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In This Issue:
What If The SEC Wins?
Bitcoin Thoughts And Analysis
Legacy Markets
Maybe We Are Earlier Thank We Think
Everyone Is Building A Layer 2
Grayscale Will Witnesses A Rare Double Halving
Noobs Are Getting Excited About The Halving
Is The Bitcoin Rally Over?
What If The SEC Wins?
We often assert confidently that the SEC stands no chance against the cryptocurrency industry. This belief is fueled by our industry's resilience, perceived weaknesses in the SEC's arguments, and a broad faith in the triumph of freedom.
However, it is crucial to temper this confidence with a recognition of the real possibility that the SEC could prevail. Understanding the potential implications of such an outcome is essential. While I am not a legal expert, I aim to shed light on what might happen if the SEC were to succeed. Let's explore this.
Firstly, let’s outline the SEC’s stated three-part mission—although I believe they have deviated from these goals:
Protect investors by ensuring access to accurate information and preventing fraud.
Maintain fair, orderly, and efficient markets by overseeing market participants and exchanges.
Facilitate capital formation by regulating securities offerings and market conduct to provide investors with necessary information.
In the context of cryptocurrency, the SEC seems focused on a singular mission: to aggressively classify all cryptocurrencies, possibly even Bitcoin, as securities. This move, spearheaded by Gary Gensler, threatens to severely impact the industry in the U.S.
Currently, most cryptocurrencies are considered commodities and regulated by the CFTC, supported by both explicit statements and case law. Yet, the SEC claims that platforms like Coinbase have facilitated trading in at least 13 tokens it deems as securities, including SOL, ADA, and MATIC, with the possibility of Ethereum soon joining this list after the Wells Notice issued to the Ethereum Foundation.
If major cryptocurrencies like Ethereum or Solana were classified as securities, the consequences would be profound. Unlike commodities, which include physical goods and are often traded on futures markets, securities must be traded through registered brokers and are subject to stringent disclosure requirements and regulatory oversight. This classification could disrupt everything from DeFi transactions to the buying and selling of cryptocurrencies, potentially leading to delisting from exchanges and jeopardizing related projects like NFTs, wallets, smart contracts, and stablecoins.
This scenario would likely trigger a massive market upheaval, characterized by panic selling and widespread uncertainty among investors. Despite this, the probability of such a scenario remains low, yet the importance of vigilance in this ongoing battle cannot be overstated.
As we move forward, support from major financial entities has been burgeoning, bolstering our stance against the SEC. The real danger to our industry is not just the SEC itself, but complacency within our ranks about the outcome of this battle.
The SEC’s likelihood of success is minimal if we remain proactive. However, overlooking the gravity of this issue could indeed result in significant setbacks for what we've built.
If you want to contribute but prefer not to engage directly, consider investing in threatened assets like Bitcoin, Ethereum, or others. The larger our community grows, the lesser the impact the SEC can have.
As we approach the halving and face potential market fluctuations, remember: the market has yet to fully price in the scenario of the SEC losing definitively to crypto—a factor that could drive unprecedented growth.
Lastly, this May is critical for Ethereum, as the SEC’s actions could delay the launch of the Ethereum ETF if they decide to classify ETH as a security.
Bitcoin Thoughts And Analysis
While the pricey action remains dicey, we have a number of signals forming (but NOT confirmed) that a bottom could be forming.
On the daily, the range lows were pierced yesterday, but price bounced back above and closed with a wick through the low. This is a liquidity grab - called a bullish SFP (swing failure pattern). Generally this is a stop hunt, where someone pushed price below an obvious level to trigger shorts and liquidate longs (those become sell orders). This way they can make money and fill at a lower price. Whale games. But we need to now see the range lows hold.
Bitcoin continues to build stronger bullish divergence with oversold RSI on multiple time frames. More often than not, this is the best bottoming (which is a process) signal there is.
Legacy Markets
Global stocks and Asian currencies experienced a rally as authorities responded to the strengthening dollar, instilling renewed confidence in financial markets. This shift came after a period of turbulence fueled by concerns over U.S. economic strength and inflation, which had led to a reassessment of the Federal Reserve's interest rate plans. Notably, the U.S. Dollar and Treasury yields fell, suggesting a pause in their recent climbs.
In significant developments, a joint statement by U.S. Treasury Secretary Janet Yellen and finance ministers from Japan and South Korea addressed the depreciation of Asian currencies, hinting at potential coordinated interventions to stabilize these currencies. This led to a temporary stabilization in the markets, with the won leading gains among regional currencies.
On the corporate front, Taiwan Semiconductor Manufacturing Co. (TSMC) reported a rise in profits driven by strong demand for AI technology, contrasting with the downturn in orders for Europe's tech giant ASML Holding NV due to new U.S. export controls. Additionally, Micron Technology Inc. is set to receive significant funding for domestic production, aligning with U.S. efforts to repatriate semiconductor manufacturing.
The global financial scene remains cautious, with ongoing concerns about U.S. interest rates and inflation, and the Chinese economy's faltering recovery despite governmental efforts to bolster growth.
Key events this week:
US Conf. Board leading index, existing home sales, initial jobless claims, Thursday
Fed Governor Michelle Bowman speaks, Thursday
New York Fed President John Williams speaks, Thursday
Atlanta Fed President Raphael Bostic speaks, Thursday
BOE Deputy Governor Dave Ramsden and ECB Governing Council member Joachim Nagel speak, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
Bloomberg Television brings you the latest news and analysis leading up to the final minutes and seconds before and after the closing bell on Wall Street. Today’s guests are Evercore ISI’s Julian Emanuel, Citi’s Andrew Gardiner, TD Cowen’s Oliver Chen, Goldman Sachs’ Daan Struyven, Invesco’s Kristina Hooper, Bloomberg News’ Tyler Kendall, Former Boeing Physicist’s Stan Sorscher, Bloomberg News’ Hema Parmar, SWIB CIO Anne-Marie Fink, Wedbush’s Alicia Reese.
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.4% as of 2:44 p.m. Tokyo time
Nasdaq 100 futures rose 0.5%
Japan’s Topix rose 0.7%
Australia’s S&P/ASX 200 rose 0.5%
Hong Kong’s Hang Seng rose 1%
The Shanghai Composite rose 0.3%
Euro Stoxx 50 futures rose 0.3%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro was little changed at $1.0683
The Japanese yen was little changed at 154.26 per dollar
The offshore yuan was little changed at 7.2458 per dollar
Cryptocurrencies
Bitcoin rose 0.9% to $61,430.51
Ether rose 1.1% to $3,004.79
Bonds
The yield on 10-year Treasuries declined two basis points to 4.57%
Australia’s 10-year yield declined nine basis points to 4.29%
Commodities
West Texas Intermediate crude rose 0.2% to $82.87 a barrel
Spot gold rose 0.6% to $2,376.16 an ounce
Maybe It Is Earlier Than We Think
Coinbase Institutional has released an in-depth report on the crypto market for Q2 2024, discussing pivotal topics such as the halving, cycle performance, and the latest on Bitcoin and Ethereum. While I plan to delve deeper into these findings in a comprehensive introduction, one particular chart caught my attention. This chart indicates that we may be earlier in the current cycle than previously thought. Drawing parallels to the 2018-2022 cycle, the analysis from Coinbase suggests that if current patterns hold, we might not see the market peak until late 2025, potentially around October.
Everyone Is Building A Layer 2
Following the successful launch of BASE, interest in developing Layer 2 solutions has reached unprecedented levels. This enthusiasm has inspired OpenAI founder Sam Altman to introduce World Chain. Building on the foundation of Worldcoin, World Chain aims to enhance the network for "verified humans," establishing an ecosystem designed to effectively deter bots in the era of advanced artificial intelligence.
Ethereum investors will be encouraged to hear that World Chain will utilize Optimism's OP stack, the same blockchain-building framework employed by BASE. This choice not only underscores the utility and robustness of Ethereum's architecture but also promises to augment its ecosystem. While opinions on 'proof-of-personhood' and retina scanning may vary, the overarching goal to minimize bot interference is widely viewed as beneficial, particularly given its integration with the Ethereum platform.
In related news, OKX has also announced the launch of an ETH Layer 2 solution this week, signaling a robust period of innovation and development within the Ethereum network.
Grayscale Will Witnesses A Rare Double Halving
Not only is Bitcoin poised for a halving tomorrow, but since the launch of the Bitcoin ETF back in January, Grayscale's BTC assets under management (AUM) have dramatically declined from 640,000 BTC to approximately 308,000 BTC. Interestingly, despite a 51% reduction in Bitcoin held under management, the value of the remaining assets has only dropped by 29%—a testament to Bitcoin's significant price increase, even at current levels. With Grayscale's BTC AUM approaching that of BlackRock, there is speculation that Grayscale might adjust its fees to align more closely with its competitors, though this is not confirmed. It would indeed be intriguing to see how Grayscale and BlackRock might compete for inflows in the future. For reference, in the chart above, black represents the price of BTC, while orange indicates Grayscale's balance.
Noobs Are Getting Excited About The Halving
This particular Bitcoin halving is distinguishing itself with an unprecedented level of public interest. It has not only broken the search record set by the previous halving in May 2020 but is also outperforming other popular search terms like “420,” which coincidentally aligns with the timing of this halving—potentially occurring late Friday or early Saturday. This surge in curiosity, especially from newcomers, is a positive shift away from fleeting trends towards more substantial aspects of cryptocurrency, like the halving, rather than ephemeral pursuits in lesser-known, speculative coins.
Is The Bitcoin Rally Over?
I am joined by James Butterfill, Head Of Research at CoinShares, as we discuss the latest in crypto and try to find out whether the Bitcoin rally is over. Chris Inks will join us in the second part to share some interesting trades in crypto and beyond.
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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.
Hey man. It is obvious that the "What If The SEC Wins?" part was written with the help of Chat GPT. You can see it with the use of the words "crucial", "essential", "profound", etc. Just saying.