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In This Issue:
Can There Be A Better Bitcoin?
Crypto ETF Resurgence - IntoTheBlock
Bitcoin Thoughts And Analysis
Legacy Markets
Friend.Tech Users Are At Risk Of SIM Swaps
Rep. Patrick McHenry To Act As House Speaker
Gas Is Cheap… In Crypto
Check Out This New Wallet
Can There Be A Better Bitcoin?
Newcomers to the crypto space often develop the false belief that a superior alternative to Bitcoin exists or will exist - we can’t just pray for these people, they genuinely need saving.
Bitcoin, being an open-source protocol, has always been susceptible to replication since its inception. Litecoin serves as a prime example of this. Did you know that Litecoin is a fork of Bitcoin that shares a nearly identical code with only a few modifications? Other cryptocurrencies may not mirror Bitcoin as closely. Ethereum, for instance, was created by Vitalik Buterin, who drew inspiration from Bitcoin but aimed to enhance its programmability. In essence, every cryptocurrency is made in the image of Bitcoin, in one way or another.
This gives rise to a common criticism: how can Bitcoin maintain its value when competitors can easily emerge, potentially offering 'improvements' to the original source code? The answer lies in understanding the role of network effects in Bitcoin's value.
This criticism begins to crumble when network effects are understood to be the key factor in Bitcoin’s value. Newcomers often assume that a cryptocurrency's superior technological attributes are the primary drivers of its value.
This simply isn't true.
Technology lays the foundation for adoption to be possible and adds credibility to monetary attributes, where the true value is derived. Bitcoin exemplifies this phenomenon as its underlying technology largely remains unchanged, yet its value continues to appreciate steadily over the years.
Don’t be misled; Bitcoin was once THE cutting-edge technology, but just because it no longer is doesn’t mean there is a reason to jump ship. Leagues of Bitcoin competitors have come and gone over the years because they eventually proved to lack the ‘network effects’ Bitcoin has established and grown regardless of the market. The crypto market has taught us that it takes an exceptionally strong base to survive a bear market. 99% of cryptocurrencies simply won’t make it as a result of a weak foundation. Bitcoin’s network effect, coupled with its digital scarcity - enforced through its fixed supply of 21 million coins - sets it apart from other technologies that lack a built-in mechanism to preserve value.
In summary, Bitcoin’s early network effect, coupled with its technological breakthrough is the feature that preserves and grows its value. It’s that simple.
Defining and identifying the network effect of Bitcoin involves assessing several key factors. These include the deep liquidity of its market, the growing number of miners dedicated to securing the network, the expanding community of retail investors, and notably, the recent participation of Wall Street. Larger investors are not inclined to speculate on assets lacking an established network. Nation-states, in particular, are unlikely to prioritize the fastest coin with the shortest settlement times. They want established and proven success. A transition to Bitcoin is a huge leap, but it's arguably the most rational step a powerful entity can take.
Bitcoin is the face of the cryptocurrency space and the reigning champ by every metric and yes, I still believe it’s possible another asset… cough, cough, with entirely different attributes can one day achieve a higher market capitalization. However, no asset will beat Bitcoin at its own game. The market simply doesn’t work like that.
By the way, before I finish off this Bitcoin speech, something has to be said about the anti-Ethereum rhetoric that’s popping up on the timeline. Bitcoin has always been the first and most reliable asset to rise out of the ashes, but Ethereum will come along for the ride too - even if the maxis swear otherwise. There is no crypto space without Ethereum. The asset just needs more time.
Crypto ETF Resurgence - IntoTheBlock
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB). ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data.
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.
Crypto ETF Resurgence
As we start this new quarter, it's beneficial to review one of the primary subjects that were covered in the previous quarter, Q3 2023. The crypto market's third quarter in 2023 concluded much as it had begun, with ETF-related headlines taking precedence. However, this time around, the discussion has transitioned from Blackrock's request for the first Bitcoin ETF to VanEck's endorsement of the inaugural Ethereum futures ETF. In this article, we dive into the latest developments regarding Bitcoin and Ethereum ETFs, explore their effects, and analyze how investors have been adjusting their positions in response.
Via ITB's Capital Markets Insights
The Grayscale products have served as an indicator, reflecting the market's estimation of the likelihood of ETF approvals.
Despite Bitcoin (BTC) and Ethereum (ETH) experiencing a slight decline of around 10% in prices this quarter, Grayscale's GBTC maintained stability, and Grayscale's ETHE saw a notable increase of over 10%.
With the introduction of Ethereum futures ETFs, it seems that the SEC may be backing away from its case against Ethereum. This development increases the possibility of a spot ETF approval, especially if one is granted for Bitcoin.
It seems that Cathie Wood's Ark Investment Management shares this belief, as they submitted an application for the first spot Ethereum ETF in early September.
Via Bitcoin's Ownership Indicators
There has been noticeable on-chain activity in the form of Large Holder Accumulation. Addresses holding at least 0.1% of Bitcoin's supply have reported significant net inflows during the entirety of Q3.
When Bitcoin's price dipped to $25,000, large holders witnessed a remarkable influx of $600 million in just a single day.
Bitcoin has experienced three additional surges of over $400 million in net inflows to large holders, indicating that there is substantial interest steadily accumulating in the cryptocurrency.
These withdrawal activities have taken place concurrently with centralized exchanges experiencing outflows, indicating that organic buyers are receiving these funds rather than just addresses associated with centralized exchanges.
Bitcoin Thoughts And Analysis
Bitcoin remains sideways, which to me is good news. Anything above $25,000 means we are still in the bullish trend off of the lows. Right now, price continues to battle the 200 MA on both the weekly and daily. Let’s see how the week closes on Sunday, shall we?
Legacy Markets
Stocks and U.S. index futures are up as markets anticipate a U.S. payrolls report that could lessen the need for the Federal Reserve to raise interest rates. Insurers in Europe saw gains, while U.S. equity futures rose slightly after a marginal decline in the S&P 500 and Nasdaq. The upcoming nonfarm payrolls report is expected to indicate slower hiring, reinforcing hopes that pressure on the Fed to raise rates might ease. Investors are keenly watching for wage growth figures to confirm recent disinflationary trends. Amid this, Treasury yields continue to climb, with the 10-year reaching 4.74%, causing concerns about elevated interest rates. The data released in the coming days will be pivotal in shaping expectations around Federal Reserve policy and interest rates.
Key events this week:
China has week-long holiday
Germany factory orders, Friday
US unemployment rate, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.2% as of 6:09 a.m. New York time
Nasdaq 100 futures rose 0.2%
Futures on the Dow Jones Industrial Average rose 0.2%
The Stoxx Europe 600 rose 0.7%
The MSCI World index rose 0.2%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0560
The British pound rose 0.2% to $1.2212
The Japanese yen fell 0.3% to 149.00 per dollar
Cryptocurrencies
Bitcoin rose 0.8% to $27,697.5
Ether rose 1.1% to $1,634.87
Bonds
The yield on 10-year Treasuries advanced two basis points to 4.74%
Germany’s 10-year yield advanced two basis points to 2.90%
Britain’s 10-year yield advanced three basis points to 4.58%
Commodities
West Texas Intermediate crude rose 0.1% to $82.43 a barrel
Gold futures rose 0.1% to $1,834 an ounce
Friend.Tech Users Are At Risk Of SIM Swaps
I strongly suggest exercising caution on Friend.Tech because instances of SIM swaps are becoming increasingly prevalent. From a hacker’s POV, Friend.Tech is a combination of a new platform lacking adequate security measures, connected to doxxed Twitter accounts, and funds displayed and discussed openly—a recipe for disaster. To exacerbate matters, Friend.Tech lacks two-factor authentication (2FA) and a robust customer support system to address attacks when they occur.
It's worth noting that the Friend.Tech code itself may not be problematic, but the platform poses a high risk of vulnerabilities that could be exploited. This is exactly why it's crucial to keep your funds securely stored in cold wallets, even though it contradicts the usability of Friend.Tech, which essentially functions as an exchange. If you do insist on using the platform, consider concealing any personal information that exposes your identity if possible.
Rep. Patrick McHenry To Act As House Speaker
Do you recall the name, Rep. Patrick T. McHenry? He is the Chairman of the Financial Services Committee who questioned Gary Gensler during last week's hearing titled 'Oversight of the Securities and Exchange Commission.' Well, he has just received a notable congressional promotion, so to speak. He has been selected to step in as the interim acting House speaker, replacing Rep. Kevin McCarthy, until a permanent replacement is chosen.
I don't closely follow politics enough to provide insight into the broader implications beyond the crypto space. However, what I do know is that Rep. McHenry has a strong pro-crypto stance, and this could potentially influence the introduction of favorable crypto legislation or exert additional pressure on Gensler. It will be intriguing to observe whether this change in leadership leads to any major pro-crypto developments.
Gas Is Cheap… In Crypto
Gas prices on the Ethereum network are currently at some of the lowest levels in history, hovering around $1.13—a price not seen since last November. According to Santiment, a crypto market intelligence firm, the decrease in gas fees can be considered a signal of a potential price bottom, often leading to increased utility.
It's important to note that establishing a direct correlation between gas fees and cryptocurrency prices would be impossible. If the crypto market enters a bullish phase, various factors come into play, overshadowing isolated metrics like gas prices. Nonetheless, cheap gas fees present an opportune moment to explore DeFi, execute swaps, or engage in NFT trading at reduced costs. Ethereum has an extremely strong case, so I’m not worried about the current accumulation phase in the slightest.
Check Out This New Wallet
Rumors of Block’s new Bitcoin wallet are ramping up, which could mean the beta version could be ready to ship soon. Dubbed BitKey, Jack Dorsey’s wallet will be a Bitcoin-only wallet, so I believe, and include other neat features such as fingerprint verification and a built-in rechargeable battery. What is known is that partners of the wallet will include CashApp and Coinbase. The beta release should be soon considering all of the leaks and then assuming it goes well, a wider release not long after. Are you planning on buying one of the Bitcoin-only alien/spaceship-looking wallets?
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.