Welcome to The Wolf Den! This is where I share the news, my ideas about the market, technical analysis, education and my random musings. The newsletter is released every weekday and is completely FREE. Subscribe!
Today’s Newsletter Is Made Possible By Phemex!
Phemex is the most efficient crypto trading and investment platform. Phemex offers over 293 spot trading pairs, minimal fees, peer-to-peer trading, derivatives, up to 100x leverage, and $8,800 welcome rewards up for grabs! Also for a limited time, if you mint your soul pass you will pay no gas fees and enjoy VIP benefits. Use MY LINK to get the rewards!
Make sure to check if Phemex is available in your jurisdiction.
In This Issue:
Coinbase Crushes Earnings
Bitcoin Thoughts And Analysis
Legacy Markets
Is Michael Saylor Destroying Bitcoin?
Turns Out Hong Kong Was A Day One Success
Come And Take It
Big Trouble Ahead | What Does Bitcoin's Fall Mean For The Markets?
Coinbase Crushes Earnings
Wall Street doubted this bald man. We didn’t.
Once again, it's remarkable how Wall Street struggles with understanding crypto, even its most basic aspects. Despite boasting trillion-dollar institutions, ivy league credentials, elite connections, and hand-picked geniuses, they seem to miss the mark. Brace yourself; there's plenty of insight ahead.
Understanding Coinbase isn't akin to decoding a complex smart contract running on the Ethereum Virtual Machine. It's a straightforward business positioned to benefit from virtually every facet of crypto growth. While in the past, its revenue predominantly stemmed from trading fees, today's Coinbase isn't exactly quantum physics.
Here's a glimpse into how Wall Street discusses Coinbase:
"Coinbase operates as a cryptocurrency exchange."
"It facilitates the buying, selling, and storage of cryptocurrencies such as Bitcoin and Ethereum."
"It serves various stakeholders, including investors, developers, and institutions."
Perhaps I'm being overly generous to Wall Street, but there might have been some progress. However, their stumbling block lies in comprehending Coinbase's diverse product offerings and how the company thrives amidst the bull market and the 4-year cycle.
Wall Street overlooks the fact that Coinbase is stepping into the void once dominated by platforms like Binance and FTX, introducing a range of new products with substantial potential. Yield and interest revenue, staking, custody services, Base, and global expansion remain conspicuously absent from Wall Street's purview. Compounding the issue is Wall Street's reluctance to acknowledge the ongoing bull market and its impact on Coinbase's financial trajectory.
Now that my rant is out of the way, let’s get down to business.
Here’s what Wall Street predicted for Q1:
Revenue: $1.36B
Net Income: $281m
EPS: $1.15
Assets on Platform: $288b
Monthly Transacting Users: 8.4m
And here is a frame of reference: statistics taken from Coinbase's previous earnings report and guidance for Q1. Not the actual Q1 report.
For the entire year of 2023, Coinbase generated a net income of $95 million, total revenue of $3.1 billion, and adjusted EBITDA $964 million.
Q4 Net income was $273 million, revenue was $954 million, and adjusted EBITDA was $305 million.
Now, let’s examine what Coinbase reported for Q1.
Revenue: $1.64 billion vs. $1.34 billion expected (up 112% YoY, up 72% QoQ)
Net income: $1.17 billion (up from net loss of $79M YoY, up 330% QoQ)
EPS: $4.40 (beat expectations by 313%)
Transaction Revenues: $1.07 billion (up 187% YoY, up 103% QoQ)
“Our financial performance in Q1 reflects our focused execution on product expansion, ongoing operational discipline, and strong crypto market conditions. We generated $1.6 billion of total revenue and $1.2 billion of net income*. Adjusted EBITDA was $1.0 billion – more than we generated in all of 2023.”
It's evident that Coinbase enjoyed a notably successful quarter. So, why did the stock dip after hours?
There are likely several valid explanations for this, which we may grasp better in the coming days. It's likely a blend of factors: A) Crypto enthusiasts may have anticipated the news and inflated the stock price, B) Coinbase might be foreseeing a slower Q2, C) mainstream retail adoption of crypto remains constrained, and D) Wall Street's attention may be diverted elsewhere. Does this signal bearish sentiment towards Coinbase? Not necessarily, as Wall Street persistently underestimates the company, presenting potential profit opportunities in the interim.
Here are further insights:
Higher expenses.
“In Q1, crypto asset volatility2 increased sharply, but remained well below all-time high levels. In terms of crypto asset prices, crypto market capitalization reached a 52-week high of approximately $2.8 trillion in Q1. While we cannot attribute the increase in market capitalization to a specific driver, we believe this increase was influenced by a variety of factors, such as the launch of the bitcoin ETFs which experienced over $11 billion in net inflows so far in 2024.”
Volatility hasn’t taken off yet.
And retail still hasn’t really arrived yet.
Coinbase still exhibits promising growth potential, which bodes well for long-term investors. It's remarkable to note that this stock was trading around $35 in December 2022 and has soared to $228.85, marking a staggering 551% increase at the time of writing.
While I've exercised caution in expressing this sentiment at the forefront of the newsletter, I'm increasingly confident that this stock is on the brink of surpassing its all-time highs and establishing new records, possibly reaching the $500 to $750 range. Coinbase's trajectory suggests it's yet to undergo its own bull market, and breaching all-time highs could serve as a potent catalyst.
While this isn't financial advice, it's prudent not to underestimate Brian Armstrong and his company. They're positioned to navigate regulatory hurdles, bridge the gap to traditional finance, cater to the retail masses, and catalyze a bull market. Consider yourself forewarned.
Prepare accordingly. It's a proven fact: bald guys don't lose.
Bitcoin Thoughts And Analysis
Bitcoin is still looking weak, trading below the range and showing little ability to take the range lows. Trading Alpha is still showing bearish dots on every meaningful time frame, with price below the track line. Further, we STILL have not hit oversold yet on RSI after having bearish divergence with overbought conditions in March. The good news? One more decent push down should get us there, and we don’t HAVE to get there at all.
Lower time frames hit oversold, so another lower low on price would likely give us bullish divergence across the board (not the daily for now).
I see no reason to do much at the moment. This is a normal bull market correction for now, but we have no clear signals as to when it will end.
Legacy Markets
Stocks surged before the US jobs report as Apple's positive earnings fueled optimism about big tech companies. Pre-market, Apple rose 6% after announcing a record stock buyback and strong sales forecasts. US stock futures indicated further strength, with Europe's Stoxx 600 also climbing. The dollar weakened, and Treasuries remained steady. The upcoming jobs data is crucial, with expectations of weaker gains. Bank of America warns of stagflation risks if jobs data disappoints. In Asia, Hang Seng Index rose, driven by Alibaba and Tencent. The yen outperformed currencies, with Japanese intervention estimated at $23 billion. Notable corporate moves include Novo Nordisk's decline due to competition concerns and Societe Generale and Credit Agricole's gains on strong earnings. Danske Bank's shares fell due to weaker-than-expected net interest income.
Key events this week:
Eurozone unemployment, Friday
US unemployment, nonfarm payrolls, ISM Services, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.4% as of 10:50 a.m. London time
S&P 500 futures rose 0.3%
Nasdaq 100 futures rose 0.6%
Futures on the Dow Jones Industrial Average rose 0.8%
The MSCI Asia Pacific Index rose 0.9%
The MSCI Emerging Markets Index rose 0.7%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.2% to $1.0745
The Japanese yen rose 0.4% to 153.05 per dollar
The offshore yuan rose 0.2% to 7.1946 per dollar
The British pound rose 0.2% to $1.2564
Cryptocurrencies
Bitcoin rose 1.3% to $59,534.87
Ether was little changed at $2,987.41
Bonds
The yield on 10-year Treasuries declined one basis point to 4.57%
Germany’s 10-year yield declined one basis point to 2.53%
Britain’s 10-year yield was little changed at 4.28%
Commodities
Brent crude was little changed
Spot gold fell 0.1% to $2,301.40 an ounce
Is Michael Saylor Destroying Bitcoin?
During the MicroStrategy World: Bitcoin for Corporations Event 2024, Michael Saylor stirred controversy with his company's announcement of intentions to build on Bitcoin, effectively splitting the community he champions.
“Today, I'd like to introduce MicroStrategy Orange, which is an enterprise platform for building decentralized identity applications on the Bitcoin blockchain. At the heart of it is a service cloud hosted that allows you to issue those identifiers to your users and your organization.”
Saylor elaborated further on the product:
“We see a huge opportunity, and this is just the beginning. Custodial or non-custodial, the obvious thing is every Bitcoin wallet out there should incorporate the capability of creating a Bitcoin based digital identity. Many messaging platforms suffer from the same challenges that email does. When you get a text message, how do you know the person who sent you the text message...We would want to include an orange check for these different messaging platforms.”
For those interested in technical details, the specifications are available on GitHub HERE.
Firstly, it's crucial to address MicroStrategy's previous declaration in February as “the world's first #Bitcoin development company.” While Bitcoin maximalists may perceive MicroStrategy solely as an aggressive Bitcoin acquisition company, their actions demonstrate aggression on all fronts.
Secondly, past attempts at achieving what Saylor proposes haven't gained traction. While I won't take sides on whether this endeavor is worthwhile, I trust Saylor to make a thorough attempt, even if it takes years to materialize. Innovation often appears eccentric initially.
Regarding Bitcoin maximalists infuriated by the decision, a dose of patience is warranted. Michael Saylor holds a substantial amount of Bitcoin (approximately 1% last checked); he lacks incentive to harm the asset. If his plan fails, at worst, it's a learning opportunity. If successful, Bitcoin advances. MicroStrategy pioneers; stagnation isn't their style. It's premature to definitively label this as spam or a miracle.
Turns Out Hong Kong Was A Day One Success
Apologies for the back-and-forth updates regarding Hong Kong, but as previously mentioned, data availability and clarity have been challenging following the launch of spot ETFs in the region. As per the headline above, I remain skeptical that Hong Kong's inflows will surpass U.S. outflows, unless it's a particularly slow day. The occurrence of outflows from BlackRock was expected, but what holds greater significance is the month-over-month and year-over-year inflow trends. Here is the official day one statistic for Hong Kong, with credit to Eric Balchunas for reporting it.
“We just put out note with final data (which doesn't come in as fast as US). In short, HK saw $292m in assets on Day One (we predicted $1b in two years so way ahead of schedule but corrections can derail trajectories as we seeing in US). Ether ETFs grabbed 15% of pie and size appeared to matter more than lower fees in attracting investors on day one. The ChinaAMC Bitcoin ETF (3042 HK), which has higher fees, led inflows with $124 million, while the Harvest Bitcoin Spot ETF (3439 HK) picked up $63 million and the Bosera Hashkey Bitcoin ETF (3008 HK) took in $61 million.”
Come And Take it
In some capacity, everything crypto-related in the U.S. seems to be under siege, except for the darlings of Wall Street. Coinbase, Binance, Kraken, MetaMask, Uniswap, ConsenSys, the Ethereum Foundation, Samourai, Tornado Cash, and nearly every altcoin would find themselves in court if Gensler had the bandwidth.
Over recent weeks, the industry has weathered a barrage of assaults from different fronts and agencies, including the IRS, FBI, and DOJ. Self-custody faces as much scrutiny as decentralized finance and privacy tools.
The above FBI memo came last week. This week, the DOJ sparked new frustrations.
This official court decision from the DOJ sparked the most recent outrage: “Additionally, despite the fact that the Tornado Cash service engaged in the business of transferring funds on behalf of the public, the defendant did not register as a money transmitter, nor did the Tornado Cash service or anyone affiliated with it. And the Tornado Cash founders also did not put in place any KYC or AML features in the Tornado Cash service, despite being required to do so.”
In light of everything, Senator Lummis has made her position clear.
“I am deeply troubled by the Department of Justice’s hyper-aggressive argument that non-custodial software can constitute a money transmission service. This stance contradicts existing Treasury guidance, common sense and violates the rule of law. Arguments against self-custody software threaten the fundamental property rights that are core to being an American. I will do everything I can to fight for your rights to hold your own keys and run your own node.”
Crypto will overcome any obstacles in its way. Despite efforts to destroy the industry, I say, "come and take it."
Big Trouble Ahead | What Does Bitcoin's Fall Mean For The Markets?
I am joined by James Murphy, aka MetaLawMan, a crypto lawyer, who regularly breaks down major regulatory and legal developments in crypto.
My Recommended Platforms And Tools
Phemex - Exclusive for new users, earn up to 8800 USDT. Also for a limited time, if you mint your soul pass you will pay no gas fees and enjoy VIP benefits. Use MY LINK to get the rewards!
Arch Public - It’s a hedge fund in your pocket. Built for retail traders, designed to outperform Wall Street. Try emotionless algorithmic trading at Arch Public today.
Trading Alpha - My new go-to indicator site and trading community. Use my link to sign up and get 25% off. Make sure to use code “25OFF.”
NGRAVE - ZERO is the most secure and user-friendly hardware wallet. If you aren't happy with your current crypto wallet, look no further than the ZERO.
Nord VPN - Get an exclusive NordVPN deal - 40% discount! It’s risk-free with Nord’s 30-day money-back guarantee. Protect your privacy.
Twitter - I spend most of my time on Twitter, contributing to CryptoTownHall every weekday morning, sharing random charts, and responding to as many of you as I can.
YouTube - Home of the Wolf Of All Streets Podcast and daily livestreams. Market updates, charts, and analysis! Sit down, strap in, and get ready—we’re going deep
TheWolfOfAllStreets.io - The most comprehensive collection of everything I have going on. Plus over 100 blogs and other exclusive content.
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.