The Wolf Den #992 - All Or Nothing
Bitcoin to zero or a million.
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In This Issue:
All Or Nothing
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
The SEC Capitulates On Consensys
Kraken Was Extorted
DJT Token Drama
Huge Win For Ethereum & Crypto | Bitcoin: What's Going On?
All Or Nothing
Bitcoin's endgame boils down to two outcomes:
1) It trades at $0.
2) It trades at over $1 million.
To some, this may seem like an extreme statement, while others may be eagerly nodding in agreement, awaiting justification for outcome #2.
First, let’s acknowledge that Bitcoin can indeed “drop to zero” (or to almost zero); it's a theoretical possibility. How might this happen? Simply put, if everyone loses interest in Bitcoin and it becomes irrelevant, it will have no value. If for some reason it was successfully attacked, it could lose all value. There are other arguments for how Bitcoin could reach zero, but this is the most straightforward and tangible threat. Like any other asset in a free market, if demand vanishes, so does its value.
Regarding Bitcoin reaching prices exceeding $1 million, opinions vary widely, often involving concepts like yield curve control, doom loops, hyperinflation, the collapse of the EU, the demise of fiat currencies, and hyperbitcoinization. Notice that these arguments are less about Bitcoin and more about the potential failure of existing systems and structures.
I'm aware of the doom-and-gloom scenarios, but they aren't particularly useful for forming a practical, everyday investment thesis. Considering Bitcoin's price in extreme terms isn't constructive either. For Bitcoin to plummet to $0, it would need to drop by 99.999%, while for it to soar to $1 million, it would require an astonishing 1,438.46% increase.
These outcomes aren't happening today, tomorrow, or next year. Furthermore, is it easy to maintain conviction in Bitcoin on a daily basis if your thesis relies on the world falling apart? There's no assurance that a catastrophic event will occur, or even if it does, that it won’t be far into the future. Holding Bitcoin for years, waiting for the world to change, doesn’t sound like a comfortable investment.
There’s a better approach.
First, reframe your thesis from focusing solely on the endgame to considering the direction in which Bitcoin versus the rest of the world is trending. If there were a chart of Bitcoin/theworld, it might resemble the charts of Bitcoin/USD, Bitcoin/real estate, Bitcoin/gold, and so on.
Secondly, shift your focus away from extremes and towards the catalysts that are currently evident and increasingly recognized: scarcity, hedging against inflation, store of value, technological potential, global and institutional adoption, and network effects. Holding Bitcoin because of these qualities is far more reassuring than focusing on extremes.
As a bonus, it's also much easier to persuade friends and relatives to consider Bitcoin by discussing these qualities rather than presenting a doomsday scenario. Most people don’t want to hear from a Bitcoiner why the world is going to collapse or radically change.
Before wrapping up, let's consider some statistics that have been on my mind, loosely related to the above.
Gold has a market cap of $15.7 trillion, while Bitcoin's market cap is $1.2 trillion. This means Bitcoin's market cap is approximately 7.6% of gold's market cap. To put that in perspective, 7.6% is like a giraffe standing next to the Statue of Liberty or an elephant next to the Leaning Tower of Pisa.
Consider that Bitcoin’s market cap hasn’t even surpassed silver. When was the last time you saw someone as excited about silver as Bitcoiners are about Bitcoin? And don’t get me started on NVDA…
On November 10, 2021, Bitcoin reached an all-time high of $69,000. On November 22, 2021, NVDA stock opened at a high of $335.17. By June 20, 2024, Bitcoin is trading around $65,000, while NVDA is trading around $136 (after a 10-to-1 split). Since the peak of the previous cycle, NVDA has achieved an impressive 3.8x growth, positioning it as the most valuable company in the world. If Bitcoin followed a similar trajectory, it would be trading at $267,720.
Instead, Bitcoin is currently trading -5.8% from its previous cycle all-time high. This is frustrating, but all the more reason to temper expectations.
I am beyond confident that Bitcoin will play an epic game of catch-up and wildly exceed our expectations. It’s going to take time, but Bitcoin is trending towards $1 million; that’s all that matters.
Bitcoin Thoughts And Analysis
Bullish divergence coming out of oversold RSI strikes again.
Nice bounce, now we want to see follow through.
But the bounce itself was highly predictable using this signal, which remains my favorite. Read yesterday’s analysis for deeper thoughts.
Altcoin Charts
For those who are new here, I share SETUPS and not SIGNALS. These are ideas that I am watching - if a certain thing happens, then the trade triggers. I am not telling you what to buy or when. I am showing you how I am watching certain charts and what has to happen for me to take a trade.
This looks almost exactly like the NEAR chart that I shared yesterday - bouncing from a key support when there was peak bearishness, with RSI hitting oversold on the daily for the first time in ages. These could just be reactionary bounces, so if you are actively trading be very careful. I would not be surprised to see a lower low hit on price, causing bullish divergence on RSI. That would be sweet.
But for now, we have nice reactions across the board.
Legacy Markets
Wall Street is poised for new record highs, spurred by gains in technology stocks and optimism about potential interest rate cuts from central banks in the coming months. Futures for the Nasdaq 100 increased by 0.7%, while those for the S&P 500 rose by 0.4%. Nvidia Corp., currently the world's most valuable company, saw its shares climb by up to 4.1% in premarket trading. Other tech stocks, including Dell Technologies Inc. and Super Micro Computer Inc., also experienced gains.
In Europe, the Stoxx 600 index rose by 0.6% following the Swiss National Bank's decision to cut interest rates for the second time this year. This move fueled hopes for further policy easing across developed nations. The Bank of England kept its interest rates steady but indicated that more policymakers might support rate cuts soon. As a result, traders now estimate a greater than 50% chance of a Bank of England rate reduction in August, leading to a drop in the pound and a three basis point decline in 10-year gilt yields.
Guy Miller, chief market strategist at Zurich Insurance Company Ltd., stated that the likelihood of rate cuts for the rest of the year is bolstering risk assets, encouraging investors with a supportive rates environment. Meanwhile, France successfully raised €10.5 billion ($11.3 billion) in its first bond sale since President Emmanuel Macron called a snap election, indicating strong investor demand and easing concerns about French debt.
Attention now turns to upcoming US weekly jobless claims data, expected to show a slight decrease. Additionally, speeches from Federal Reserve officials, including Neel Kashkari of the Minneapolis Fed and Thomas Barkin of the Richmond Fed, may provide further insights into the timing of potential US rate cuts.
Key events this week:
Eurozone consumer confidence, Thursday
UK BOE rate decision, Thursday
US housing starts, initial jobless claims, Thursday
Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday
US existing home sales, Conf. Board leading index, Friday
Fed’s Thomas Barkin speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.4% as of 7:34 a.m. New York time
Nasdaq 100 futures rose 0.6%
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 0.5%
The MSCI World Index was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.1% to $1.0730
The British pound fell 0.2% to $1.2695
The Japanese yen fell 0.2% to 158.41 per dollar
Cryptocurrencies
Bitcoin rose 2.3% to $66,331.23
Ether rose 1.5% to $3,606.41
Bonds
The yield on 10-year Treasuries advanced two basis points to 4.24%
Germany’s 10-year yield advanced two basis points to 2.42%
Britain’s 10-year yield declined three basis points to 4.04%
Commodities
West Texas Intermediate crude rose 0.2% to $81.70 a barrel
Spot gold rose 0.5% to $2,340.44 an ounce
The SEC Capitulates On Consensys
So, there you have it: the SEC has concluded its investigation into ConsenSys and announced it will not recommend any legal action against the company. One down, many more to go.
Yes, this is a significant victory, but it still raises the question of what will happen with the other entities under investigation by the SEC for similar or related matters. The Ethereum Foundation, Uniswap, and Robinhood have unaddressed Wells Notices, and active lawsuits persist against Coinbase and Binance.
If Ethereum is indeed clear in the eyes of the SEC, the next logical step would be to issue a similar letter to the Ethereum Foundation and then to the remaining entities, especially if the political climate is truly shifting. Coinbase, in particular, stands to benefit from this news, as it is not only dealing with a lawsuit but is also in contention with the SEC over Ethereum staking.
I copied below the official statement from Consensys, it’s worth reading if you have a minute.
“ETHEREUM SURVIVES THE SEC.
Today we’re happy to announce a major win for Ethereum developers, technology providers, and industry participants: the Enforcement Division of the SEC has notified us that it is closing its investigation into Ethereum 2.0.
This means that the SEC will not bring charges alleging that sales of ETH are securities transactions.
The decision follows a letter we sent on June 7, asking the SEC to confirm that the May ETH ETF approvals, which were premised on ETH being a commodity, meant the agency would close its Ethereum 2.0 investigation.
The closing of the Ethereum investigation is momentous, but it’s not a cure-all for the many blockchain developers, technology providers, and industry participants who have suffered under SEC’s unlawful and aggressive crypto enforcement regime.
Our fight continues. In our lawsuit, we also seek a declaration that offering the user interface software MetaMask Swaps and Staking does not violate the securities laws. It should not take a lawsuit to provide the much-needed regulatory clarity to allow an industry that serves as the backbone to countless new technologies and innovations to thrive – but here we are. #ETHforAll”
Kraken Was Extorted
This story is wild. On June 9th, Kraken received a Bug Bounty program alert identifying a serious but isolated glitch that led to artificially inflated balances on their platform. The bug was patched in less than an hour, but Kraken soon discovered that the exploit had been abused by three individuals. Remarkably, and not coincidentally, one of these individuals was the very person who alerted Kraken to the bug.
It has been discovered that the “security researcher” who found the bug, tipped off two familiar individuals who leveraged the exploit prior to the report and fix that made a sum of $3 million from Kraken’s treasury, which is where the exploit led to. As per the latest update, the group of individuals is not returning the money and demanding to have answered how expensive this bug could be, to extort further money.
Kraken’s Chief Security Officer Nick Percoco puts it well, “As a security researcher, your license to ‘hack’ a company is enabled by following the simple rules of the bug bounty program you are participating in. Ignoring those rules and extorting the company revokes your ‘license to hack.’ It makes you, and your company, criminals.” In Kraken’s post, the exchange didn't name the group, but Certik, a well-known auditor has come forward as the group behind the discovery.
I’m not an expert on the ethics of bug bounties, but I can't see how Kraken is at fault here. White hat hackers don't take millions of dollars to prove there is an exploit. They follow the company's guidelines, accept the rewards, and don't hold capital hostage. While Kraken’s customer funds are safe, the $3 million may be unrecoverable, depending on the outcome of the criminal and legal proceedings. If you want to read CertiK’s side of the story, click the image below.
DJT Token Drama
I'm only briefly covering this story to emphasize that these tokens aren't worth our time and are detrimental to the industry’s reputation. While I don’t know every detail and don’t care to, Martin Shkreli is behind the DJT token, apparently launched with political insiders affiliated with Trump, possibly even his son. Evidence is scattered, and it’s not worth digging into. Just be wary of political tokens this election cycle, even if they come with endorsements from candidates. Someone else out there knows more than you do, and the individuals at the top are probably breaking securities laws, at the least. Invest in Bitcoin; that’s the asset we want presidents talking about, not Boden or Tremp.
Huge Win For Ethereum & Crypto | Bitcoin: What's Going On?
Bill Barhydt, the founder and CEO of Abra, joins me today to break down the latest news in crypto including a major win for Ethereum over SEC. But what's going on with Bitcoin?
Chris Inks will join us in the second part to share some interesting trades in crypto and beyond.
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