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In This Issue:
There’s A Snake In The Garden
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Test Your Crypto Security
Lizzy Warren Spews Lies
Inflation Data Came In Hot
We Are Starting To Learn Who Is Buying Bitcoin ETFs
There’s A Snake In The Garden
“When you build technology that improves people’s lives – you don’t need to hide.”
The quote above comes from a longer response Hayden Adams gave yesterday on X, following news of Uniswap receiving a Wells Notice from the SEC.
As a refresher, a Wells Notice is a formal notification from the SEC informing individuals or companies that their staff intends to recommend enforcement action.
In our industry, a Wells Notice is nothing more than a ‘heads up, you are about to be sucker punched by the SEC’ warning.
Coinbase (currently in a lawsuit) and Ripple (previously in a lawsuit) both received Wells Notices, along with Paxos, Binance, and Bittrex – all companies with past or ongoing interactions with the SEC.
This leads to one and only one conclusion: Uniswap is going to court with the SEC.
Since Uniswap has now officially (or perhaps unofficially officially) joined the legal fight, I want to share a little about what Uniswap is at its core. We all already know Uniswap is for trading, but what is the essence of Uniswap?
Uniswap was created on November 2, 2018, and epitomizes the idea of removing the middleman from the trading equation and replacing it with a decentralized alternative. It is the undisputed pioneer of Decentralized Exchanges (DEXes), which play a critical role in today's crypto ecosystem and are an essential pillar of the Web3 economy.
Uniswap operates on an Automated Market Maker (AMM) model, overseen by trustless smart contracts instead of people. Early in Uniswap’s life, the platform caught the eye of Vitalik Buterin and quickly earned praise from the Ethereum mastermind and his followers, who recognized the potential of Hayden Adams and his creation.
The very early days of Hayden Adams talking…
“Ethereum was really cool and interesting because of this idea: you could build applications that no one controlled, anyone could use them, and you didn't need to trust anyone. All you had to trust was the code. So, the earliest idea for a swap was just this: could we create a smart contract on Ethereum that lets you trade between cryptocurrencies in a way that truly embodies those core properties of Ethereum, like decentralization? That's what got us thinking about building a side project.”
Interestingly, the name Uniswap wasn't the original idea. Hayden Adams envisioned 'Unipeg,' a blend of unicorn and pegasus. However, Vitalik Buterin suggested Uniswap, and the rest is history.
Another early quote from Hayden Adams…
“I think a really important starting point is to view Uniswap as very similar to Ethereum itself. Ethereum is a core piece of public infrastructure, upon which thousands of teams are building and hundreds of thousands of liquidity providers participate. It's really just this public infrastructure for the entire space, right?”
The platform's evolution was swift. It introduced its own governance token, UNI, and released new versions at the community's request. Now boasting $5 billion in TVL, Uniswap has been on a roll. Now they are ready to square off with the SEC.
Here is Hayden Adams’ full response to the Wells Notice:
“Today, Uniswap Labs received a Wells notice from the SEC.
I’m not surprised. Just annoyed, disappointed, and ready to fight.
I am confident that the products we offer are legal and that our work is on the right side of history. But it’s been clear for a while that rather than working to create clear, informed rules, the SEC has decided to focus on attacking long-time good actors like Uniswap and Coinbase. All while letting bad actors like FTX slip by.
When I first set out to build Uniswap, the goal wasn’t to reimagine finance.
It was an experiment in radically decentralized, fully automated onchain markets. I didn’t know if it would work or if anyone would use it.
Fast forward to today, the Uniswap Protocol has processed over $2 trillion in volume. Many thousands of teams and developers have forked our code or built on top of it. We built entirely new financial infrastructure that is transparent, fair, secure, and accessible powering an entire industry.
The team at Uniswap did all of this in the US from our office in New York City.
People often ask me why we stay in the US and my answer is simple: I believe that blockchain is incredibly powerful technology. Like the Internet, it’s here to stay. So someone needs to figure it out, and it might as well be us.
And that when you build technology that improves people’s lives – you don’t need to hide.
The SEC’s mission is “protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.” This is a noble mission. I would argue Uniswap does a far better job of this today than the SEC.
Yes, I'm frustrated that the SEC seems to be more concerned with protecting opaque systems than protecting consumers. And that we'll have to fight a US government agency to protect our company and our industry.
This fight will take years, may go all the way to the Supreme Court, and the future of financial technology and our industry hangs in the balance. If we stand together we can win.
I think freedom is worth fighting for. I think DeFi is worth fighting for.
And of course, we won’t stop shipping. Stay tuned.”
What I want to know is what angle is the SEC going to take on Uniswap?
Is it possible the SEC is issuing a Wells Notice as ammunition to deny the ETH ETF because unregulated DEXes are built on top of it? At its core, Uniswap is a software company, arguably falling far outside the SEC's usual regulatory purview. What happened to the SEC’s goal of fostering capital formation? Anyone capable of a quick Google search can learn that the First Amendment protects communication, even if it's expressed in a code like computer programming. After all, musical scores and mathematical formulas are a kind of code too.
Echoing Hayden Adams' sentiment, this development isn't unexpected. The SEC is clearly desperate and has resorted to going after everyone and anything. However, ongoing lawsuits are already providing clarity on the boundaries of the SEC's authority, which will ultimately lead to a more defined regulatory landscape.
At the expense of satisfying a hunger for power, Gensler, the Chair of the SEC, is picking the wrong fight and self-cannibalizing the SEC.
I have no doubt Uniswap and crypto will slay the snake, it’s only a matter of time.
I am eager to delve deeper into this again once the lawsuit unfolds and dissect the SEC's actions—it truly never gets old.
Unicorn > Snakes.
*The newsletter is delayed today - I had no internet on my flight so I was unable to send it!
Bitcoin Thoughts And Analysis
I went to Paris for a few days and did not look at charts.
I landed in American, checked for the first time, and price was the same as when I left.
Bitcoin is sideways.
The good news? Last week closed above $69,000.
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.
I am always a bit hesitant to share smaller cap coins, so always consider that and use solid risk management. I own PROM, and am sharing it because Trading Alpha is giving a clear buy signal. As you can see, this indicator is showing squeeze shading (the yellow) with a buy arrow on the daily, and the trackline turning green. We also have grey dots, indicating a bullish trend.
The first target would be the top of the ascending channel. A break above that would really get the party started. We also have the all time high at $16.42, so we would have a blue sky breakout above that.
Legacy Markets
The "Magnificent Seven" large tech companies are driving a rebound in the stock market as investors await the upcoming earnings season, which is expected to show continued profit growth for S&P 500 companies. Despite higher interest rates, the earnings, particularly from tech giants like Apple, Microsoft, and Amazon, have exceeded expectations, supporting the market's $4 trillion rally this year.
Inflation data, slightly below estimates, has positively influenced market sentiment, contrasting with the previous day's higher inflation figures that dampened hopes for imminent Federal Reserve rate cuts. The market is adjusting to a potentially smaller number of rate cuts, with expectations leaning towards a gradual easing of rates.
The S&P 500 has surged, partly due to exceptional performance forecasts for the tech sector, which anticipates a 38% profit increase in Q1. However, the overall earnings growth for the S&P 500 is projected to be modest. Wall Street is closely monitoring the banking sector, where CEOs are expected to provide insights into the economic resilience and future prospects, particularly concerning net interest income and investment banking amidst changing interest rate expectations.
Investor focus also remains on the Federal Reserve's stance, with various Fed officials indicating a cautious approach to cutting rates, emphasizing the need to balance inflation control with economic growth. The high interest rates are beneficial for banks' net interest income but pose risks of loan defaults, creating a complex environment for financial institutions.
Overall, the stock market is navigating through a period of cautious optimism, with upcoming corporate earnings likely to determine the trajectory for equity valuations amidst a backdrop of rising Treasury yields and persistent inflation.
Key events this week:
China trade, Friday
US University of Michigan consumer sentiment, Friday
Citigroup, JPMorgan and Wells Fargo due to report results, Friday.
San Francisco Fed President Mary Daly speaks, Friday
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.9% as of 3:03 p.m. New York time
The Nasdaq 100 rose 1.6%
The Dow Jones Industrial Average rose 0.2%
The MSCI World index rose 0.4%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.2% to $1.0726
The British pound rose 0.1% to $1.2554
The Japanese yen was little changed at 153.23 per dollar
Cryptocurrencies
Bitcoin rose 0.4% to $70,084.51
Ether fell 0.4% to $3,500.26
Bonds
The yield on 10-year Treasuries advanced three basis points to 4.57%
Germany’s 10-year yield advanced three basis points to 2.46%
Britain’s 10-year yield advanced five basis points to 4.20%
Commodities
West Texas Intermediate crude fell 1.1% to $85.29 a barrel
Spot gold rose 1.2% to $2,362.77 an ounce
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Lizzy Warren Spews Lies
Sen. Elizabeth Warren sent a letter to Sen. McHenry and Sen. Waters, expressing concerns that stablecoin legislation could unleash financial risks to consumers, financial stability, and national security, fearing that positive regulation could soon unfold. However, her letter is riddled with misinformation and half-truths, designed to mislead unsuspecting readers and listeners. Thankfully, we know better.
When listing some of the risks stablecoins pose, Warren stated the following which is the crux of where her concerns lie, “Risks associated with a rapid growth of stablecoin usage, including an excessive concentration of economic power, systemic risk to the financial system and the real economy, higher borrowing costs, and decreased credit availability.”
Elizabeth Warren is concerned that her banking cartel could lose power to entities beyond her control, and I give her credit for acknowledging this truth. However, what she fails to mention in her letter is her desire for a CBDC, which is really the heart of the matter. If Warren could, she would target Bitcoin, but she knows her influence in that arena is waning. Thus, she is focusing on the next best option: stablecoins.
Here’s a quote she provided in the letter, which is just so ridiculous when you spend just a couple of minutes looking at the facts:
“Stablecoins also pose risks to our national security. According to blockchain analytics firm Chainalysis, stablecoins now account for the majority of all illicit transaction volume, overtaking bitcoin.”
I dug into this quote to give you the full context… “Through 2021, Bitcoin reigned supreme as the cryptocurrency of choice among cybercriminals, likely due to its high liquidity. But that’s changed over the last two years, with stablecoins now accounting for the majority of all illicit transaction volume. This change also comes alongside recent growth in stablecoins’ share of all crypto activity overall, including legitimate activity.”
Warren is literally quoting a pro-crypto firm and expressing concern about less than 1% of crypto transactions being illicit. However, global illicit money flows totaled $3.1 trillion in 2023, with crypto's illicit activity estimated at around $20 billion. I am praying that Warren is replaced by anyone else, or even better, by John Deaton, who truly understands our industry instead of blindly working against it.
Inflation Data Came In Hot
Here are the two-inflation metrics you need to know:
U.S. CPI: +3.5% year-over-year (est. +3.4%)
U.S. core CPI: +3.8% year-over-year (est. +3.7%)
In February, the metrics were at:
U.S. CPI: +3.16% year-over-year (2.9%)
U.S. core CPI: +3.76% year-over-year (est. +3.7%)
Despite this being the 3rd consecutive 'hot' reading, I don't believe the projected cuts or hikes mean much for Bitcoin. Furthermore, this reading should mark the end of disinflation, as three consecutive instances are enough, in my book, to break the trend. Inflation itself serves as an advertisement for Bitcoin, but the most significant advertisers right now are ETF flows and rising debt. Bitcoin doesn’t care what the Fed does.
We Are Starting To Learn Who Is Buying Bitcoin ETFs
SEC filings are beginning to trickle in, revealing who is buying the Bitcoin ETFs. Yesterday, I learned that wealth management firms Signal Advisors and Wedmont Private Capital each purchased shares of the Bitcoin ETF, 20,571 shares of IBIT, and 3,471 shares of FBTC, respectively, with a South Carolina firm being the first last week. Most of these firms are likely unfamiliar to us, which is exactly what we want to see: the Bitcoin ETF reaching mass adoption. We should continue to see lots more of these reports the coming weeks and through May.
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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.