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In This Issue:
Crypto On The Offensive
Bitcoin Thoughts And Analysis
Legacy Markets
Stripe Is Back
Movement Labs Moves To Ethereum
All Good Things Come To An End
This Notepad Sold For Over $1 Million
SEC, IRS... FBI?
Bitcoin To Hit $90K Soon | Mike Alfred
Crypto On The Offensive
This is it—the beginning of the end, the clash we've all been anticipating.
Until now, the SEC has been aggressively pursuing the crypto sector. Wells Notices have been served extensively, signaling that the SEC is covertly orchestrating a comprehensive offensive aimed at curtailing Ethereum's reach by any means necessary.
The crypto community has long speculated that a lawsuit would be filed against the SEC to champion Ethereum's cause, but until recently, no one had taken definitive action. The Ethereum Foundation, despite receiving a Wells Notice, remained silent. Grayscale, previously proactive in legal matters, seemed to be waiting for a decision on May 23rd. Uniswap, potentially lacking the resources to lead such a charge, hasn't made a move, and Coinbase, already embroiled in its own legal battles, might be reluctant to open another front.
However, a new chapter has begun: ConsenSys has boldly stepped forward and filed a lawsuit against the SEC in a Texas federal court. Earlier this month, they disclosed receiving a Wells Notice from the SEC, which alleged that their MetaMask Wallet had breached securities laws. ConsenSys' decision to launch a legal counterstrike is a strategic move; by initiating a lawsuit before the SEC fully marshals its arguments, ConsenSys forces the regulatory body to react according to their schedule, compelling the agency to address urgent questions from the industry—chief among them, the classification of Ethereum as a security.
Let’s explore what ConsenSys represents and their stance on this lawsuit. Founded in 2014 by Joseph Lubin, an Ethereum co-founder, ConsenSys has been a key player in the cryptocurrency arena, spearheading several pivotal Web3 projects. The company is notably recognized for developing MetaMask Wallet, as well as other significant platforms like Infura, Linea, Diligence, and a white-label NFT platform. Given the technologies it develops, ConsenSys is deeply vested in understanding where the SEC stands regarding the foundational technology of their products.
In tandem with announcing their lawsuit, ConsenSys has dedicated a considerable portion of its website to discuss the significance of their legal action and has actively used social media to maximize public awareness, creating a rallying cry that resonates throughout the crypto industry.
The following outline, copied from this official page, says everything about the lawsuit you need to know.
Why We’re Suing the SEC
The SEC has no authority—nor should it—to regulate global, peer-to-peer computer networks. The SEC’s aggressive overreach into commodities, software, and these novel technology platforms is unlawful.
The SEC insists that Ethereum, a decentralized network that allows people to control their own finances, identity, and information, must be centralized and beholden to the SEC or not be accessible to the U.S at all. Its position and resulting actions undermine the global Ethereum system and negatively impact developers, market participants, the state of Texas and the U.S. at large.
The SEC is currently reframing its authority, by redefining legal standards and even everyday language, in order to claim oversight of the Ethereum computer programming ecosystem.
If the SEC has its way, then all the work that Congress and other agencies such as the Federal Reserve and Treasury have done on stablecoins is effectively dead, thereby destroying a well-established U.S policy priority and giving the advantage in technological advancement to countries outside of the U.S.
This is just the latest example of aggressive SEC regulatory overreach into sectors far beyond U.S. capital markets: the SEC has decided to regulate environmental policy and corporate governance (boards of directors), and now wants to regulate the technological evolution of the Internet.
As of July 2023, the cryptocurrency industry includes 190,000 direct employees, with 29% of them based in the U.S. If the SEC succeeds in designating ether as a security, companies and developers would see years of work squandered and billions of dollars of economic value destroyed that could potentially lead to widespread layoffs of American workers.
From here on out, the situation is set to improve significantly; Coinbase, Grayscale, the Ethereum Foundation, and numerous other influential entities with a vested interest in the outcome are poised to file amicus curiae briefs, significantly complicating the SEC's position. Additionally, ConsenSys has made a strategic move by engaging the same legal team that represents Coinbase in its ongoing battle with the SEC. This ensures a cohesive and consistent approach, as both companies are essentially waging similar legal battles on behalf of the entire industry.
One can only speculate about what Commissioner Hester Peirce might be devising. Known for her dissenting views within the SEC, she may well be preparing to challenge her colleagues’ stance even before the proceedings kick off.
Joseph Lubin expressed his conviction in a recent blog post, stating, “We fervently believe this technology will prove to be world-changing. Think back to the first time you touched the internet. Did you ever imagine devices like iPhones, smart home devices and vehicles, or connected watches would be possible? That’s the launchpad we stand on today with Ethereum’s potential—a more transparent, accountable, and secure world, a world of possibilities we’re only just beginning to imagine and unlock. Ethereum must be allowed to mature so that we can each claim our right and power to be active builders of the web.”
While I'm not a legal expert, the precedent set by Grayscale compelling the SEC to approve a Bitcoin ETF against Chair Gary Gensler's wishes, and Ripple’s successful argument that XRP is not a security, provide a strong basis for optimism. If these entities can achieve such victories, it’s hard to see how ConsenSys or Ethereum could fail. The premise is straightforward: Wallets are not brokers, and Ethereum is not a security.
The SEC, currently plagued by staffing issues, misinformation, and internal disagreements, continues to see its reputation erode as it racks up more losses. After a year dominated by Bitcoin, it’s now Ethereum's turn to step into the spotlight and deliver a resounding counter to regulatory overreach. This fight transcends price, narratives, and tribalism; it's about shaping the future of the entire industry for years to come.
I hope everyone has a fantastic weekend. This lawsuit is as monumental as Coinbase's and it may take time, but it will be worth every bit of effort and every challenge faced. Wolf out.
Bitcoin Thoughts And Analysis
WEEKLY CHART
I tweeted this chart yesterday and said the following:
Human emotion and Bitcoin during this bull market, described in a single chart. We are back at "it's over," for those playing along at home.
You may have noticed that we bounced right after this post… because humans never change.
Bitcoin is in a range, like it has been many times before. Chill, go touch grass and don’t get shaken out.
Legacy Markets
US equity futures rose, driven by strong earnings from Microsoft and Alphabet, signaling continued momentum in the AI-driven tech sector. Alphabet's shares surged by 12% in premarket trading, potentially increasing its market cap by over $230 billion, while Microsoft rose by 4%. Both companies significantly exceeded Wall Street expectations, particularly in AI services, providing relief amid concerns about high tech valuations and recent unsettling economic data.
The yen reached a record low against the dollar following the Bank of Japan's decision to maintain its interest rate, prompting speculation about potential market intervention. In Europe, the Stoxx Europe 600 index gained, with tech stocks performing well, though Anglo American Plc saw a decline after rejecting a takeover bid from BHP Group.
Other financial highlights included underwhelming performances from Exxon Mobil and Chevron, and a significant drop in Intel's shares after issuing weak guidance. Conversely, companies like Thyssenkrupp and Amundi SA experienced stock gains due to strategic investments and strong quarterly inflows, respectively.
Overall, while a majority of S&P 500 companies reporting so far have beaten earnings estimates, the market response has been mixed, with significant penalties for misses and muted reactions to positive surprises.
Key events this week:
US personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.7% as of 7:38 a.m. New York time
Nasdaq 100 futures rose 1%
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 0.7%
The MSCI World index rose 0.2%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0728
The British pound was little changed at $1.2515
The Japanese yen fell 0.7% to 156.73 per dollar
Cryptocurrencies
Bitcoin fell 1% to $64,136.37
Ether fell 1.4% to $3,128.41
Bonds
The yield on 10-year Treasuries declined two basis points to 4.68%
Germany’s 10-year yield declined four basis points to 2.59%
Britain’s 10-year yield declined two basis points to 4.34%
Commodities
West Texas Intermediate crude rose 0.6% to $84.11 a barrel
Spot gold rose 0.6% to $2,346.27 an ounce
Stripe Is Back
Fintech powerhouse Stripe has made a significant return to the crypto payments arena, announcing that it will once again support cryptocurrency transactions. This time, Stripe is focusing solely on a single stablecoin, USDC, to streamline its operations. The company plans to accept USDC on three major blockchains: Ethereum, Solana, and Polygon, with the rollout expected this summer. This marks a notable pivot from Stripe’s initial foray into the crypto space in 2018 when it began accepting Bitcoin. However, Stripe had to cease Bitcoin support due to issues like high transaction fees, lengthy processing times, and frequent transaction failures. This renewed approach with USDC aims to capitalize on the stablecoin’s predictable value and lower operational hurdles, reflecting Stripe’s commitment to adapting and evolving within the rapidly changing digital payment landscape.
This time, Stripe appears to have addressed these issues, showcasing fast and seamless payments in a live demo hosted by Stripe co-founder and President John Collison. Collison expressed, "Transaction settlements are no longer comparable to Christopher Nolan films in length. And transaction costs are no longer comparable to Christopher Nolan films in budget. Stripe is reintroducing crypto payments—this time with stablecoins, which offer a much-improved experience."
Movement Labs Moves To Ethereum
Movement Labs, a blockchain development team within the Facebook ecosystem based in San Francisco, has recently raised $38 million in Series A funding to integrate Facebook's Move Virtual Machine with Ethereum. Historically, Facebook has explored the blockchain terrain with various ambitious projects, including its foray into stablecoins with Libra, and ventures into the metaverse through its rebranding to Meta, alongside other blockchain-related products. Although many of these early initiatives did not fully come to fruition, Facebook has maintained its interest in the blockchain space, now pivoting its strategy towards supporting developers rather than spearheading specific product-based projects.
The challenge for companies in adopting unique programming languages like Move, and proprietary blockchains such as M1 and M2, has been significant. However, with this funding, Facebook, through Movement Labs, is making a strategic pivot by moving from less mainstream blockchains like Aptos and Sui to a more established platform like Ethereum. This shift signifies a thoughtful approach to leverage a more stable and widely-recognized foundation to foster developer engagement and potentially achieve greater integration and adoption within the blockchain ecosystem.
All Good Things Come To An End
The remarkable run of continuous IBIT inflows has come to an end after 71 straight days, positioning the ETF among the top 10 for the longest ETF inflow streaks in history. More notable than the streak itself is that during these 72 days, IBIT achieved the highest assets under management (AUM) ever recorded in such a timeframe for an ETF, with Fidelity's FBTC closely trailing in this record-setting pace. The cessation of this inflow streak coincided with a day on which Bitcoin declined by 5%, suggesting a potential correlation with broader market movements. Despite this setback, IBIT is now just $7 billion shy of surpassing GBTC’s AUM—a milestone it could reach within a few weeks if current trends continue or if there’s a significant market breakout. This surpassing of GBTC appears imminent, setting the stage for a new leader in cryptocurrency ETFs.
This Notepad Sold For Over $1 Million
The infamous "Buy Bitcoin" sign, scribbled on a yellow legal notepad, held by a 22-year-old intern behind Janet Yellen during a 2017 hearing, has been sold for a staggering $1.019 million. The intern, of course, was promptly removed, but Bitcoin rose 3.7% that day, leaving a powerful image etched in our minds that has endured to this day.
With the proceeds, the intern, Langalis, will reportedly fund his startup, which is developing a Bitcoin Lightning Network wallet. Reflecting on the sign, Langalis stated, "You'd have done the same in my seat." He added, "It's good to finally liberate this number from my sock drawer and offer it back to the Bitcoin public."
SEC, IRS... FBI?
The FBI has issued a warning to Americans advising them against using cryptocurrency money transmitting services that are not registered as Money Services Businesses (MSBs) under federal law. The warning, issued by the FBI's Internet Crime Complaint Center (IC3), emphasizes the risks of engaging with unregistered services that do not adhere to anti-money laundering regulations and fail to collect necessary KYC (Know Your Customer) information, such as names, dates of birth, and addresses. The FBI also highlighted the use of an official tool provided by the Financial Crimes Enforcement Network (FinCEN) that allows users to check if a crypto service is registered as an MSB. Examples of compliant firms include Coinbase and Kraken. The FBI cautioned that using unregistered services could lead to financial disruptions, especially if these services are involved in illegal activities and are targeted by law enforcement operations.
They are coming for our self-custodied coins.
Bitcoin To Hit $90K Soon | Mike Alfred
Mike Alfred predicts Bitcoin will achieve $90,000 in the short term. We will uncover what this prediction is based on. In the second part of the show, Dan from The Chart Guys will share his market analysis and some trades.
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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.