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In This Issue:
This Is Terrifying
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
How Did Coin 4x WallStreet’s EPS Prediction?
The Block Is Buying Bitcoin
Beware Of Adress Poisoning
GBTC Finally Sees Inflows
It’s War! This Is How We Save Crypto In The United States | John E. Deaton
This Is Terrifying
I can’t believe my eyes. Or my ears.
A chilling clip from the recent film “Finding The Money” (which just released on May 3rd) surfaced on Twitter, unexpectedly turning into one of the most unironic and effective Bitcoin advertisements I've ever encountered.
Jared Bernstein, the individual highlighted in the clip, is an American economist who currently holds the position of chair of the United States Council of Economic Advisers. In this capacity, he literally serves as the principal advisor to President Joe Biden on matters of economic policy.
For the film, a simple question is asked: why does the government borrow money? Mr. Bernstein then proceeds to stumble through the answer, unsure and confused, as if he is trying to recall and talk himself into an answer for an unsolvable problem.
Make no mistake, this isn't an 'armchair' expert; this is supposed to be the expert who knows the most about these types of questions and should at the least provide a strong answer even if we disagree with it.
Here’s what is featured in the video.
The Opening Scene
Jared Bernstein: The U.S. government can't go bankrupt because we can print our own money.
Narrator: It absolutely begs the question, why exactly are we borrowing in a currency that we print ourselves? I am waiting for someone to say, why do we borrow our own currency in the first place?
The Actual Interview
Interviewer: Like you said, they print the dollar, so why does the government even borrow?
Jared Bernstein: Well, ummmm, the uhhhhh, so the, I mean, again, some of this stuff gets, some of the language that the MMT, some of the language and concepts are just confusing. The government definitely prints money, and it definitely lends that money, which is why uhhh, the government definitely prints money and then it lends that money by uhhh, uhh selling bonds. Is that what they do? They, they ummmm, they yeah, they they ummm they sell bonds, yeah, they sell bonds. Right? They sell bonds and people buy the bonds and lend them the money, yeah.
So a lot of times, a lot of times at least to my ear with MMT the language and the concepts can be unnecessarily confusing, but there is no question that the government prints money and then uses that money to ummmm, uhhhhhhhh, uhhhhhhh, uhhhhhh, so ummmmm yeah. I guess, I guess, I’m just, I can't really talk, I don't know what they are talking about, it’s like, the government clearly prints money, does it all the time. It clearly borrows, otherwise we wouldn't be having this debt and deficit conversation. I don't think there is anything confusing there.
I'm truly struggling to find the right words to describe this commentary. Part of me sympathizes with Mr. Bernstein because the fiat system is undeniably complex, and there are likely very few people, if any, who fully understand the inner workings of money. However, this initial feeling is overshadowed by an overwhelming sense of terror, as I believe it is individuals with complicit ignorance like Mr. Bernstein who have enabled this system in the first place.
I’m not going to pretend to be an expert on monetary policy, but here’s what he is attempting to describe.
Modern Monetary Theory, which he briefly alludes to as MMT, is an economic theory that challenges conventional views on government spending, deficits, and monetary policy. At its core, MMT suggests that a government that issues its own currency can never "run out" of money in the same way that individuals or businesses can. This is because the government can always create more money to meet its obligations, such as paying for goods and services, funding social programs, or servicing debt denominated in its own currency.
The process of money creation through bond issuance and purchase by the Federal Reserve is one massive, convoluted loop. The government issues bonds, essentially IOUs, which are often bought by the Federal Reserve using newly created money. This money, in turn, is backed by the bonds themselves (among other things) where money is created to buy assets that back the money's value.
Yes, it’s far more complex than this, but you get the idea.
Have I confused you at all up until this point? Don't worry, if the explanation of money creation didn't make sense, there are several other ways money is created that might be even more perplexing: bank lending, government spending, quantitative easing, foreign exchange operations, and central bank operations.
Borrow money—> print money —> lend money —> inflate money—> Ad infinitum.
The order of operations or chosen terminology doesn't matter. One way to think of the fiat system is to liken it to the game Jenga: remove blocks one at a time and place them back on top. If the tower leans left, pull from the bottom and place the next block on the right; if it leans right, counterbalance to the left. In case of disaster, swiftly swipe a few blocks from the bottom and place them neatly back on top as carefully as possible—it’s illustrated below.
This is why we're playing a different game…Bitcoin.
For your sake, I hope you see the warning signs and start safeguarding yourself against an inevitable collapse. I'm not a doomsdayer who believes the end is near, but I do think we're heading for a crash. My good friend Dave Weisberger makes a good point regarding this below.
Don’t play their game.
The tower can only grow so large before tumbling down.
Opt out. Choose Bitcoin.
Bitcoin Thoughts And Analysis
Bitcoin printed a lovely weekly candle - a hammer with a long wick down and small bullish body. This is often a sign of strengthening demand (buyers buying up the dips) and of a bullish reversal. That said, this is still just trading in a range, with price sweeping those range lows on higher time frames. Not much to get excited about until we break through the range highs, which is far away at the moment.
The sweep of the lows is encouraging - usually that means we eventually test the top of the range as well.
Proceed with slight caution. Just as bullish divergence has shown us the bottoms, bearish divergence often shows us the tops - and we have that right now. Becareful on lower time frames here.
Legacy Markets
Stocks saw a notable advance, buoyed by growing confidence that the Federal Reserve might cut interest rates within the year, with the S&P 500 index increasing. The optimism spilled over to European and Asian markets, although trading volumes were subdued due to holidays in the UK and Japan. Apple Inc. experienced a decline after Berkshire Hathaway reduced its holdings. In the commodities space, oil prices rose following Saudi Arabia's decision to hike prices for its Asian customers.
Central bank activity and upcoming policy meetings in various countries are expected to influence market movements, especially with minimal economic data releases scheduled for the week. Notably, European Central Bank's chief economist expressed confidence that inflation is trending back to the 2% target, hinting at a potential rate cut in June. In Asia, Chinese stocks outperformed after a holiday, while European markets showed mixed results with individual stocks reacting to corporate news and earnings reports.
Some key events this week:
Eurozone S&P Global Services PMI, PPI, Monday
Australia rate decision, Tuesday
Eurozone retail sales, Tuesday
UBS earnings, Walt Disney, BP earnings, Tuesday
Minneapolis Fed President Neel Kashkari speaks, Tuesday
Brazil rate decision, Wednesday
Sweden rate decision, Wednesday
Toyota earnings, Wednesday
China trade, Thursday
Malaysia rate decision, Thursday
Mexico CPI, rate decision, Thursday
UK BOE rate decision, Thursday
Canada unemployment, Friday
UK industrial production, GDP, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.2% as of 7:45 a.m. New York time
Nasdaq 100 futures rose 0.1%
Futures on the Dow Jones Industrial Average rose 0.2%
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 rose 0.1% to $1.0773
The British pound rose 0.2% to $1.2577
The Japanese yen fell 0.5% to 153.77 per dollar
Cryptocurrencies
Bitcoin rose 0.5% to $64,091.76
Ether rose 0.3% to $3,146.77
Bonds
The yield on 10-year Treasuries declined two basis points to 4.48%
Germany’s 10-year yield declined four basis points to 2.46%
Commodities
West Texas Intermediate crude rose 1.1% to $78.88 a barrel
Spot gold rose 0.7% to $2,316.79 an ounce
How Did Coin 4x WallStreet’s EPS Prediction?
Wall Street overlooked a crucial detail in Coinbase's balance sheet that explains how the EPS jumped in value from $1.04 to $4.40 per share. In Q1 2024, Coinbase implemented the Financial Accounting Standards Board's (FASB) new accounting standards update, which improved disclosure around holding crypto assets. This update allows companies to report their crypto holdings at fair value, allowing changes in fair value to impact net income. Essentially, Coinbase could now include its crypto holdings as a gain for the first time, which was previously unrealized. This change is believed to have added about $2.75 to Coinbase's EPS, accounting for more than half of the gain.
The Block Is Buying Bitcoin
Jack Dorsey's Block grabbed investors' attention late last week with its first-quarter earnings report, which exceeded expectations. The company also announced its intention to invest 10% of gross profits into Bitcoin weekly. Based on current prices, Block's initial Bitcoin investment of $220 million has grown by approximately 160% to $573 million.
In addition to the purchase plan, Block released a public company blueprint for others to follow. This blueprint includes details on their philosophy, purchase strategy, execution, custody, insurance, and accounting. Dorsey stated, “We've chosen to open-source this documentation to clearly articulate the process behind our purchases as others consider similar moves.”
Beware Of Address Poisoning
Recently, a substantial $71 million in Wrapped Bitcoin (WBTC) was mistakenly sent to the wrong address, signaling a new scam technique known as 'address poisoning.' This scam targets major blockchain transactors. Here, scammers create a wallet with an address that closely mimics a victim's, altering only one character in the middle. They then send the victim small, inconsequential transactions that display this modified address, exploiting interfaces that show only the first and last four characters of an address. As a result, the altered address may appear identical to the legitimate one, and if used inadvertently, funds are diverted to the scammer.
This incident underscores the urgent need for platforms to improve address verification methods, perhaps by adding visual indicators like checkmarks to denote verified and safe addresses. Moreover, individuals must take greater responsibility in securing their assets. This means rigorously verifying every address, rather than relying solely on checking the initial and final characters or reusing old addresses. While it's good practice to confirm these characters, it's insufficient for complete security. This case serves as a stern reminder of the cunning strategies scammers employ and the need for heightened vigilance in digital transactions.
GBTC Finally Sees Inflows
After more than 100 days, during which it lost over 300,000 Bitcoin and experienced $17.5 billion in outflows in AUM, Grayscale's Bitcoin trust finally saw its first day of net inflows on Friday, totaling $63 million according to data from Farside Investors. Franklin Templeton also experienced its strongest inflow day, totaling $60.9 million. While it's perhaps premature to conclude that this marks the end of Grayscale's selling spree, it is certainly a welcome change of pace. If Grayscale does cease its persistent outflows, a significant amount of selling pressure would be alleviated from the market, potentially altering one of the most prevalent bearish narratives of recent months. While occasional outflows are to be expected, four months of continuous selling was undeniably substantial. Hopefully, Grayscale has more positive potential than we are estimating.
It’s War! This Is How We Save Crypto In The United States | John E. Deaton
John E. Deaton is going to war. A war for freedom. A war for Bitcoin. A war to make America innovative and strong again. A war with Elizabeth Warren. John E. Deaton is a lawyer, entrepreneur, and a long-standing crypto supporter, who represented XRP holders against the SEC overreach, and has been handling issues for Massachusetts Coinbase customers in the SEC vs Coinbase lawsuit. Crypto needs John. I want to help John win in Massachusetts. Please watch this episode to learn why John is a perfect candidate to lead crypto initiatives in the USA and represent the people of MA, check the link HERE to support him and donate to his campaign!
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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.