The Wolf Den Crypto Newsletter

By Scott Melker aka The Wolf Of All Streets

The Wolf Den #534 - Lessons Learned





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July 5 · Issue #534 · View online
The Wolf Den Crypto Newsletter
Welcome to The Wolf Den! This is where I share my ideas about the market, technical analysis, education and advice regarding trader psychology and emotional control. The newsletter is released every weekday and is completely FREE.
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In This Issue:
  1. Lessons Learned
  2. Bitcoin Thoughts And Analysis
  3. Legacy Markets
  4. Crypto Volume Cratering In India
  5. Nexo To Potentially Buy Vauld
  6. Number Three By Arthur Hayes
  7. The Future Of The Digital Dollar
  8. How Crypto Becomes A 100 Trillion Dollar Market
  9. My Recommended Platforms And Tools
Lessons Learned
The majority of tokens being created will fail in the long run. This is no secret, and is an inevitability in a new market with innovators and entrepreneurs trying new things. There are over 20,000 coins in a market where 100 different coins is potentially enough. The same principle applies to the internet. You can Google search “100 website rule” to read more. The idea is that only 100 websites rule the internet, but I digress.
We expect that most tokens will disappear.
I was not expecting the platforms to fail as well.
It’s a tough pill to swallow and I am only beginning to comprehend the breadth of the contagion, both for the industry and for my personal finances.
As you likely know, I bought into “CeFi” hook, line and sinker. I have significant funds on multiple platforms that are locked in purgatory, just like many of you. It is a horrible feeling, especially after already experiencing the portfolio drawdown of this brutal bear market.
I made the decision to risk these funds based on personal conversations with the teams, believing that I had chosen the best horses and that they were extremely responsible fiduciaries. I was offered assurances that things were fine, just hours before the shut downs. I saw the world’s most brilliant investors and billionaires jumping in with clear endorsements and investments. I saw the names of these platforms on athletes, in arenas and on celebrities. I followed suit and am paying the price.
This seems to be the general timeline for these companies.
Step 1. Establish a “DeFi” company (really a CeFi company)
Step 2. Offer yield, loans, and leverage
Step 3. Go public, raise money, offer a token, encourage deposits
Step 4. Lend money to others who can do the trading that you legally can’t… cough, cough, 3AC.
Step 5. Something goes wrong, likely because of greed or poor counterpartty risk analysis.
Step 6. Freeze withdrawals, trading, deposits.
Step 7. Hope and pray for a bailout.
The list of troubled companies is growing each day: Celsius, BlockFi, Voyager, CoinFLEX,, Babel, Finblox, and Vauld. There are probably many more that haven’t yet caught mainstream attention.
Not a fun newsletter to write.
Almost all of them are victims of the same contagion in one way shape or form, starting with Luna, moving to 3AC and then beyond.
What happens next?
The motto from here is “only the strong survive.”
This applies to more than just cryptocurrencies; exchanges, funds, lenders, projects and other stakeholders are all on the chopping block. For those that do make it to the other side of this bear market, they will be staples for years to come. The rest will likely fade into the ether.
Binance and FTX are at the top of the food chain, clearly looking for deals in the chaos below and also looking to shore up some confidence in the wavering industry.
But they won’t rescue everyone. CZ has already made this clear.
There is no easy fix. It’s sad how far the contagion has spread to players with good intentions that found themselves caught in 3AC’s massive wake. But that does not mean those companies are innocent. Like many of us individually, they were not prepared for a black swan event. They should be held accountable, and likely will with time.. The market is our teacher and this will be a lesson etched into the history books of crypto.
STOP High Leverage.
STOP High Yield.
STOP Risky Loans.
If we learn this lesson, we move on. If we forget it, we repeat it.
The strong will survive.
They always do.
Bitcoin Thoughts And Analysis
The weekly candle closed below both the 200 MA and the 2017 highs, both of the key levels of support that we have been watching. Price attempted a small rally yesterday, but is not struggling right at resistance, which was formerly support.
This is the third consecutive weekly candle close below the 200 MA, something that has never happened before. This is clearly a key resistance now and a cause for concern.
Analyst Who Nailed May 2021 Bitcoin Crash Says BTC Flashing Major Bear Market Bottom Signal - The Daily Hodl
Rather than borrow the charts, here is a look at the weekly MACD, which offers a bit of hopium. As Dave The Wave points out in the article, this indicator is at all-time lows and a level that historically signals a bear market bottom.
Legacy Markets
The dollar continues to put a whooping on a basket of other global currencies, meaning that almost no asset is safe. As I have mentioned previously, the dollar is trading at levels not seen in 20 years, and continues to make new highs. This is a tough situation for stocks, metals, Bitcoin etc., as dollar strength usually inversely correlates and causes asset weakness.
Unfortunately, when you zoom into the daily (not shown), you will see that new highs are being made today.
The dollar topping (whenever that happens) could be a good signal that it’s safe to jump back into risk assets. No reason to believe that is happening yet.
Daily Market Wrap
Stocks Fall Amid Recession Worries; Euro Tumbles: Markets Wrap
What to watch this week:
  • PMIs for euro area, India among others, Tuesday
  • US factory orders, durable goods, Tuesday
  • FOMC minutes, US PMIs, ISM services, JOLTS job openings, Wednesday
  • EIA crude oil inventory report, Thursday
  • Fed Governor Christopher Waller, St. Louis Fed President James Bullard, scheduled to speak, Thursday
  • ECB account of its June policy meeting, Thursday
  • US employment report for June, Friday
Some of the main moves in markets:
  • The Stoxx Europe 600 fell 0.7% as of 10:32 a.m. London time
  • Futures on the S&P 500 fell 0.6%
  • Futures on the Nasdaq 100 fell 0.7%
  • Futures on the Dow Jones Industrial Average fell 0.6%
  • The MSCI Asia Pacific Index rose 0.2%
  • The MSCI Emerging Markets Index was little changed
  • The Bloomberg Dollar Spot Index rose 0.6%
  • The euro fell 1.1% to $1.0305
  • The Japanese yen was little changed at 135.66 per dollar
  • The offshore yuan fell 0.2% to 6.7107 per dollar
  • The British pound fell 0.6% to $1.2041
  • The yield on 10-year Treasuries was little changed at 2.88%
  • Germany’s 10-year yield declined seven basis points to 1.26%
  • Britain’s 10-year yield declined seven basis points to 2.13%
  • Brent crude fell 0.6% to $112.79 a barrel
  • Spot gold fell 0.7% to $1,804.43 an ounce
Crypto Volume Cratering In India
India crypto tax has halted trading, forced investors and startups to flee | Fortune
The TDS deduction in India has gone into effect, which is a 1% tax on every single crypto transaction and trade. The harsh law is forcing crypto companies to leave India, and is causing massive declines in trading and usage in the country. Here are some stats.
“Trading volume on Indian exchange WazirX is down 68% since the law took effect. On other popular exchanges in the country such as CoinDCX and ZebPay, trading volume is also down 83% and 16%, respectively. Indian exchange Koinbazar appears to be an outlier, with trading volume up 7% since July 1. But despite the recent bump, Koinbazar’s trading volume has sunk since February, when India’s government first announced the crypto tax. Koinbazar has gone from handling $100 million in daily crypto transactions to $44 million now.”
This is an unfortunate example of how regulatory overreach can put a massive dent in adoption.
Nexo To Potentially Buy Vauld
Nexo starts process to potentially acquire troubled crypto lender Vauld
Nexo is actively in the process of purchasing Vauld, the most recent embattled CeFi company to half withdrawals and other activity. This is largely dependent on due diligence and what Nexo finds on Vauld’s books, so nothing will change in the short term. Client withdrawals will remain haulted, my own included.
“Trenchev said Nexo could restructure or refinance Vauld depending upon how the due diligence process goes. That is, if Vauld has some assets staked for longer periods or has made investments for a long duration, Nexo could take those and instantly provide liquidity. On the other hand, if their assets have been lost, Nexo could potentially replenish them if it makes sense, said Trenchev.”
Nexo has somehow risen above the nonsense (so far) and is looking to consume it’s competitors. They offered to buy Celsius as well.
Number Three, By Arthur Hayes
Number Three. (Any views expressed in the below are… | by Arthur Hayes | Jun, 2022 | Entrepreneur's Handbook
“Number Three" is a sad but predictable story of #cryptocurrency centralized trading and lending businesses blowing up due to too much leverage. Long Live #DeFi.” - Arthur Hayes.
The fall of 3AC has been widely covered by mainstream news, but nobody can cover the nuances quite like Arthur Hayes. This 25-minute read linked above is worth your time if you want the full breakdown. It includes all of the details leading up to 3AC’s collapse and how they subsequently wreaked havoc on the industry.
Surely the Fed or another central bank could bail out these hedge funds and companies, but these entities dealt in crypto. These entities are not part of the club of TBTF financial institutions, and shall therefore die an ignoble death. But let us not shed too many tears, for we have learned through these trials and tribulations that the promise of a new decentralized financial system has weathered yet another test.
DISCLAIMER - I am not saying Arthur’s analysis is right or wrong. I am only saying he has intelligent positions worth reading.
The Future Of The Digital Dollar Ft. Chris Giancarlo
Podcast - The Wolf of All Streets
Former CFTC Chairman Chris Giancarlo On The Future Of The Digital Dollar
Does the future of digital money free us to be our own unique selves, or does it enslave us to financial and governmental powers? Chris Giancarlo, lovingly known as “Crypto Dad,” knows it’s inevitable for our financial system to yield to an internet-based system and is encouraging regulators to be proactive instead of reactive. He believes that society has every right to experiment with the money of the future and is doing just that with The Digital Dollar Project. In this episode we cover the jurisdiction of the CFTC, CBDC activity and fears that come with it, and whether or not our government will get this right.
In this episode with Chris, we discussed:
  • Crypto’s generation gap and how the younger generation is falling short
  • Our financial system will yield to an internet-based system
  • The Lummis-Gillibrand bill
  • Expanding the CFTC’s Jurisdiction
  • Regulation and the SEC’s role
  • Why clear congressional values will be good for agencies
  • The Digital Dollar Project and CBDC
  • CBDC Fears
  • Demanding greater privacy and The Freedom Coin
  • Why surveillance of our economic activity is infringing on our freedom
  • Will our government get this right?
  • The future of money: freedom or enslavement?
Thanks to BULLISH for sponsoring.
How Crypto Becomes A 100 Trillion Dollar Market
Podcast - The Wolf of All Streets
How Crypto Becomes A 100 Trillion Dollar Market
Legislators and regulators are fighting incredibly important battles in Washington D.C. that will determine the future of Crypto. Guest Perianne Boring, founder of the Chamber of Digital Commerce, is leading the charge and working directly with policymakers to encourage mainstream adoption of blockchain technologies. She explains why we should be working alongside those policymakers, tells us about the positive regulation shifts she’s seeing, and illustrates exactly what YOU can do to help.
In this episode with Perianne Boring, we discussed:
  • Perianne’s intro to Bitcoin in 2011
  • Why we should work WITH policy makers
  • Founding the Chamber of Digital Commerce
  • Positive shifts in Crypto regulation
  • The Chamber: moving from education to building
  • The fall of Terra
  • Any awareness is good awareness
  • Perianne’s optimism for the regulatory process
  • CBDC
  • What you can do to help the Crypto industry
My Recommended Platforms, Tools And Podcast Sponsors
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Subscribe to my YouTube channel for free daily content.
Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
On-chain and fundamental analysis, research, predictions and indicators, all in one place. Highly recommend.
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.
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