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In This Issue:
World War Three
Bitcoin Thoughts And Analysis
What Should We Expect With The Hong Kong ETF Debut?
USDe Holds Strong
IBIT Is Chasing An All-Time ETF Record
Everyone Wants The ‘Epic’ Sat
Bitcoin Pump Is Imminent | Macro Monday
World War Three
The threat of WWIII is omnipresent.
August 8, 2008—The start of the Russo-Georgian War, which raised concerns about a wider conflict involving Russia and NATO.
April 6, 2014—Russia annexed Crimea, creating conflict in Eastern Ukraine and heightening tensions between Russia and Western countries.
April 7, 2017—The U.S. orders missile strikes on a Syrian airbase in response to chemical weapons.
June 12, 2018—U.S. President Donald Trump and North Korean leader Kim Jong-un meet, leading to speculation about the potential for conflict if diplomatic efforts fail.
January 3, 2020—A U.S. drone strike killed Iranian General Qasem Soleimani, raising fears of conflict between the United States and Iran.
February 24, 2022—Russia invades Ukraine with a large-scale military intervention, leading to fears of a broader war involving NATO and Russia.
October 7, 2023—Hamas initiates a major attack on Israel, leading to speculation about a larger-scale war in the Middle East.
The list I just provided was only a quick summary of past recent conflicts that led to speculation about WWIII. Historically, since the end of WWII, there has always been a threat of WWIII. The Korean War, Cuban Missile Crisis, the Vietnam War, and the invasion into Afghanistan were not listed above and are only a few of the many major conflicts that could have ended up in WWIII.
As Israel retaliates against Iran, expect there to be loads of discussion about WWIII.
Until WWIII is declared—fingers crossed it never comes—there will always be a threat of another world war. And when WWIII ends, there will be a threat of WWIV, assuming at least a couple of people are left to speculate. The anticipation and fear of major war is human nature.
This inevitably means that as investors, to some extent, we must become historians in order to make informed decisions about global events that best serve our financial bottom line. War is dreadful, and the pervasive and terrifying threat of it looms, but markets will always persist—which means we still have decisions to make. For the record, I am never hoping for the loss of life to benefit from volatility, but I am advocating that everyone that is exposed to market risk stays educated to make the best possible decisions when situations arise.
When it comes to conflict, it's essential to understand that there's no general rule of thumb for how markets will react. There's no such thing as a script to follow, and I can't believe I even have to clarify that.
If there were a rule of thumb or guarantee of how smaller conflicts would impact the market, we would all be rich. When you factor in a nascent and uncorrelated asset i.e. Bitcoin, the immediate and subsequent fluctuations due to the conflicts mentioned are VERY random. In general, narratives are primarily going to form around the needs of whales looking to offload or buy, depending on the cycle, rather than being influenced by geopolitical tensions, your favorite altcoin, maximalist views, or rare solar eclipses.
These are coping mechanisms to explain the unexplainable.
When it comes to larger-scale conflicts, such as major wars, there tends to be less randomness and more consistency in markets. The cycle looks something like this: fear and uncertainty rise—> markets hate uncertainty—> investors sell—> high volatility—> sharp declines—> war progresses—> markets stabilize—>markets recover—>markets rise. It's a tale as old as modern markets themselves, and one that will continue to unfold because the only certainty is that humans will always have emotions and react with fear when they perceive a threat.
What's unique about these smaller-scale conflicts is that, like all things, investors have an extremely short memory or lasting concern for them. This means markets will naturally quickly recover upwards because the next shiny thing or threat of war is more distracting. Is anyone actually concerned today about how the Russia and Ukraine conflict might impact the S&P 500? Does anyone not in that region even know if there is a war still going on or where exactly it is taking place? For better or worse, investors move on quickly.
The material threat of nuclear war would rightfully scare the hell out of anyone and the markets. But if the world is going to end, do investments really matter anymore at that point? Probably not. By design, Bitcoin is stable and over the long run, it will naturally thrive as the world continues to speculate about WWIII, rising debts, and the rapid deterioration of fiat currency.
If you are going to have an opinion, I agree with this:
There is always going to be fear mongering, skepticism, and uncertainty in the world, which means it’s our job to remain levelheaded when the markets test us.
Regardless of how events unfold in the Middle East this week, our primary focus should be on thinking about ways to minimize conflict. For many investors, the ideal scenario would entail completely forgetting to check your portfolio and returning when the mainstream discourse has forgotten about war. If a dip is what you're waiting for, it just might happen. It’s impossible to say, we have already had a decent one.
Let’s hope for a safe and great week, thank you all for reading.
*I am currently without laptop access so cannot give a thorough market update
Bitcoin Thoughts And Analysis
I am posting this on my phone from a plane, so will simply share a screenshot of what I am watching, which should be obvious to anyone who’s follows me - potential bullish divergence with oversold RSI on the 4-hour chart. We want to see a definitive “elbow up” on RSI and price to confirm, which we started to have before. This looks to be building nicely for a local bottom.
What Should We Expect With The Hong Kong ETF Debut?
It's challenging to predict the extent of inflows into Hong Kong, but what we do know is that the approval of spot BTC and ETH ETFs is an additive development, regardless of the flow volumes. One important point to note is that Chinese investors do not have legal access to these funds. However, this does not mean that they will not find ways to purchase the ETF. Consider the ‘strict’ ban on miners, which initially decimated China's dominance, only for miners to quickly return in large numbers.
Also, the fees for these products are significantly higher, and the issuers are not nearly the size of BlackRock or Fidelity; they are more comparable to the smaller firms with much lower trading volumes. Overall, my expectations are moderate, but I would not be surprised if, over time, there is an unusually high level of inflows due to Chinese investors finding ways to invest despite the restrictions. This could take a long time though. It is impossible to predict how strict the Chinese government will be on this, which will directly impact the flow of funds.
Also, despite the negative FUD surrounding Ethereum, it continues to garner credible and positive attention global attention. Haters should take notes.
USDe Holds Strong
Ethena Labs, the creator of USDe, the synthetic dollar, has released the asset's first attestation report, highlighting its full collateralization during the past volatile week. According to Ethena Labs, "Going forward, these attestation reports will be released on a monthly basis to provide regular updates on the amount and location of the assets backing the protocol. The monthly attestation reports will be shared in the Ethena governance forum." Seraphim Czecker, Ethena’s head of growth, described USDe's resilience during this market turbulence as the stablecoin "passing its inaugural stress test." This of course did not appease critics. Nonetheless, it is noteworthy that a brand new synthetic stablecoin only depegged to $0.995 despite the strong volatility this past week. The real test will come when there is a truly massive day, such as +/-30% in a day. If that ever happens, that's when USDe will truly earn its stripes.
IBIT Is Chasing An All-Time ETF Record
IBIT is the sole remaining Bitcoin ETF with a streak of only positive flow days among all issuers. Last Friday, Fidelity’s FBTC recorded $0 in flows, marking the end of its 63-day run. In contrast, IBIT continues to add flows steadily, currently tied for 14th place, with just a few more days needed to break into the top 10. JPMorgan’s Equity Premium Income ETF, JEPI, holds the #1 position with 160 days. IBIT potentially reaching the #1 spot is more so about bragging rights at this point, as a negative net flow day wouldn't have a meaningful impact if it came. Nevertheless, it's an impressive achievement and a good advertiser for the space.
Everyone Wants The ‘Epic’ Sat
Mining companies are ramping up their operations in preparation for the imminent Bitcoin halving, intensifying their efforts to secure the first block post-halving. The race to capture the 'epic' sat has gone more mainstream, and has encouraged miners to deploy new, more powerful equipment and potentially reinstalling older hardware, pushing the hashrate to new heights. The value of this single Satoshi is uncertain, with some sources suggesting it could be worth $1 million, while other stronger ordinal believers speculate it could be as high as $50 million, a pretty significant range of possibilities. Friday will be epic, regardless of how the sat hype pans out.
Bitcoin Pump Is Imminent | Macro Monday
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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.
Dear Scott,
Options on a Bitcoin ETF are available today. As you probably know, the world’s first physically settled Bitcoin ETF (BTCC.TO) was launched in 2021 by Purpose Investments. Since its inception, BTCC's price performance almost exactly mimics Bitcoin’s. The BTCC options are traded on the Montreal exchange, not the biggest by far - but this is options you can buy on Bitcoin!! I would love to hear your opinion Scott. Thank you. John
Unfortunately I live in Iran