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In This Issue:
Smoke And Mirrors
Bitcoin Thoughts And Analysis
Legacy Markets
DOJ Recommends 3 Year Sentence For CZ
There Is A Fee War In Hong Kong
Two More Developers Arrested
Bitcoin To $150K, Ethereum To $8K By The End Of The Year | Is This Target Achievable? | Mark Yusko
Smoke And Mirrors
Here is the Britannica Dictionary definition of SMOKE AND MIRRORS:
[plural] chiefly US
: something that seems good but is not real or effective and that is done especially to take attention away from something else that is embarrassing or unpleasant
Magicians and illusionists often rely on smoke and mirrors to craft deceiving tricks and illusions that fool the audience's senses. It appears that DeFi protocols might be adopting similar tactics.
Let me share what happened.
Yesterday afternoon, I discovered a shocking depegging and liquidation event at Renzo, the second-largest liquid restaking protocol, which boasts a total value locked (TVL) of $3.14 billion. This incident resulted in over $60 million being liquidated across two pools, Morpho and Gearbox. The fallout is undeniably serious, and the deception that ignited this cascade was almost theatrical in its execution.
Without further ado, take a look at this chart. Analyze it carefully—can you spot what’s wrong?
You don't need an in-depth understanding of tokenomics or supply distribution to realize that this chart was manipulated to create a deceptive narrative; even a basic grasp of math, similar to that of a third grader, would suffice to see what's really happening. Additionally, the choice of colors could hardly be more unpleasant to the eye.
Following the backlash, Renzo reissued the chart, yet it still failed to accurately represent the data visually.
To show that crafting honest pie charts isn’t rocket science, I whipped up the chart below in just 4 minutes. It’s straightforward, manipulation-free, and uses an easy-to-read color scheme. If you need clear, transparent visuals—consider hiring me!
The marketing was indeed over the top, but the core issue goes beyond mere deception; it lies in the allocation decisions—2.5% to liquidity, 2.5% to the launch pool, with a staggering 65% to insiders and 30% labeled as for the "community." This was not a novice mistake; it was a deliberately executed plan driven by greed.
Despite digging through the official documents for an explanation or justification of these allocations, I found nothing substantive. The manipulation doesn't stop there; many online articles have also failed to acknowledge the truth.
Even CoinDesk's coverage of the event was timid, evidently too cautious to state the obvious. Unlike them, I’m not holding back.
Following the debacle and ensuing investor disappointment, those holding ezETH rushed to exit their positions, overwhelming the thin order books. This led to the token's price plummeting from parity with ETH to $2,755 on some platforms and to as low as $700 on Uniswap. Investors who held their ground were not affected—assuming no covert debasement occurred—but panic sellers suffered heavily, and those with leveraged positions were completely wiped out.
Depeg events have become alarmingly frequent as their notoriety has grown, affecting both major and minor tokens across platforms like Ethereum and Solana, including stETH and mSOL. Nonetheless, the poor practices at Renzo are particularly indefensible. With Eigen Layer, the leading restaking platform, planning an airdrop later this year, they should take note of what to avoid.
The allure of earning from point farming, lending, staking, and restaking is undeniable, especially with new DeFi trends emerging every week. However, the associated risks are significant. Remember, yield equates to risk; it's never free. Earning a modest 2.5% by staking ETH on a centralized exchange carries minimal risk, but if you're making 18% by lending restaked liquid derivatives to point farmers, heed this warning.
Be diligent about the projects you support. Question where the money flows. The hunt for venture capital funding is rampant, and even if you're offered a piece of the pie, chances are someone else is taking a much larger share. The DeFi sector must prioritize the interests of its users over those of VCs, whose main concern often lies merely in investment returns.
Proceed with caution. If you're experiencing FOMO but know deep down this game isn't for you, sticking with major, established tokens is likely a safer bet.
Bitcoin Thoughts And Analysis
If we take a look at the weekly Bitcoin chart and draw the same range that we have been looking at on the daily, the situation becomes more clear. Why? When you have a range, you add the EQ (equilibrium, center dashed line) and it tends to act as resistance and support. As you can see, the last two weekly candles all found strong resistance at the range EQ and price is stuck in the bottom half of the range, effectively creating a smaller channel between the EQ and the range lows. Bulls really want to see the EQ flipped to support, which would target the range highs around $74,000. For now, still sideways chop in the bottom half of the range.
Trading Alpha still has grey dots on the weekly time frame and is still showing price above the green, rising track line. The trend remains bullish until proven otherwise.
Legacy Markets
Technology stocks are leading declines in US equity futures, notably after Meta Platforms Inc. reported a disappointing outlook, causing its shares to tumble and affecting the broader market. The Nasdaq 100 and S&P 500 futures both dropped, reflecting heightened volatility during a critical earnings week. In other market news, Anglo American Plc saw a significant rise after BHP Group made a takeover offer, which could potentially create the world's largest copper miner.
This market activity occurs amidst key economic events, including awaiting US GDP growth figures that could influence Federal Reserve interest rate decisions. Furthermore, the Japanese yen has hit a 34-year low, raising prospects of intervention by Japan's central bank.
On the corporate front, various companies reported earnings with mixed results affecting stock performances across sectors, from banking to consumer goods. The geopolitical landscape is also in focus, with U.S. Secretary of State Antony Blinken discussing economic policies and sanctions during his visit to China.
Key events this week:
US GDP, wholesale inventories, initial jobless claims, Thursday
Microsoft, Alphabet, Airbus earnings, Thursday
Japan rate decision, Tokyo CPI, inflation and GDP forecasts, Friday
US personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday
Exxon Mobil, Chevron earnings, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.5% as of 6:06 a.m. New York time
Nasdaq 100 futures fell 0.9%
Futures on the Dow Jones Industrial Average fell 0.3%
The Stoxx Europe 600 fell 0.2%
The MSCI World index fell 0.1%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro rose 0.3% to $1.0727
The British pound rose 0.4% to $1.2511
The Japanese yen fell 0.2% to 155.62 per dollar
Cryptocurrencies
Bitcoin fell 0.3% to $63,858.46
Ether fell 0.2% to $3,124.7
Bonds
The yield on 10-year Treasuries was little changed at 4.64%
Germany’s 10-year yield declined one basis point to 2.58%
Britain’s 10-year yield declined three basis points to 4.31%
Commodities
West Texas Intermediate crude was little changed
Spot gold rose 0.4% to $2,325.15 an ounce
DOJ Recommends 3 Year Sentence For CZ
The U.S. Department of Justice (DOJ) has recommended a three-year prison sentence for Changpeng "CZ" Zhao, founder and former CEO of Binance, following his guilty plea for violating the Bank Secrecy Act. This recommendation comes despite Zhao's attorneys arguing for probation based on his acceptance of responsibility and the fine he already paid. The DOJ argues that Zhao's actions had massive implications, including facilitating transactions involving illicit funds through Binance. Zhao's defense contends he was not directly aware of specific illegal transactions and suggests that the portion of such transactions was very small relative to Binance’s overall volume. The sentencing, originally set for late February, has been postponed to April 30. Meanwhile, Binance has also pleaded guilty to related charges, agreeing to a $4.3 billion fine and the appointment of a court monitor.
There Is A Fee War In Hong Kong
Mark your calendars, the date is set for Bitcoin and Ethereum spot ETFs to begin trading in Hong Kong. On top of this good news, the attitude toward capturing AUM is similar to the U.S. in that there is already a fee war happening between the major issuers. $230 billion AUM Harvest Fund has opted for the 0% fee approach then 0.3% after the first 6 months, whereas the competitors are respectably below 1%. Also unique about the approved ETFs is that they will operate under an in-kind model, which means investors can swap their coins for ETF shares, which is believed to be an advantage in attracting a new class of investors. One last tidbit, according to this ETH ETF tracker, there are 20 spot ETH ETFs listed around the world and 7 futures ETFs.
Two More Developers Arrested
Bitcoin Magazine wrote this excellent opinion piece on the severity of arresting coders for writing code, which I suggest you read. The gist of the story is that federal prosecutors charged Samurai Wallet founders Keonne Rodriguez and William Lonergan Hill with conspiracy to commit money laundering.
Below is an excerpt taken from the official DOJ press release.
Samourai Wallet, a Bitcoin-only noncustodial CoinJoin service known for enhancing privacy for Bitcoin users, faced a major setback yesterday. The service, which mixes Bitcoin from multiple users to obscure transaction records, had its website seized by authorities. Alongside this, a warrant was issued for the mobile application. The implications for the funds or users of the platform remain unclear, but the situation is likely to have serious repercussions.
“Bitcoin is a tool of empowerment and Bitcoin is for enemies. Well, now our enemy, the state, is empowered, and their regulatory goons are barking like wolves at the gate. We must stay clever, and arm ourselves with the rhetoric needed for the oncoming onslaught against those that dare to build tools that threaten the spellings of the state. Writing code is not a crime. Whispering numbers to a loved one cannot be redefined as a criminal act. Bitcoin is not money, but just a ledger. A database. Free Samourai.”
Bitcoin To $150K, Ethereum To $8K By The End Of The Year | Is This Target Achievable? | Mark Yusko
Mark Yusko, and, of course, his brother, join me today to unpack the latest in crypto. And there is a lot: Hong Kong Bitcoin ETFs, Standard Chattered's year-end predictions, Do Kwon's and CZ's cases updates, and more! 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.