The Wolf Den #909 - The Worst Take of All Time
Bitcoin Is Worth Nothing?
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In This Issue:
The Worst Take Of All Time
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Narratives Are Everything
Fidelity Addresses Bitcoin Criticisms
Nvidia Made History
Reddit Invests in Bitcoin and Ethereum
Ethereum To Skyrocket To $5.2K? AI Coins Go Nuclear
The Worst Take Of All Time
The European Central Bank must have rolled out of bed yesterday and decided it was a good day to drive what little credibility they had left off a cliff when they released their latest report on Bitcoin. The report, titled, “ETF approval for bitcoin – the naked emperor’s new clothes,” is easily one of the most misguided takes I have ever seen.
Just as a backstory to the reference…
In the tale ‘The Emperor's New Clothes,’ an emperor is deceived into believing he is wearing invisible garments, showcasing a false sense of grandeur and sophistication. The ECB is implying that the approval of the spot ETF (like the emperor) is being hyped up and portrayed as something grand and beneficial, but in reality, nothing is really there.
Kind of like the arguments the ECB is making, but more on that shortly.
The blog not only rehashed old criticisms, such as misunderstood environmental concerns around mining, El Salvador’s shortcomings, price manipulation, and exaggerated criminal financing, but it also introduced new ones. These included concerns about Bitcoin ETFs, misjudgment by regulatory figures, and the assertion that Bitcoin is currently in a bubble.
Oh joy, a brand-new season of FUD. I guess I will have to resubscribe to Netflix.
At least we can be glad the ECB thinks price is on the rise.
I don’t want to say for certain that I know why the ECB has taken this stance, but it seems like it has something to do with Bitcoin's perceived and real threat to banks, the Euro, and the diminishing power structure held by regulators. While it's hard to argue that the Euro is in meaningful decline, the status of all fiat currencies are seriously in question.
If anything, the fact that banks and other legacy institutions feel cornered by Bitcoin ironically suggests that our efforts are indeed being felt by the institutions that most need to adapt. Below are some of the best and worst quotes from the report. Enjoy.
The fair value of Bitcoin is still zero.
We argued that Bitcoin has failed to fulfill its original promise to become a global decentralized digital currency.
So why is this dead cat bouncing so high?
Detached from economic fundamentals every price is equally (im)plausible – a fantastic condition for snake oil salesmen.
Finally, it is incredibly ironic that the crypto unit that had set out to overcome the demonised established financial system should need conventional intermediaries to spread to a broader group of investors.
The “market” capitalisation quantifies the overall social damage that will occur when the house of cards collapses.
I won’t go line by line on these, but the last thing I will quote is the ECB’s main summary: “Bitcoin has failed on the promise to be a global decentralised digital currency and is still hardly used for legitimate transfers. The latest approval of an ETF doesn’t change the fact that Bitcoin is not suitable as means of payment or as an investment.”
If Bitcoin isn’t a global decentralized digital currency, then what is it? That's akin to me saying the ECB is NOT the central bank of the European Union countries. This has to be the most delusional lie I have ever seen; you just can't argue with stupidity.
Thankfully, I don’t have to refute the claims in the report, because X community noted the post with 16 links dedicated to debunking the lies of the ECB. Decimation. Also, could this chart have something to do with why the ECB cares about Bitcoin?
One final thought before you all head off to the weekend: it's interesting to see where 'experts' are drawing the line for the chance of Ethereum receiving a spot ETF approval. It's almost as if some anti-Ethereum individuals want to see it rejected, as if an approval would desecrate their divine orange coin. I know that a spot Ethereum ETF isn’t a done deal this May and another lawsuit might have to go down or at least be threatened, but it should be all hands-on deck to see this push through.
A spot ETH ETF significantly legitimizes altcoins and the hard work builders and developers have spent on our space. It will also bring in much-needed capital to expand the Ethereum vision. A spot ETH ETF is the goal; don’t get caught up in the numbers, percentages, or chances. Nobody knows when it will come, everyone should just be rooting for it to come. Just my two cents.
Have a great weekend, wolf out.
*Newsletters will be sporadic next week and will not come every day. They will also likely be shorter with less charts.
Bitcoin Thoughts And Analysis
There is absolutely nothing new to see on the Bitcoin chart today. We are still at weekly resistance, we still have overbought bearish divergence on the daily chart (not shown). For now, it appears we will see a bit more downside or chop.
Legacy Markets
After a period of significant gains driven by Nvidia's blockbuster earnings, global markets showed signs of pausing. U.S. futures saw fluctuations, and European shares remained flat amid a mix of earnings reports. Nvidia's remarkable performance, with a $277 billion increase in market capitalization, marked the largest single-session boost ever, outpacing even Meta Platforms Inc.'s substantial gain.
Investors are now contemplating whether the tech-led rally can expand into other sectors, especially as optimism about Federal Reserve rate cuts diminishes in light of strong economic indicators from the U.S. The potential for generative AI as a growth theme is highlighted, with Nvidia's success underscoring the robust investment in AI infrastructure.
In Europe, the Stoxx Europe 600 index showed little change after initial gains, reflecting mixed corporate earnings. Notable movements included Standard Chartered Plc's rise following a profit beat and share buyback announcement, whereas Allianz SE and Deutsche Telekom AG experienced declines due to earnings shortfalls.
The concentration of gains in a few large-cap stocks presents a risk in Europe, similar to the U.S., with a small group of companies significantly contributing to the Stoxx 600's performance. However, there's optimism for a broader equity market rally, supported by a combination of Federal interest rate cuts, continued growth, and declining inflation.
In Asia, Chinese and Hong Kong shares showed strength, with the CSI 300 extending its winning streak. Markets in Australia, Taiwan, and South Korea also advanced, while Japan was closed for a holiday.
Fed officials maintain a hawkish stance, indicating that rate cuts may occur this year but not immediately. The 10-year Treasury yield rose slightly, and the dollar remained stable. Commodities saw mixed movements, with oil prices dropping amid demand concerns, while nickel and aluminum prices increased. Iron ore faced its largest weekly decline in nearly a year, fueled by worries over Chinese steel demand.
Key Events This Week:
Germany IFO business climate, Friday
ECB publishes 1- and 3-Year inflation expectations survey, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 was little changed as of 9:35 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures fell 0.2%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index was little changed
The MSCI Emerging Markets Index was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.0819
The Japanese yen fell 0.2% to 150.76 per dollar
The offshore yuan fell 0.2% to 7.2133 per dollar
The British pound was little changed at $1.2654
Cryptocurrencies
Bitcoin fell 1.3% to $51,001.06
Ether fell 1.8% to $2,932.27
Bonds
The yield on 10-year Treasuries advanced three basis points to 4.35%
Germany’s 10-year yield advanced four basis points to 2.48%
Britain’s 10-year yield advanced three basis points to 4.14%
Commodities
Brent crude fell 1.2% to $82.70 a barrel
Spot gold fell 0.3% to $2,018.08 an ounce
Narratives are Everything
The technology in our space is undoubtedly one of the most significant financial breakthroughs of the century. However, our tendency to speculate on which technologies will succeed is often solely driven by the narratives we create around these investments. A compelling story can greatly influence investor sentiment, especially when it is supported by strong technological fundamentals. Conversely, some investments with excellent technology may struggle because the narrative fails to resonate with the community. This could be due to being ahead of its time, overly complex, or counterintuitive.
Arthur Hayes's new blog explores the power of narratives and why they are crucial in our space. Before I share a quote from Hayes, it's important to note that the technology behind what we are building is often too complex for 99% of investors to fully understand. This highlights the importance of crafting narratives that are relatable and putting our trust in those who can guide us effectively.
“While your tech skills are usually inadequate to properly evaluate the project, you can easily understand whether a story is good or not. A good story is one that more and more people tell each other. Of course, it’s great if the story is spoken about in a positive manner. For example, ‘All retail traders are going to switch from CEXs to DEXs in this cycle.’ But even if the story is spoken about negatively: ‘There is no way that retail traders are going to leave CEXs for DEXs.’, the story of the migration of trading volume from CEX to DEX is still being spread. I don’t care if people believe the story; I just want them to tell a positive or negative variant of it. Because you make more money being long than short, optimism will win over pessimism during the cycle. It’s just how the human brain is wired.”
Fidelity Addresses Bitcoin Criticisms
In November of last year, Fidelity Digital Assets Research published a detailed report highlighting numerous criticisms gathered from discussions with institutional investors and the public. Fidelity not only outlined these criticisms but also provided extensive research to address and refute each one individually. They also acknowledged a few criticisms that they deemed legitimate. In light of the recent statement from the ECB, I thought it would be timely to revisit this report and share some of its key findings.
The report debunks the following criticisms: “Bitcoin is too volatile to be a store of value. Bitcoin has failed as a means of payment. Bitcoin is wasteful and/or bad for the environment. Bitcoin will be replaced by a competitor. Bitcoin is not backed by anything.” The criticisms believed to be legitimate and holding some weight are: “A bug in Bitcoin’s code could render it worthless. Regulations will slow Bitcoin adoption. People could lose interest. There are ‘unknown unknowns.’”
In light of the ECB’s poor reporting, I am going to focus on the criticism that Bitcoin has failed as a means of payment and use Fidelity’s reasoning to counter this point. “Contrary to what some people think, data from Coin Metrics shows significant transaction volume on the Bitcoin network with more than $3.1 trillion in transactions settled, which was just under 40% of what Mastercard processed in the last year.”
“Bitcoin vs. Mastercard or Visa is not an apples-to-apples comparison because legacy transaction processors do not provide final settlement until days later, whereas Bitcoin’s low five to seven transactions per second (TPS) is slower, but it represents final settlement. Compared with Visa, which can theoretically reach up to 24,000 TPS, but in reality, the amount it processes on a day-to-day basis is a fraction of that, Bitcoin’s Lightning Network is by far the fastest and cheapest payment technology available.”
Nvidia Made History
A couple of weeks ago, I was amazed to see Meta's market cap increase by $197 billion in a single day, setting a new record and surpassing Apple's previous record set in late 2022. Now, I am beside myself because NVIDIA (NVDA) has broken Meta's record with a $247 billion single-day jump in market cap following its incredible Q4 earnings report. NVIDIA is now larger than Amazon and Google, and not far from breaching the $2 trillion market cap milestone, currently only held by Microsoft, Apple, and Saudi Aramco. NVIDIA's jump indicates that if the bull market continues, we can probably expect more moves like what we are seeing. Times are changing. Investors are still selecting large tech stocks as their hedge against inflation; imagine what happens when they consider crypto.
Reddit Invests in Bitcoin and Ethereum
Reddit is the proud owner of Bitcoin and Ethereum. Don’t get your hopes up too high because it doesn’t seem like Reddit made a huge purchase. But any amount is a good amount, and Reddit is ahead of the curve.
“The net carrying value of our cryptocurrencies, which consisted primarily of Bitcoin and Ether, as well as all related cryptocurrency activity, was immaterial for the periods presented.”
Ethereum To Skyrocket To $5.2K? AI Coins Go Nuclear
Join Charles Jansen, Head of DeFi Transformation at S&P Global, and Chris Inks from TexasWestCapital, as we are exploring massive AI boost after the massive Nvidia earnings. At the same time analysts predict Ethereum price to skyrocket to $5,200. We are gonna discuss all this and more! Tune in!
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