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In This Issue:
The Little Engine That Could
Bitcoin Holding Daily 50 MA
Stocks Under Pressure From Raging Yields
How To Avoid Hacks
The DOP Testnet Is Here
The SEC Remains Locked In On Crypto
Vitalik Clears The Air On Selling ETH
The Largest Asset Managers In The World Are All In Bitcoin And You Are Bearish!?
The Little Engine That Could
Year to date, GBTC is up about 170.89%.
Year to date, Bitcoin is up about 71%.
$1,000 invested in Bitcoin on January 1st would be worth $1,710.
$1,000 invested in GBTC on January 1st would be worth $2,708.9.
Simply put, the difference between Bitcoin’s performance and GBTC’s performance is remarkable.
Before continuing with this comparison, it's essential to clarify that this is NOT an ‘I told you so’ post. I've consistently emphasized that investing in GBTC involves distinct risks that Bitcoin itself does not share. GBTC’s discount was always in plain sight and everyone knew the reward would be higher if it succeeded. The question remains: did we miss out?
First and foremost, I believe that individuals who chose the path of safety by directly owning Bitcoin did not make a mistake compared to those who invested in GBTC. I know some really intelligent investors who supported GBTC but carefully assessed the associated risks and found satisfaction in owning Bitcoin directly, avoiding concerns about Net Asset Value (NAV), bankruptcies, legal matters, and so forth. On the flip side, I've also encountered experienced investors who placed their trust in GBTC, adopted a straightforward approach, and reaped substantial rewards. I commend them for their success.
There is a very diverse spectrum of Bitcoin investors.
Back in December of last year, the GBTC discount hit its lowest point, nearly reaching -50%. For long-term GBTC holders, this predicament was exceedingly challenging. During that time, Digital Currency Group and Genesis consistently garnered negative headlines, and existential threats loomed that posed risks to the assets held in GBTC. There was speculation that these assets might be frozen, locked up with a discount for an extended period, or potentially liquidated to support DCG and Genesis. The ETHE discount reached the -50% mark, and even staunch Bitcoin advocates criticized GBTC holders for not opting for spot Bitcoin purchases, making it a highly tumultuous situation at Grayscale.
Investing in GBTC was far from a straightforward move. It hinged on the success of not only Bitcoin but also Grayscale, Digital Currency Group, and the broader industry. Owning GBTC is essentially akin to a Bitcoin-focused parlay. Moreover, anyone claiming that the GBTC trade was always obvious either lacked full awareness of the facts, opted to overlook them, or was inclined toward a high-risk, high-reward strategy. When the sky appears to be falling or is actually falling, few things are truly self-evident.
So what is to come of GBTC for the remainder of this year and next? I have a few opinions, along with some facts.
For starters, GBTC remains a parlay, transitioning from an underdog ‘plus money’ wager to a favorite in ‘minus money territory.’ I like to view GBTC’s NAV as a gauge that reflects public sentiment regarding the conversion of GBTC into an ETF or of a Bitcoin Spot ETF approval in general. Grayscale wrote the following in a blog addressing what would happen if GBTC’s conversion to an ETF is made effective:“first, because the arbitrage mechanism would be activated through the availability of simultaneous creations and redemptions, GBTC share prices will likely move to trade in line with NAV.”
I wouldn't be surprised to see Grayscale’s discount turn into a premium briefly in the wake of the hype. And as far as the fee structure goes, “Grayscale has publicly committed to lowering fees if GBTC is converted to an ETF. While we aren’t yet publicly sharing a specific fee level, we are committed to creating a competitive spot-based Bitcoin ETF product.” All of this is exciting because the discount hasn’t been this low since late 2021 and hasn’t seen a premium since early 2021.
Uou may be wondering about Grayscale’s other products. Here is what they have said. “All of our crypto investment products are designed to follow the same product roadmap, beginning with private placements and ending with conversion into an ETF, pending regulatory approval. GBTC is merely the first to advance to this stage.” It's essential to highlight that when the Bitcoin spot ETF finally materializes, there will be a significant shift in focus towards the Ethereum ETF. Grayscale has already submitted this application, alongside four other major players.
In the grand scheme of things, Grayscale has emerged as a financial powerhouse, but its future was and is far from assured. To those resilient individuals who held their ground, you have earned my respect. And to those who chose a different path, I am right there with you. Grayscale presently holds 2.96% of the 21 million total Bitcoin supply - a substantial stake. Considering conservative assessments of the actual circulating BTC supply, GBTC represents 3.18%, a figure of even more significant magnitude. Envision the potential when the ETF gains approval and substantial capital inflows occur over the next few years, propelling GBTC on a path of continuous expansion.
Owning any amount of Bitcoin, whether it is spot or paper, is a feat in and of itself. Be proud of what you own, as we are all riding on the same train.
Bitcoin Holding Daily 50 MA
We already know that Bitcoin is struggling at the weekly 200 MA - I shared it yesterday. On the flip side, Bitcoin has managed 3 daily closes above the daily 200 MA, with a 4th in the works. This is generally a bullish signal. I still am waiting to see what happens with the weekly close, as discussed yesterday. The reality? Still very much sideways.
Stocks Under Pressure From Raging Yields
Stock markets are facing downward pressure as 10-year U.S. Treasury yields near the 5% mark for the first time since 2007. The rise in yields reflects traders' expectations that the Federal Reserve will maintain high interest rates to combat persistent inflation. This has caused a ripple effect in equity markets, with Europe's Stoxx 600 Index falling more than 1% and U.S. equity futures also edging lower.
Specific stocks have been hit hard, such as Tesla, which slid as much as 4.7% in premarket trading due to an earnings miss. On the flip side, Netflix saw a surge in its share price, thanks to strong subscriber growth numbers. Meanwhile, bonds, traditionally seen as a hedge against market volatility, are losing their safe-haven status. This has led investors to look towards gold and oil as alternative hedges, especially in the context of geopolitical risks like the ongoing Israel-Hamas conflict.
Finally, currencies and commodities are also showing volatility. Israel's shekel weakened, and the dollar remained steady, while the yen strengthened due to Japan's better-than-expected export data. Oil prices dipped as the U.S. eased sanctions on Venezuela, which could increase global supply.
Key events this week:
US initial jobless claims, existing home sales, leading index, Thursday
Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
Japan CPI, Friday
China loan prime rates, Friday
Philadelphia Fed President Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 1% as of 9:54 a.m. London time
S&P 500 futures fell 0.3%
Nasdaq 100 futures fell 0.2%
Futures on the Dow Jones Industrial Average fell 0.3%
The MSCI Asia Pacific Index fell 1.6%
The MSCI Emerging Markets Index fell 1.2%
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.0538
The Japanese yen was little changed at 149.84 per dollar
The offshore yuan was little changed at 7.3340 per dollar
The British pound fell 0.2% to $1.2110
Cryptocurrencies
Bitcoin rose 0.3% to $28,355.45
Ether fell 0.8% to $1,550.6
Bonds
The yield on 10-year Treasuries advanced six basis points to 4.97%
Germany’s 10-year yield advanced two basis points to 2.95%
Britain’s 10-year yield advanced five basis points to 4.71%
Commodities
Brent crude fell 1.8% to $89.82 a barrel
Spot gold was little changed
How To Avoid Hacks
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The SEC Remains Locked In On Crypto
Earlier this week, the SEC announced its continued focus on the digital asset industry in its examination priorities for the 2024 fiscal year, which begins on October 1, 2023. Essentially, the SEC acknowledged the growth of the industry and its volatility, and its commitment to conduct ongoing examinations of crypto-related companies registered with the agency. What was interesting was how the SEC subtly introduced the term "crypto asset securities," contributing to the ongoing debate about whether cryptocurrencies should be classified as securities. Eventually, there will be a day when the language from the SEC turns knowledgeable and fair, but I don't see that happening until Gary Gensler is fired.
Vitalik Clears The Air On Selling ETH
How often have we encountered baseless FUD suggesting that Vitalik Buterin is selling his bags for personal profit? I've consistently dismissed these allegations as unfounded, understanding that occasional sales are reasonable since everyone has basic financial needs. In any case, it should now be abundantly clear that Vitalik's intentions are not driven by bad faith. See below.
“If you see an article saying ‘Vitalik sends XXX ETH to [exchange],’ it's not actually me selling, it's almost always me donating to some charity or nonprofit or other project, and the recipient selling because, well, they have to cover expenses. I haven't ‘sold’ ETH for personal gain since 2018.”
The DOP Testnet Is Here
Does the name DOP sound familiar? I introduced this protocol a couple of months ago. They are our partners on #CryptoTownHall and are a project I have been supporting long before that was in place.
Data Ownership Protocol (DOP) represents an innovative approach to data ownership enabled by TOMI, a platform that empowers users to reclaim control and redefine the freedoms they should enjoy.
The DOP testnet is now available for those residing outside of the United States. Participants will receive a portion of 1% of DOP's total supply as Testnet tokens. These tokens come with a 2-year vesting period and can be claimed monthly. While there is a reward, the primary goal of the testnet is to collaborate with developers and the community to fine-tune everything.
One important note: claiming DOP tokens earned from the Testnet will occur after the official token launch, and they will provide an exact date for this process. Unfortunately, I won't be able to participate due to U.S. regulation, but I encourage all of you outside of the U.S. to give it a try. You can find all the information you need on the TOMI website and DOP's Twitter page. Happy testing and let me know your thoughts.
The Largest Asset Managers In The World Are All In Bitcoin And You Are Bearish!?
Join Sandy Kaul, Franklin Templeton’s Head of Digital Asset & Investor Advisory Services, and Chris Inks from TexasWestCapital as we are breaking down the latest in crypto.
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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.