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In This Issue:
‘The Mainstream Cycle’
Bitcoin Thoughts And Analysis
Markets Hold Breath Before FOMC
15 Fun Facts On The White Paper’s 15th Birthday
Tether Releases Q3 Attestation Report
COIN Earnings Are Around The Corner
Go Away, Gary
Here is What Will Happen When A Bitcoin ETF Is Approved
‘The Mainstream Cycle’
Q3 remained relatively uneventful for the crypto market. Following Bitcoin's initial rebound from the previous year's low, the #1 asset appeared to take an extended slumber all the way until the middle of this month. To better comprehend the significance of the recent move, I want to rewind to what transpired during this waiting period in reference to the past. To do this, I have the professional help of Bitwise Asset Management, led by my good friend Matt Hougan.
For reference, Q3 refers to the time period between July 1st and September 30th, and the images I will be referring to are Bitwise’s ‘Q3 Crypto Market Quarterly Review.’
Here’s how Bitwise debuted their findings:
The best word to describe crypto during the third quarter of 2023 is “quiet.”
Prices drifted downwards, with the Bitwise 10 Large Cap Crypto Index falling roughly 13%. Trading volumes were the lowest in nearly three years. Even big news stories—usually a constant in crypto—were few and far between.
Some see this quiet period as a sign of malaise, but after looking through the numbers I think that’s wrong. The data in this quarter’s report, which features more than 50 charts and key metrics on the forces moving the crypto markets, shows an industry holding steady, but in a much stronger position than in previous cycles. It shows crypto is a coiled spring.
Following this opening statement, Bitwise shared tons of interesting charts, each lending unique perspectives to where we are right now. I handpicked my favorites and will discuss each below.
For those worried that we might be in the middle stages of the bull cycle, historical patterns suggest otherwise. While calculating averages might not be applicable due to significant outliers, it wouldn't be surprising to witness substantial growth, possibly ranging between 100% to 300%, at some point between 2023, 2024, or 2025.
Since 2011, Bitcoin has been the best-performing asset of the year, with only three exceptions. Buying and holding Bitcoin for a few years has been a consistently successful investment strategy throughout the past decade.
A correlation coefficient of -0.25 to 0.25 suggests a very weak or negligible correlation between the variables. It indicates that there is little to no linear relationship between the two variables, and the movement in one variable does not reliably predict the movement of the other. This range is typically considered as having no meaningful correlation or a very weak correlation. Bitcoin has spent the majority of its lifespan in the dark green zone. It is an uncorrelated asset. Myth debunked.
Ethereum dominance may be beaten down and bruised, but crypto still prefers the #2 asset as their top choice by a large margin. Over time, Ethereum may lose some of its market share, but the only thing that will predominantly fluctuate is how many users are in the space, not what chain they choose.
In case you believed the Merge resulted in no significant changes to supply, this chart provides evidence to the contrary. Ethereum has experienced a substantial reduction in its supply since the merge, rendering the asset deflationary.
I anticipate an expansion of this list as traditionally traded companies explore fresh ways to engage with the space. The strategic advantage of holding COIN is its position as the largest in its category, similar to my recommendation of investing in Bitcoin and Ethereum due to their dominance in their respective classes. Among these options, COIN remains my preferred stock to hold.
BlackRock's contribution has added excitement to this list, but each name matters! Now I want you to consider that staggering figure at the bottom: $39 trillion dollars and steadily growing. Envision the potential impact when even 1%, 5%, or 10% of that capital flows into the industry—it will be a game-changing scenario.
Could the SEC potentially approve the ETF by November 11, ARK's next impending deadline? The image circulating is why many investors anticipate the imminent arrival of the ETF. ARK's final deadline aligns with January of next year, coinciding with several other filers. At this stage, it seems challenging for the SEC to justify a complete denial of the applications. I believe there's a high likelihood we'll receive positive news between now and January 10.
Ending on a high note, nothing surpasses relishing the significant triumphs in the crypto sphere throughout Q3. While celebrating major victories, the industry eagerly awaits Coinbase's anticipated success, alongside smaller yet pivotal wins such as evading DeFi regulations, dispelling FUD around Tether, and determining the regulatory authority governing the U.S. crypto landscape.
While Q3 may not have been the most exhilarating quarter in retrospect, it effectively laid the groundwork for the ongoing performance this quarter, which we are already relishing. Anticipating numerous exciting developments, I particularly appreciate BitWise’s initiative in labeling this phase as 'The Mainstream Cycle.’
Bitcoin Thoughts And Analysis
We have some bearish divergence on the daily chart, in overbought territory. It somewhat confirmed a day or two ago, but without the clearest elbow down on RSI. I would look for more confirmation today. This is usually a local top signal. That said, we would likely see hidden bullish divergence confirm after, so there is more indecision here than clear signal. I’m not doing anything for the moment.
Markets Hold Breath Before FOMC
US stock futures experienced a decline, with both the S&P 500 and Nasdaq 100 contracts witnessing a drop of about 0.3%. This comes in anticipation of the Federal Reserve's impending decision on interest rates and the US government's unveiling of a new borrowing strategy. Adding to the financial tumult, WeWork Inc. is reportedly on the brink of a 42% decrease due to impending bankruptcy news, while European retailers, especially Next Plc, have been performing positively, raising their profit forecasts. On the flip side, Danish utility firm Orsted A/S faced a significant 22% decline after taking a $4 billion hit from abandoned US wind projects.
The Federal Reserve is currently projected to keep its rates, which are at a 22-year peak, steady. However, there's speculation about another potential rate increase in December, given the ongoing resilience of economic growth. The recent uptick in US Treasury yields has begun to tighten financial conditions, causing even the hawkish members of the Federal Open Market Committee to reconsider the pace of future rate hikes.
Furthermore, there's growing anticipation surrounding the Treasury's plans for its note and bond auctions. Some experts believe that the department might introduce another round of increments, while others predict a more cautious approach to avoid pushing yields even higher. Meanwhile, the Japanese markets have been navigating through some turbulent waters. The yen has seen an improvement, especially after Japan's foreign exchange chief hinted at potential intervention. This positive shift was further emphasized when the Bank of Japan initiated unscheduled bond-buying operations as the 10-year bond yield was inching towards 1%.
In other market news, First Solar Inc. is enjoying a surge due to increased shipment volume predictions by analysts. However, Paycom Software Inc. is grappling with a 35% drop after revising its annual projections downwards. The oil market also saw some action, with prices rebounding after an initial slump earlier in the week. This change is attributed to shifting global demand focus in light of the ongoing conflict between Israel and Hamas.
Key events this week:
UK S&P Global / CIPS UK Manufacturing PMI, Wednesday
US construction spending, ISM Manufacturing, job openings, light vehicle sales, Wednesday
All Saints holiday in much of Europe, Wednesday
Treasury quarterly refunding announcement, Wednesday
Federal Reserve interest rate decision. Fed Chair Jerome Powell holds news conference, Wednesday
Eurozone S&P Global Eurozone Manufacturing PMI, Thursday
Bank of England interest rate decision. Governor Andrew Bailey holds news conference, Thursday
US factory orders, initial jobless claims, productivity, Thursday
Apple earnings, Thursday
China Caixin services PMI, Friday
Eurozone unemployment, Friday
US unemployment, nonfarm payrolls, Friday
Canada employment report, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.3% as of 7 a.m. New York time
Nasdaq 100 futures fell 0.4%
Futures on the Dow Jones Industrial Average fell 0.3%
The Stoxx Europe 600 rose 0.1%
The MSCI World index rose 0.2%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.2% to $1.0549
The British pound fell 0.1% to $1.2138
The Japanese yen rose 0.3% to 151.20 per dollar
Cryptocurrencies
Bitcoin fell 0.8% to $34,372.57
Ether fell 1.1% to $1,794.14
Bonds
The yield on 10-year Treasuries declined two basis points to 4.91%
Germany’s 10-year yield advanced two basis points to 2.83%
Britain’s 10-year yield advanced four basis points to 4.56%
Commodities
West Texas Intermediate crude rose 1.7% to $82.39 a barrel
15 Fun Facts On The White Paper’s 15th Birthday
Twitter user RIZZO (@pete_rizzo_) from Bitcoin Magazine shared 15 fascinating fun facts about the Bitcoin White Paper that left me in awe. I am going to spoil a few of my favorites below, but you can see all of them if you click the link above.
1) The White Paper is Only 9 Pages Long
At 9 pages and 2,736 words, the #Bitcoin white paper is shorter than the Magna Carta (3,550 words) and the Constitution (4,543 words), but longer than the Bill of Rights (652 words).
When it comes to history, it's the message that matters
4) The Word Bitcoin Only Appears Twice in the Paper
It’s widely believed Satoshi named #Bitcoin fairly late in the process, and there is evidence he may have even wanted to call it “Electronic Cash” or “Netcoin.”
5) Satoshi Wrote Code Before He Wrote the Paper
In his early emails, Satoshi mentions he'd been working on #Bitcoin's code for 2 years when the paper was released, writing:
"I actually did this kind of backward. I had to write all the code before I could convince myself."
13) Twitter Creator Jack Dorsey Once Called the White Paper ‘Poetry’
The comments underscore why Dorsey has committed Block to becoming a Bitcoin services company, and why he believes that #Bitcoin will reduce the cost of transactions for millions around the globe.
15) The White Paper Has Been Cited Over 4,000 Times
According to SemanticsScholar, the Bitcoin white paper has been cited in over 4,000 academic papers.
Doubtless, that number will only continue to rise as more people recognize and advance Satoshi’s groundbreaking work.
Tether Releases Q3 Attestation Report
Despite Tether finding itself under regulatory scrutiny, the stablecoin has maintained its dominance in the crypto market. In its Q3 attestation report, Tether disclosed a significant achievement: it reached a new milestone with the highest percentage ever recorded of its reserves held in Cash and Cash Equivalents, totaling 85.7%, which amounts to $72.6 billion. Furthermore, Tether announced a reduction in the amount of secured loans, allowing the company to become more self-reliant. On top of all of these improvements, in Q3, Tether held excess reserves in Bitcoin, $2.1B, and made sizeable donations into the industry, $668M.
“Tether’s Q3 attestation is a testament to our unwavering commitment to transparency, stability, and responsible financial management. We've achieved the highest-ever percentage of our reserves held in Cash and Cash Equivalents, signaling our dedication to maintaining liquidity and stability within the stablecoin ecosystem. Our ability to reduce secured loans and weather market volatility is a demonstration of our robust risk management strategies. We are proud of the robustness of Tether's operational profits, showcasing our financial strength and resilience. Moreover, our investments in sustainable energy, Bitcoin mining, data, and P2P technology exemplify our commitment to building a more sustainable and inclusive financial future for all.”
COIN Earnings Are Around The Corner
Coinbase is set to release its Q3 earnings on November 2 after the closing bell. If you remember from Coinbase's previous earnings report, the company exceeded expectations, causing the stock to initially surge, then drop back down and level off. In Q2, Coinbase remained focused on cost reduction, positioning, and navigating multi-year lows in volatility, I hold higher expectations for Q3, especially given Bitcoin’s recent activity and the enthusiasm surrounding the company’s involvement in ETFs. Is it logical that Coinbase, the most successful crypto exchange, has a market cap just slightly higher than Solana and is only 8.3% the size of Ethereum? Personally, I believe the market might be somewhat dislocated in its assessment of sizing.
Go Away, Gary
Go away Gary and approve the ETF, then maybe I’ll consider laughing at your pathetic jokes.
Here is What Will Happen When A Bitcoin ETF Is Approved
Bitcoin ETF can be approved any day, Matthew Hougan (Bitwise) and Steven McClurg join me to discuss what the approval process will look like and who will know it first. Join if you want to be the first one to learn when Bitcoin Spot ETF is approved.
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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.