catalyst that sent price flying was already there in the chart. RSI was massively oversold, for a long period of time - much longer than usual. So relief was a matter of time. It just happened to come in a single candle.
You can see that RSI also has a descending line of resistance where it was rejected for now. You can draw patterns on indicators, just like price. Usually a breakout on RSI precedes a bigger move on price, so it is worth watching.
Altcoin Thoughts
Altcoins moved nicely yesterday on the Grayscale move - but not as much as Bitcoin. Once again, being in Bitcoin is the safer option and was currently more profitable. I can’t get there on altcoins yet… once the bull market hits, that will change dramatically.
As you know, I am not a huge fan of charting Bitcoin Dominance, because it is not a traded asset. I also believe that it is a lagging indicator, not one that gives us future information. Dominance is reacting to what we already know - that Bitcoin is either outperforming or underperforming altcoins.
That said, many use it, so this is worth sharing. As you can see, Dominance bounced exactly at support, the highs of the range it was in for years. If Dominance rises again, that means altcoins are underperforming.
For now, Bitcoin is still clearly leading.
Inflation Is Sticky In Europe
European stocks and bonds declined after new inflation data from Germany and Spain indicated that inflation is not yet receding in the Eurozone. This complicates the European Central Bank's upcoming rate decision, with market pricing indicating a near-even chance of a rate increase. In individual stock news, Orsted A/S plummeted over 20% due to a bleak U.S. portfolio outlook, while Prudential Plc rose 4% on higher new business profit.
In the U.S., stock futures slipped after a significant S&P 500 gain the previous day, sparked by weaker-than-expected jobs and consumer confidence data. This led to speculation that the Fed might halt its tightening cycle. HP Inc. shares fell nearly 10% in premarket trading due to reduced full-year outlooks.
Asian markets also cooled off after an initial rally. Chinese efforts to reduce mortgage and deposit rates did not sustain the early enthusiasm. In other markets, Bitcoin dropped slightly after a recent surge, while oil prices continued their upward trend. Overall, investors are cautiously eyeing a range of forthcoming economic data and central bank moves.
Key events this week:
US GDP, wholesale inventories, pending home sales, Wednesday
China manufacturing PMI, non-manufacturing PMI, Thursday
Japan industrial production, retail sales, Thursday
Eurozone CPI, unemployment, Thursday
ECB publishes account of July monetary policy meeting, Thursday
US personal spending and income, initial jobless claims, Thursday
China Caixin manufacturing PMI, Friday
Eurozone S&P Global Eurozone Manufacturing PMI, Friday
South African central bank governor Lesetja Kganyago, Atlanta Fed President Raphael Bostic, BOE’s Huw Pill, IMF’s Gita Gopinath on panel at the South African Reserve Bank conference, Friday
Boston Fed President Susan Collins speaks at virtual event, Friday
US unemployment, nonfarm payrolls, light vehicle sales, ISM manufacturing, construction spending, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.4% as of 10:47 a.m. London time
S&P 500 futures fell 0.2%
Nasdaq 100 futures fell 0.3%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.4%
The MSCI Emerging Markets Index was little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0886
The Japanese yen fell 0.3% to 146.28 per dollar
The offshore yuan fell 0.2% to 7.2993 per dollar
The British pound rose 0.1% to $1.2658
Cryptocurrencies
Bitcoin fell 0.6% to $27,404.2
Ether fell 0.6% to $1,715.48
Bonds
The yield on 10-year Treasuries advanced two basis points to 4.14%
Germany’s 10-year yield advanced six basis points to 2.57%
Britain’s 10-year yield advanced one basis point to 4.44%
Commodities
Brent crude rose 0.5% to $85.88 a barrel
Spot gold was little changed
A Bad Take
Peter Schiff can't see the forest through the trees. What he is missing in his analysis is that the net inflows of a spot BTC ETF will far outweigh any forced selling that may occur as the discount returns to zero. I expect bad takes to continue even once the ETF is approved and beyond - some critics will never leave the ‘then they fight you’ stage.
Genesis and DCG Reach A Crappy Deal For Creditors
At first glance, the DCG and Genesis deal appeared to favor creditors, yet a deeper examination reveals a different story. As outlined in the court filing, “the plan could provide unsecured creditors with recovery rates ranging between 70-90% in USD and 65-90% in terms of digital assets, subject to market moves.” Twitter user Ram Ahluwalia further elaborates on why creditors are at a disadvantage: “The distributions to Genesis creditors do not adequately compensate for the Time Value of Money. Achieving a 90% distribution over 7 years at 5% rates is akin to receiving a 50% distribution when accounting for the opportunity cost of capital.” For an in-depth breakdown of the agreement, refer to the details provided HERE.
Crypto Is Coming To X
In other good news announced yesterday, X (formerly Twitter) obtained a license required for crypto payments and trading in the US. It remains to be unknown where exactly Elon Musk plans to take the platform, but hopefully, it turns into a genuine use case for the overlap of cryptocurrency and social media. Having secured this fresh license, X has moved a step closer to enabling users to seamlessly send, receive, and store cryptocurrency directly within the platform.
Binance May Be In Trouble Soon
Amidst the Grayscale news dominating the headlines, yesterday bore witness to a handful of significant stories that remained largely overshadowed – this one potentially eclipsing them all. In relation to the Biannce case, the SEC made an intriguing move by submitting a sealed motion, a strategic maneuver reserved for handling sensitive or confidential information while keeping it from public view.
The rationale behind the SEC's choice remains a bit enigmatic, yet plausible explanations suggest the SEC is aiming to avoid hampering an ongoing DOJ lawsuit or to prevent any detrimental impact on a witness or implicated company. Binance is the largest skeleton in the closet right now. Once the air is cleared, there’s no reason why a true bull run can't commence.
Bitcoin's Longest Bear Market? When Will It End?
Everything you wanted to know about this bear market: I am joined by two my favorite guests - Noelle Acheson and Charlie Burton! Don't miss this live!
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.