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In This Issue:
Tether Is About To Make History
Bitcoin Thoughts And Analysis
Altcoin Charts
Stocks And Treasuries Are Up
The CFTC Is Stepping Up Its Game
Bitcoin ETFs Are Popular In Brazil
Something Has To Give
Ronaldo Sued For Binance Partnership
These Narratives Will Drive The Next Bull Market l Ram Ahluwalia
Tether Is About To Make History
Tether is on the verge of making history, but the journey to this point hasn't been sunshine and rainbows.
This is the story of Tether.
Established in 2014, the Tether stablecoin has weathered substantial waves of industry doubt and criticism while navigating through multiple bouts of instability. In addition to facing cycle crushing winters, Tether has also battled de-pegging setbacks, including an all-time high of $1.32 in 2018 and an all-time low of $0.57 in 2015.
Despite these challenges, Tether has always found its way back $1.
Today, Tether is the unequivocal leader among stablecoins, standing at the precipice of a historic moment. It is poised to surpass a $100 billion market cap. On that positive note, I want to dedicate this introduction to Tether, recognizing what it has become and discussing the nuances of its success.
Tether Limited is owned by the Hong Kong-based company iFinex Inc., which also owns the Bitfinex cryptocurrency exchange. As per Tether’s official site, “All Tether tokens (USD₮) are pegged at 1-to-1 with a matching fiat currency and are backed 100% by Tether’s reserves. We publish a daily record of the current total assets and reserves.”
Here is a visualization of how close Tether is to reaching $100B.
Before delving deeper into Tether's success, I want to thoroughly clarify how Tether operates.
There are 5 steps in the life cycle of Tether tokens, taken from Tether’s official site.
Step 1 - A KYC verified Tether user, could be an an exchange, an individual trader, a business merchant or trading firm deposits fiat currency into Tethers bank account.
Step 2 - Tether issues Tether tokens and sends them to the users provided wallet address. The amount of issued Tether tokens that enters circulation is equal to the users’ deposited amount minus fees.
Step 3 - The Tether tokens are used for transactions by users and can be transferred, traded, or stored for later use.
Step 4 - A user can redeem their Tether tokens into fiat currencies by depositing the tokens into their account at Tether.to
Step 5 - Tether removes the Tether tokens from circulation and sends the equal amount of fiat currency to the users’ bank account. Tether is the only party that can issue Tether tokens into circulation or take them out of circulation. This is the main process by which the system solvency is maintained.
Now that we understand how demand drives growth, let's examine Tether's journey to success in comparison to its largest rival, USDC. Circle's USDC was officially introduced and launched on September 26, 2018, approximately four years after Tether's inception. There was a brief historical moment when USDC made a significant push against Tether, nearly overtaking its position. However, Tether has since solidified its dominance, holding a firm lead. I will delve into the reasons for this after presenting the history of Tether vs USD Coin.
Jan 1st, 2019
Tether - $1.88B—#7
USD Coin - $254m—#24
Jan 1st, 2020
Tether - $4.1B—#4
USD Coin - $518m—#21
Jan 1st, 2021
Tether - $21.09B—#3
USD Coin - $3.53B—#11
Jan 1st, 2022
Tether - $78.35B—#4
USD Coin - $42.15B—#7
Jan 1st, 2023
Tether - $66.24B—#3
USD Coin - $44.54B—#4
Today
Tether - $88.94B—#3
USD Coin - $22.4B—#7
At one point in late 2022, this Forbes article was predicting that, “USDC could overtake USDT in market capitalization in a matter of months, if not weeks” because, “less than $10 billion is separating the two stablecoins.” Oh how times have changed.
While I cannot definitively pinpoint the reasons behind this divergence, I can offer some informed speculation. One plausible explanation is the differing perceptions of crypto in Asia compared to the United States. The U.S. is only recently warming up to the notion that crypto is in a bull market, and the American market is rife with fear of regulation. Asia has been trading like there’s no tomorrow for months. This nuance is crucial because Tether reigns as the predominant stablecoin globally, excluding the U.S., and its demand likely surged at a rate that USDC couldn't keep pace with.
Another turning point was the collapse of Silicon Valley Bank. Circle had over $3B deposited there. When the bank went under, there was speculation for an entire weekend as to what it would mean for USDC. The coin “depegged” temporarily, but the perception was forever damaged. USDT came out smelling like roses.
Another significant blow to USD Coin was the U.S. government's decision to raise rates, resulting in treasury yields becoming a more appealing choice for cash holders. The impact of treasury yields seemed to affect USDC more than Tether, a narrative that aligns well with the timeline illustrated in the chart above.
USDC's supply reached its pinnacle at $55.1 billion in June, 2022. It has experienced a substantial decline, shedding over $33 billion, equivalent to nearly 60% of its market capitalization. While there might be renewed interest in USDC when the U.S. experiences a true bull market and treasury yields decrease, it may be too little too late.
Tether has also become more transparent with time, reshaping the structure of its reserves. They have made aggressive and strategic investments into the crypto market, and of course have added Bitcoin to their balance sheet.
In the past 30 days, USDT’s market cap grew by $4.5B. Whale Alert caught this on Twitter and Paolo Ardoino chimed in to shed some light on the growth.
I'm not discounting the potential for USDC to stage a comeback against Tether, but the likelihood seems to be diminishing. Tether has strengthened through rigorous trials, rightfully earning the crown in the stablecoin war. The industry owes much of its current standing to Tether.
I have long argued that stablecoins are the “killer app” of crypto.
$100B is coming soon.
Bitcoin Thoughts And Analysis
$BTC once again refusing to give dip buyers a big enough move down to buy.
Welcome to Bitcoin in a bull market, where max pain is watching from the sidelines.
Bitcoin continues its push into key resistance. Can it finally break through?
Altcoin Charts
For those who are new here, I share SETUPS and not SIGNALS. These are ideas that I am watching - if a certain thing happens, then the trade triggers. I am not telling you what to buy or when. I am showing you how I am watching certain charts and what has to happen for me to take a trade.
As you know, I am not a huge fan of charting Bitcoin Dominance, as it is not a traded asset with buyers and sellers creating support and resistance. Further, it is a reaction to what we can already see in the market - that Bitcoin is either outperforming or underperforming alts.
That said, when a number of people are watching something, it is worth taking note of.
Bitcoin dominance has clearly broken out through resistance, which means it is likely time to focus more on Bitcoin than alts for the moment. Alts will continue to rise vs. USD as long as Bitcoin is rising alongside dominance - they will just underperform BTC.
My feeling here is that alts are waiting to see Bitcoin finally break through this key resistance area.
Stocks And Treasuries Are Up
Stocks and Treasuries have shown significant progress, spurred by growing expectations that the Federal Reserve might ease its policy tightening and possibly reduce interest rates next year. This surge in stocks and bonds is the most substantial since the 2008 financial crisis, with the MSCI All Country World Index of stocks climbing 8.7% this month, marking its largest increase since November 2020. The trend is partly attributed to slowing inflation and a more dovish stance from Federal Reserve officials.
European stocks, particularly the Stoxx 600 index, rose, and U.S. equity futures indicate potential gains. Notably, shares in Spanish firm Ferrovial SE saw an uptick following a significant business deal involving Heathrow Airport. This market optimism follows comments from Fed Governor Christopher Waller, hinting at a strategic position to achieve a 2% inflation target. Influential investor Bill Ackman anticipates potential Fed rate cuts as early as the first quarter of next year.
German bonds have rallied, and U.S. Treasury yields have dropped, reflecting a broader anticipation of over 100 basis points in rate cuts by the end of 2024. The focus now shifts to upcoming data and a speech by Fed Chair Jerome Powell, which could shed light on possible policy adjustments. This optimism has also positively influenced oil and gold prices, with gold reaching its highest level since May.
Key events this week:
OECD releases biannual economic outlook, Wednesday
Eurozone economic confidence, consumer confidence, Wednesday
Bank of England Governor Andrew Bailey speaks, Wednesday
US wholesale inventories, GDP, Wednesday
Cleveland Fed President Loretta Mester speaks, Wednesday
Fed releases its Beige Book, Wednesday
China non-manufacturing PMI, manufacturing PMI, Thursday
OPEC+ meeting, Thursday
Eurozone CPI, unemployment, Thursday
US personal income, PCE deflator, initial jobless claims, pending home sales, Thursday
China Caixin Manufacturing PMI, Friday
Eurozone S&P Global Manufacturing PMI, Friday
US construction spending, ISM Manufacturing, Friday
Fed Chair Jerome Powell to participate in “fireside chat” in Atlanta, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.5% as of 10:24 a.m. London time
S&P 500 futures rose 0.3%
Nasdaq 100 futures rose 0.4%
Futures on the Dow Jones Industrial Average rose 0.3%
The MSCI Asia Pacific Index fell 0.3%
The MSCI Emerging Markets Index fell 0.2%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.0977
The Japanese yen was little changed at 147.56 per dollar
The offshore yuan was little changed at 7.1321 per dollar
The British pound was little changed at $1.2691
Cryptocurrencies
Bitcoin rose 0.6% to $38,189.96
Ether rose 0.3% to $2,060.63
Bonds
The yield on 10-year Treasuries declined three basis points to 4.29%
Germany’s 10-year yield declined four basis points to 2.45%
Britain’s 10-year yield declined four basis points to 4.14%
Commodities
Brent crude rose 0.8% to $82.35 a barrel
Spot gold was little changed
The CFTC Is Stepping Up Its Game
Coinbase has been served with a subpoena by the CFTC as part of an initiative to build a case against ByBit. The CFTC's objective is to investigate user activity on Coinbase, seeking information on individuals suspected of transferring funds to ByBit from the platform. It's important to note that I am not a lawyer or judge, but based on speculation, it seems that users who received this email may not be in immediate trouble. Instead, the focus may be on potential legal actions against ByBit when the data is disclosed, revealing the platform's usage by U.S. users.
If you've received this email and are concerned, it's crucial to recognize that you have a limited timeframe to take legal steps to protect your data by filing a motion to quash. The contents of the email are provided below in case you haven't had the opportunity to see them.
CFTC Subpoena to Coinbase in the matter of Bybit Fintech Ltd. and Ben Zhou [Bybit CEO].
We write to inform you that Coinbase has been served with a subpoena in the above-referenced matter seeking information related to your account and account transaction activity.
No action is required from you, but Coinbase may respond to the subpoena unless served before November 30, 2023, with a motion to quash or other objection to the subpoena that has been filed with the court - including sending information concerning your Coinbase account to the CFTC.
Bitcoin ETFs Are Popular In Brazil
It's quite remarkable to consider that Bitcoin ETFs have been successfully operating in Brazil for two years, in Canada for 2.5 years, and nearly 3.5 years in Germany, while the U.S. still grapples with the concept. Nevertheless, Brazil is experiencing substantial demand for its two major Bitcoin ETFs, accumulating an impressive total of nearly $100 million in assets under management (AUM). To put this in perspective, the largest ETF in the nation boasts $2.41 billion in AUM, with the second largest reaching $1.19 billion.
For a striking comparison, the largest ETF in the United States has amassed approximately $430 billion in AUM. This underscores the significance of a spot ETF in the U.S. and highlights the potential impact it could have on the market.
Something Has To Give
Does this post align with my biases? Undoubtedly, but the reasoning is sound. Coinbase is poised to dominate Q4 trading volume, fueled by the anticipation of ETFs in early January. Anticipating only an 8.6% quarter-over-quarter revenue growth overlooks the broader picture. Wall Street clearly fails to grasp the nuances of crypto’s bull and bear market cycles, not to mention Coinbase's other products. The 8.6% expectations are likely to be surpassed by transactional volume alone, constituting roughly half of Coinbase's revenue. This is as alpha as it gets.
Ronaldo Sued For Binance Partnership
What utter nonsense!
Cristiano Ronaldo is facing a proposed class-action lawsuit for his role in promoting Binance, a crypto exchange currently facing legal challenges. The lawsuit, filed in a U.S. district court in Florida, accuses Ronaldo of helping in the offer and sale of unregistered securities in collaboration with Binance. This follows a partnership formed in mid-2022, where Ronaldo promoted his nonfungible tokens (NFTs) through Binance, potentially leading users to invest in other offerings on the platform, such as Binance’s BNB and its crypto yield programs.
The complaint argues that Ronaldo's promotions significantly boosted Binance's popularity, citing a 500% increase in searches for Binance after his NFT sales. The plaintiffs claim Ronaldo, who has vast investment experience and resources, should have been aware of the legal implications of promoting unregistered crypto securities. They also allege that he failed to disclose payments received for these promotions, as required by U.S. Securities and Exchange Commission (SEC) guidelines.
The plaintiffs, Michael Sizemore, Mikey Vongdara, and Gordon Lewis, are seeking damages and coverage of legal fees. In a related context, Binance and its founder Changpeng Zhao are dealing with their legal issues, including a guilty plea and a $4.3 billion settlement with the U.S. government for various violations. Zhao has resigned as CEO and faces potential prison time, while Binance is under compliance monitoring and additional legal scrutiny from the SEC.
These Narratives Will Drive The Next Bull Market l Ram Ahluwalia
Scott is joined by investor Ram Ahluwalia to discuss the narratives that will drive the next bull market.
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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.