The Wolf Den #817 - Has Ethereum Disappointed You?
Be patient, good things come to those who wait.
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In This Issue:
Has Ethereum Disappointed You?
Bitcoin Thoughts And Analysis
Markets Adrift At Sea With Little Direction
“Peak Ignorance”
The SEC Is Playing Dirty
Gensler Testifies Before Congress Today
Chase Bank And JPMorgan Are Chasing Away Crypto Customers
The Bitcoin Rally Is Coming, Are You Ready?
Has Ethereum Disappointed You?
Once upon a time (almost exactly a year ago, which is 100 years in crypto), Ethereum underwent its most highly anticipated upgrade in history. This development, the Merge, reignited hopes that Ethereum might surpass Bitcoin to become the reigning king of crypto and that DeFi would genuinely replace traditional finance.
We were so young. So naive.
If I were giving a talk right now in an auditorium to all of my subscribers, I'd pose the following question: how many of you are disappointed with Ethereum following the Merge? If there were no stigma attached to raising your hand, I'd be willing to bet that at least half of the hands would be in the air.
My intuition stems from the fact that my Crypto Twitter timeline for the past few months has been flooded with posts lamenting how Ethereum has seemed somewhat 'dormant' over the past year, trailing Bitcoin's growth and missing out on the most significant developments. Yes, some spot ETH ETFs were filed, but it's no secret in the market that an ETH approval is contingent on a Bitcoin ETF approval, additional hurdles, and a much longer timeline.
Yes, we will probably get an Ethereum Futures ETF soon, but those approvals have often marked market tops.
My gut is that many of you, not just JPMorgan, share a sense of disappointment with Ethereum. However, it's crucial to clarify what this entails. Bitcoin, unlike the rest of the crypto market, enjoys a much stronger shield against regulatory scrutiny from the SEC, even more so than Ethereum and other major coins.
We all understand that, if Gary Gensler had his way, virtually every cryptocurrency except Bitcoin (and perhaps even Bitcoin itself) would face extremely stringent regulatory measures. Alongside cryptocurrencies, exchanges and platforms would also bear the brunt of this crackdown, and the DeFi space would be severely hobbled.
What's noteworthy about the current market landscape in the U.S. is its unique bifurcation. In previous cycles, regulators here viewed cryptocurrencies as a single, homogenous entity. But with Wall Street gradually legitimizing the market, Bitcoin stands on its own pedestal. Everything else, including Ethereum, is treated like the red headed step child - and that's where the heart of the disappointment lies.
Moreover, beyond the U.S., other forms of bifurcation exist, as regulators in various regions adopt divergent approaches to crypto. Attending a cryptocurrency conference in Singapore, Switzerland, or El Salvador might give the impression that the bear market is merely a myth. In these nations, there's a clear and distinct divide between legitimacy and illegitimacy, as should be the case worldwide.
In essence, this introduction is a roundabout way of suggesting that anyone who feels 'disappointed' with Ethereum likely harbors a generalized sense of disappointment with the entire cryptocurrency space over the past year. After all, it's been a year or less since platforms like FTX, Voyager, Celsius, Luna, 3AC, BlockFi, and numerous smaller ones blew up.
Part of the issue with Ethereum is that the crypto community often anticipates it to outperform Bitcoin during periods of growth. While this expectation holds merit in a bull market, it may not hold true in a bear market. Rising from the ashes requires great resilience, and currently, we are primarily witnessing Bitcoin just beginning to take those initial steps. It will take time for Ethereum to truly shine, but when it does, it will undoubtedly impress.
My theory remains that Ethereum is a dormant giant, and when it awakens, it will be a force to be reckoned with. I eagerly anticipate revisiting this commentary when that day arrives; it promises to be a remarkable moment.
Bitcoin Thoughts And Analysis
Interesting moment on the line chart for Bitcoin. As you can see, RSI broke out a few weeks ago, smashing through descending resistance. This was a perfect bottom signal, as it often is. Patterns on indicators often lead price. Now RSI has come back to retest that former resistance as support, so we could see some further relief to the upside for price.
Not a strategy I see many people using, but one that has a relatively solid hit rate in my experience.
Markets Adrift At Sea With Little Direction
The global markets are displaying signs of uncertainty and caution. While the bond selloff has eased and the dollar remains steady, stock markets are struggling to find a clear direction. European shares have fluctuated, and U.S. equity futures gained modestly, though a measure of global equities suggests that stocks might be oversold. U.S. Treasury yields retreated from a 16-year high but speculation persists that the Federal Reserve will maintain a restrictive policy into next year. Notably, the bond market appears to be a pivotal factor influencing stocks and currencies, according to experts. If yields continue to climb, there could be larger declines in equity markets and potential adverse effects on consumer spending.
Oil prices are back on the rise, surpassing $91 a barrel, which has been a blow to U.S. consumer confidence. The measure of consumer sentiment dropped more than expected, mainly due to higher fuel costs and the ripple effects of rate hikes. On the political front, Senate leaders have agreed on a plan to keep the U.S. government open until mid-November and to provide assistance to Ukraine. However, this plan still faces potential roadblocks in the House. Overall, the market environment is marked by apprehension, impacted by multiple factors ranging from monetary policy to consumer sentiment and political uncertainties.
Key events this week:
US durable goods, Wednesday
Eurozone economic confidence, consumer confidence, Thursday
US initial jobless claims, GDP, Thursday
Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday
Eurozone CPI, Friday
Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday
US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday
ECB President Christine Lagarde speaks, Friday
New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 was little changed as of 10:58 a.m. London time
S&P 500 futures rose 0.3%
Nasdaq 100 futures rose 0.3%
Futures on the Dow Jones Industrial Average rose 0.2%
The MSCI Asia Pacific Index rose 0.1%
The MSCI Emerging Markets Index rose 0.2%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.0559
The Japanese yen was little changed at 149.17 per dollar
The offshore yuan fell 0.1% to 7.3176 per dollar
The British pound was little changed at $1.2149
Cryptocurrencies
Bitcoin rose 0.8% to $26,356.54
Ether rose 1.5% to $1,610.42
Bonds
The yield on 10-year Treasuries declined four basis points to 4.50%
Germany’s 10-year yield declined two basis points to 2.78%
Britain’s 10-year yield declined four basis points to 4.28%
Commodities
Brent crude rose 0.7% to $94.62 a barrel
Spot gold fell 0.3% to $1,895.54 an ounce
Peak Ignorance
Beneath this text segment, you'll find a mental model crafted by Twitter user Ken Deeter, illustrating the real progression of cryptocurrency over time in contrast to the perceived progression. Take a moment to examine it. What becomes evident is that the perceived progression of crypto is highly volatile, while the actual progression consistently ascends. It’s this dynamic that leads to both bear and bull markets. When the perception of crypto lags significantly behind its actual progression, a bear market ensues. Conversely, when perception significantly exceeds actual progression, a bull market emerges.
In the tweet, an argument is made that we are currently experiencing a 'peak bear moment,' a viewpoint I personally disagree with. However, when it comes to perception, I concur that the broader public still holds an incomplete understanding of the true state of progress in this field. Ideally, our goal should be to foster public comprehension of the genuine state of progress and to ignite enthusiasm for what lies ahead. Nevertheless, it's essential to recognize that this may never be fully achieved, as market cycles are equivalent to human nature. The closer we come to this ideal, the greater the level of accountability in pricing becomes.
The SEC Is Playing Dirty
This news segment is a two-parter. The dotted line separates the two stories.
Following the Celsius bankruptcy and ensuing court proceedings, Coinbase was the selected exchange to act as the distribution agent for international customers, but the SEC had other plans. Unfortunately for creditors, the SEC has raised objections to the reorganization plan proposed by Celsius Network due to their ongoing legal dispute with Coinbase, which is seen as a conflict from a legal standpoint.
CEO Brian Armstrong and CLO Paul Grewal have jointly issued a statement challenging the SEC's interference, leaving the final decision in the hands of the bankruptcy court. Coinbase is clearly the most suitable choice for Celsius creditors, but alas, I don't set the rules.
What's perhaps more concerning beyond this specific story is the possibility that the SEC might use Coinbase as a scapegoat to delay or deny future ETF decisions. It provides a convenient excuse for the SEC, which holds water until the resolution of the court case, a process that could potentially take a year or two. I sincerely hope this doesn’t come true, but I wouldn't be entirely surprised if it did.
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If the first part didn't raise your frustration level, this second part is likely to do the trick. Yesterday afternoon, a bipartisan group consisting of four congressional committee members—two from each party—sent Gary Gensler a strongly worded letter demanding the approval of a spot Bitcoin ETF. The letter must have been read by the head of the snake, because the SEC's response came swiftly: within just 30 minutes, they issued a preemptive denial for proposals from ARK and 21Shares, signaling a potential delay for others in the pipeline. My guess is this probably means the SEC is confident in a new rationale to delay. F***ing annoying. It's becoming increasingly unlikely that we'll see a spot Bitcoin ETF approved this year. On the bright side, this delay gives us all more time to accumulate.
#FireGaryGensler
Gensler Testifies Before Congress Today
SEC Chair Gary Gensler is set to speak before the U.S. House Financial Services Committee to discuss how the Securities and Exchange Commission (SEC) is updating its regulatory framework to accommodate technological advancements like cryptocurrencies and artificial intelligence. Gensler's address will specifically touch on the SEC's strategy towards cryptocurrencies, which has received criticism for its "regulate-by-enforcement" approach that some argue stifles innovation. He will emphasize that most cryptocurrencies likely fall under securities laws, meaning that exchanges and brokers dealing with them must also comply with these regulations.
Gensler will also delve into the role of predictive data analytics and artificial intelligence in financial markets, stating that while these technologies bring efficiency and potential financial inclusion, they also pose risks of exploitation. An SEC proposal made in July 2023 aims to require firms to analyze and neutralize conflicts of interest arising from these technologies. His remarks come against a backdrop of ongoing legal cases against U.S.-based cryptocurrency exchanges Coinbase and Binance.US for alleged securities law violations.
The speech is already available here. The interesting part will be the questioning from the committee after.
Chase Bank And JPMorgan Are Chasing Away Crypto Customers
Alright, I might have had a bit too much fun with the title of this segment, but regrettably, it's the truth. Beginning October 16, Chase Bank and JPMorgan in the U.K. will prohibit crypto-related payments made through debit cards and outgoing bank transfers for all customers. In Chase’s email announcement, the bank stated, “If we think you're making a payment related to crypto assets, we'll decline it,” and recommended seeking an alternative banking provider for crypto transactions. It's clear that crypto regulations in the U.K. are stringent and forcing banks to comply, but one has to question the agenda of the leaders and regulators behind the decision. It's disheartening to witness such measures happen in a developed nation, which only underscores the importance of crypto in today's financial landscape.
The Bitcoin Rally Is Coming, Are You Ready?
Join David Duong, head of institutional research at Coinbase, and Big Cheds as we study crypto markets and discuss the upcoming bull market.
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.