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In This Issue:
The Next Move
Bitcoin Thoughts And Analysis
Legacy Markets
Bull Market Dips
Japan Inches Closer To Bitcoin
Fidelity Adds A Staking Clause
Coinbase Remind Us Why We Are Here
Bitcoin's Massive Crash, The End Of The Crypto Rally?
The Next Move
Imagine what we could do with all financial instruments.
The opening line of today’s newsletter isn't my quote; it’s a quote from none other than Larry Fink, CEO of BlackRock, the world’s most powerful and decorated financial institution.
This quote, "imagine what we could do with all financial instruments," was said a day after the iShares Bitcoin ETF was approved during a Bloomberg interview. While everyone probably expected the conversation to be about celebrating Bitcoin, it turned out to be focused on BlackRock’s next move.
Tokenization.
If you have any amount of interest in where this space is headed in the next 5-10 years, pay close attention to the text below. This isn't a prediction; this is BlackRock telling you word for word what will happen. After this, I am going to share some epic news.
Larry Fink: When we bought BGI in 2009, we were ridiculed by most of the financial community, saying you cannot marry the culture of an active investor, which is who we were, with a passive culture. We said, "Why not? Our clients use both products. Our job is to be agnostic to our clients, to work with them, to provide a whole portfolio solution." Over time, more and more clients started to think about how they wanted exposure. Do they want exposure in this area or this product? And they could do that through actively investing in ETFs.
In 2012, we said ETFs are going to be the new engine for fixed income. Boy, did that get a lot of ridicule by many people in the business community. Today, the fixed income markets are totally imbued by ETFs. When we bought BGI, we had $29 billion of ETFs. Today, we have $3.5 trillion. This week alone, just yesterday, we launched the iShares Bitcoin ETF. So, I would say to you, if we could ETF a Bitcoin, imagine what we could do with all financial instruments.
In our architectural change, iShares was this business division in itself. We thought that's too exclusive. We needed to include the ethos, the philosophy, the spirituality of what iShares can provide in everything we do at BlackRock. Because we believe we're just halfway there in the ETF Revolution. Everything is going to be ETF, and we needed to ensure both active products, passive products, digital products are going to be used through the vehicle of ETFs.
At the same time, in this architectural change, we're elevating the whole concept that we are going to be curating more and more of our performance-based products, too. It's a very large architectural change. A lot of people have asked me, "Is this the most successful division within BlackRock? Look what it did. Why are you doing this now?" We believe it's so important to be anticipating the next move.
On the beginnings of a Bitcoin ETF, we believe ETFs are a technology, no different than Bitcoin was a technology for asset storage. We believe the next step going forward will be the tokenization of financial assets. That means every stock, every bond will have its own basically QR code. It'll be on one general ledger. Every investor, you and I, will have our own number, our own identification. We can rid ourselves of all issues around illicit activities about bonds and stocks and digital by having tokenization. But the most important thing, we could customize strategies through tokenization that fit every individual. We would have instantaneous settlement. Think about all the cost of settling bonds and stocks. But if you had tokenization, everything would be immediate because it's just a line item. So, we believe this is a technological transformation for financial assets.
I believe you want to talk about voting and voting choice and all the things. If we know every moment who is the owner of that stock, and it's now time to vote, every individual who has ownership is identified, and they can vote their own shares.
Interviewer: Is this the end of mutual funds?
Larry Fink: I think for a lot of people, it's just a wrapper. It's not the end of it. But I would say the dominant form of bringing products going forward will be in the form of ETFs.
The entire interview is copied above, but if you want to watch it, the video is below. I've shared this clip in the past; it's nothing new, but it sets the stage for what I'll cover next.
Since this interview, other than BlackRock filing for an Ethereum ETF, we haven’t seen anything develop on the tokenization front... until now.
Yesterday afternoon, it was discovered that Blackrock is using the Ethereum blockchain to introduce a tokenized asset fund. The future of finance is here.
Partnering up with Securitize, a crypto company founded in 2017 with a mission to digitize all the world’s assets, BlackRock has launched their BlackRock USD Institutional Digital Liquidity Fund with the ticker $BUIDL and a $100 million seed on Ethereum. Very little is known about the scope of the fund at this point, but yes, it exists.
For proof, you can view the SEC filing HERE, the BlackRock fund HERE, and the Ethereum Smart Contract HERE.
I wish I could say more about the details of this fund, but by its name, it appears to possibly be tokenized treasuries or leading to a stablecoin. Whichever it is, just remember that BlackRock has said their goal is to tokenize everything. It's all coming, one step at a time.
My last point…
Ethereum facing criticism for being eaten away by both Bitcoin and Solana is flat out ridiculous. Ethereum is the happy medium between these two assets, and institutions will latch onto it because of that. Ethereum is a premier decentralized store of value more than capable of handling retail.
Oh, and before I sign off, if you had any doubt that an Ethereum ETF would eventually be approved, this is your proof. BlackRock is thinking bigger. They have already moved onto their next play.
Bitcoin Thoughts And Analysis
Bitcoin has confirmed bullish divergence on the 4-hour chart (and the hourly, which is not particularly powerful), with a likely divergence printing on the 6-hour.
These are signals I love to look for for likely bottoms, even if temporary. As you know, these divergences can build - meaning we get more lows on price with more highs on RSI to make them stronger. I particularly like when we see these divergences on multiple time frames.
I also don't love the shape of this divergence, with the flattened RSI for a period at the bottom.
But still - it counts.
My concern is that RSI has not even hit oversold on the 6-hour or 12 hour, and is still not even close on the daily. As you know, RSI always eventually makes the trip from overbought to oversold and back. And RSI has not been oversold on the daily since $25,000 or so in August.
Nothing “has to happen,” so for now we have a decent signal that Bitcoin is starting to bottom (at least for a bit) in the current zone.
Legacy Markets
Luxury stocks experienced a significant downturn in Europe, driven by Kering SA's warning about falling sales and sparking concerns over luxury consumer spending in China. Kering, the owner of Gucci, saw its shares plummet by 15%, leading to a notable decline in other luxury brands like LVMH, Burberry, and Christian Dior, and causing Europe's Stoxx 600 Index to drop by 0.3%. Despite this, the S&P 500 futures remained stable after reaching a new high on Tuesday, with all eyes on the Federal Reserve's upcoming meeting.
The meeting is highly anticipated, with traders eager to learn whether the Fed will adjust its outlook on rate cuts. The central bank's decision and economic forecasts, along with Chair Jerome Powell's subsequent press conference, are expected to shed light on the potential pace of easing. Investors will specifically be looking at the Fed's dot plot to understand the anticipated number of rate cuts for the year. The outcome could trigger movements in the dollar, Treasuries, and equity markets, reflecting the market's cautious stance ahead of the Fed's announcements.
Meanwhile, the Bloomberg dollar index has been on the rise, marking its fifth consecutive session of gains. The pound experienced volatility following a sharper-than-expected drop in Britain's inflation rate. In Japan, the yen weakened to its lowest level against the euro since 2008, amidst speculation that the Bank of Japan will maintain an accommodative monetary policy even after ending its negative interest rate policy.
In other market news, oil prices stabilized after a two-day increase, supported by a reported decrease in US crude stockpiles, while gold prices hovered in a narrow range in anticipation of the Federal Reserve's decision.
Key events this week:
Fed rate decision; Chair Jerome Powell holds news conference, Wednesday
Reddit’s IPO, Wednesday
ECB’s Christine Lagarde speaks, Wednesday
Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, Thursday
Bank of England rate decision, Thursday
US Conference Board leading index, existing home sales, initial jobless claims, Thursday
Nike, FedEx earnings, Thursday
Japan CPI, Friday
Germany IFO business climate, Friday
Atlanta Fed President Raphael Bostic speaks, Friday
ECB’s Robert Holzmann and Philip Lane speak, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.2% as of 9:15 a.m. London time
S&P 500 futures fell 0.1%
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 0.1%
The MSCI Emerging Markets Index rose 0.1%
Currencies
The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.2% to $1.0841
The Japanese yen fell 0.5% to 151.57 per dollar
The offshore yuan was little changed at 7.2139 per dollar
The British pound fell 0.2% to $1.2697
Cryptocurrencies
Bitcoin fell 1.5% to $62,766.13
Ether fell 1.8% to $3,218.27
Bonds
The yield on 10-year Treasuries declined one basis point to 4.28%
Germany’s 10-year yield declined four basis points to 2.41%
Britain’s 10-year yield declined six basis points to 4.00%
Commodities
Brent crude fell 0.8% to $86.70 a barrel
Spot gold fell 0.1% to $2,155.03 an ounce
Bull Market Dips
I made it my personal mission to dig up some historical data on previous bull market dips. This isn’t an exact science, and these figures can be debated by a small margin, but you get the idea.
Here is a list of meaningful corrections in the run up to $20,000 in 2017.
- 41%
- 38%
- 29%
- 34%
- 41%
- 40%
- 27%
Here is a list of the meaningful corrections in the run up to $69,000 in 2021.
- 21%
- 17%
- 31%
- 26%
- 55%!!!
- 25%
Japan Inches Closer To Investing In Bitcoin
Japan's Government Pension Investment Fund (GPIF), the world's largest pension fund by assets under management, is reportedly seeking "basic information on illiquid assets," including "forests, farmland, gold, and Bitcoin." While there is no current evidence that the GPIF will invest in Bitcoin or cryptocurrencies, most of the significant hurdles have been cleared. Recently, the Japanese cabinet approved a bill allowing venture capital firms and investment funds to hold crypto assets, with the parliamentary approval pending. Several pension funds outside of Japan, such as the Houston Firefighters' Pension Fund and South Korea's National Pension Service, already invest in Bitcoin and crypto-related assets. Bitcoin is inevitable.
Fidelity Adds A Staking Clause
Spot ETH ETF hopefuls should be excited to learn that Fidelity has included a staking clause in its pending application. Personally, I find it unlikely that staking will be implemented in the initial spot ETF approval, be it May or the following deadline. However, I do fully expect this feature to be included at some point in the future. Staking is a unique selling point for an Ethereum ETF, especially for boomer investors who have had positive experiences with Bitcoin and are interested in new products that bear yield. If anything, adding the staking clause is a bargaining chip for Fidelity when it comes to approval time.
“According to the Registration Statement, the Sponsor may, from time to time, stake a portion of the Fund’s assets through one or more trusted staking providers, which may include an affiliate of the Sponsor (“Staking Providers”). In consideration for any staking activity in which the Fund may engage, the Fund would receive certain network rewards of ether tokens, which may be treated as income to the Fund as compensation for services provided.”
SEC Body Slammed By US Judge
Last year, the SEC sued the crypto company Debt Box, alleging fraud and subjecting the company to challenging operational hurdles and a massive lawsuit. Fast forward to today, and a federal judge has ruled that the SEC must pay all of Debt Box’s legal fees. The judge also stated that the SEC "committed a gross abuse of power in its efforts to secure a temporary restraining order." HUGE.
The following quote is from the federal judge presiding over the case, “The ‘critical evidence’ the SEC offered to have obtained ‘lacked any basis,’ which was nonetheless advanced in deliberately false and misleading ways. The bad faith in inextricable from the abusive conduct and a sanction of attorneys’ fees and costs for all expenses resulting from that conduct is appropriate.”
Coinbase Reminds Us Why We Are Here
Coinbase's latest blog post, titled "What is crypto good for, anyway?" authored by Brian Armstrong, offers a refreshing and concise reminder of the intrinsic value of cryptocurrencies beyond mere financial gains. While the market is worried about price volatility and meme coins, Brian eloquently argues that Bitcoin represents a return to the principles of sound money, a concept lost to the U.S. since it abandoned the gold standard in the early 1970s. Several impactful use cases for cryptocurrencies are highlighted including the “digitization of the dollar, facilitating fast and cost-effective global payments, providing a novel business model for creatives through NFTs, and empowering decentralized social media platforms.”
“If inventing digitally native sound money were the only utility of crypto, it would still be a world-changing technology, but that is just the start. Crypto isn’t just a new asset class – it’s the future of money. Today’s system is clogged with middlemen, high fees, delays, and other inefficiencies that make the system hard to access and unfair. The future of money is more open, free, efficient, and it’s powered by crypto. Crypto is the most important technology we have to update our global financial system, and it can move America forward. In fact, it's critical to ensuring the dollar's future status as a reserve currency, and America's status as a technology and financial hub.”
Bitcoin's Massive Crash, The End Of The Crypto Rally?
Although Bitcoin and most cryptocurrencies are going through a massive crash today, I am still bullish, and my today's guest, Austin Federa, the Head Of Strategy at Solana Foundation, is bullish as well. Together we are going to discuss what's happening with crypto and how Solana became one of the main beneficiaries of this crypto rally.
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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.