The Wolf Den Crypto Newsletter

By Scott Melker aka The Wolf Of All Streets

The Wolf Den #580 - The Bottom

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September 15 · Issue #580 · 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. The Bottom
  2. The Merge Vs. Macro Headwinds - IntoTheBlock
  3. Bitcoin Thoughts And Analysis
  4. Legacy Markets
  5. Ethereum Merge Party!
  6. Bitcoin’s Hashrate Goes Up Only
  7. Arrest Warrant Issued For Do Kwon
  8. BNB + Google Cloud
  9. My Recommended Platforms And Tools
The Bottom
The global investment community is bipolar, with each individual seemingly locked into one of the following two groups.
Group A: The bottom is not in - there is more pain to come.
Group B: The bottom is in - the worst is over.
Only one group can be right, and which one you fall into will largely determine how much success you have in the next bull market.
Members of Group A are playing a game of high-risk, high-reward. They are either actively short or sitting in fiat, waiting for the eventual bottom to hit. They will be greatly rewarded if they are right, but could lose everything by shorting. If they are simply sitting on the sidelines, they may be forced to buy in much higher if the bottom is already in.
Group B’s success hinges on the assumption that markets trend up over time. They might see portfolio drawdown in the short-term, but they almost guarantee themselves profit over a longer period of time. Dollar-cost averaging and HODL strategies are not glamorous, but they are unlikely to leave an investor broke.
Here’s a great article from 2009 that echoes the situation we are in today.
Never Short a Dull Market | Barron's
On June 10, 2009, Barrons released, “Never Short a Dull Market.“ The author made the case that the bottom of the Great Recession was not yet in (he was wrong). He believed that investors should mimic Group A. June, 2009 was a flat month, coming after a +30% bounce off of the bottom. He believed this was a dead cat bounce.
The question for traders/investors at the time was whether or not there was room left to drop.
In June, the majority was flipping to a bullish outlook, mimicking sentiment from early 2007, before the major crash. The author made the case for being a contrarian. This thinking would lead one to short the relief bounce and prepare for more pain. In the end, the contrarian author was punished, while bulls profited for more than a decade.
The situation today is not the same as 2009. It is impossible to know for sure whether the bottom is in or not.
What we do know is that it is far safer to exist in Group B than in Group A in all markets, as long as the money being invested is for the long term. Even if the bottom is not in, the market will inevitably rise again at some point in the future. Members of Group B may make a bit less by missing the exact bottom, but they will end up profitable. Members of Group A may make nothing, or lose everything. Further, they still need to attempt to time the bottom when it comes. Spoiler, they are unlikely to believe that is the bottom either and will probably miss it.
The market will pick the winners and losers, as it did in 2009. Those that choose wisely will win. Those that choose poorly but adapt will also make money. But those that pick wrong and refuse to adapt will suffer more pain than the market itself can ever inflict.
If you are unsure, play the long game - that’s the only strategy that is guaranteed to win.
The Merge Vs. Macro Headwinds - IntoTheBlock
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB).  ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data. 
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.
The Merge Vs. Macro Headwinds
Crypto continues to be dragged down by negative macro news. High correlations with stocks have been pervasive throughout the year, but could the anticipated Ethereum merge be enough to give crypto back a life of its own?
Ethereum has outperformed most crypto-assets over the last three months, but retraced strongly as the CPI numbers were higher than expected. Despite this, the transition to proof of stake poses at least three key reasons to be optimistic about ETH near-term:
  • Ether’s issuance is expected to drop between 85%-90%, making ETH deflationary if fees are above approximately 15 gwei. Based on the last three months’ fees, Ether’s net issuance (after the burn) should range between -1% and 0.5%, down from 3.5% pre-merge
  • ETH staking will become more attractive as transaction fees will now go to stakers as opposed to miners. Due to this fact, right after the merge ETH staking yields are expected to climb to 5.8% to 6.9%, up from the current 3.8%
  • Last but not least, the Ethereum network will become 99% less energy-intensive as it gets rid of miners. This is expected to drive adoption of more builders, help alleviate regulatory pressure and potentially attract ESG-oriented institutional investors over the medium-term
Bullishness surrounding ETH going into the merge has been reflected in on-chain accumulation patterns.
  • The amount of addresses holding between 10 to 100 ETH is at all-time highs of nearly 280,000 addresses
  • Accumulation to reach this level accelerated in June as prices dropped and have continued to climb
Overall, the merge is likely to be one of the largest positive catalysts for crypto in 2022, assuming it is successful. As this is being written a few hours prior to the merge, it is still yet to be seen if this impact will be reflected in price action near-term or if the macro headwinds will continue to dictate the direction of crypto for the time being.
Bitcoin Thoughts And Analysis
4-HOUR CHART
There is nothing to see on higher time frames, so I am zooming in for fun.
The consolidation after the recent drop is looking slightly less bearish than a day ago. We now have a Descending Broadening Wedge, which should statistically break to the upside. That said, price can drop much further in the wedge first, and the target is merely near the top of the wedge, so it’s not that exciting. The way to play this pattern is to wait for a break of the upper resistance.
What is important to note, for the moment, is that this is not a bearish pattern. There is no bear flag or pennant.
That’s all I’ve got for you! The chart is boring. Consider this a brief educational lesson, nothing more.
Legacy Markets
Futures Waver, Yields Rise as Traders Await Data: Markets Wrap - Bloomberg
“US futures declined as investor sentiment swung between hopes that inflation has peaked and concern that large interest-rate hikes by the Federal Reserve will hamper economic growth. Treasury yields rose and the dollar gained.”
Here are some key events to watch this week:
  • US business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
  • China home sales, retail sales, industrial production, fixed assets, surveyed jobless rate, Friday
  • Euro area CPI, Friday
  • US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
  • Futures on the S&P 500 fell 0.2% as of 6:40 a.m. New York time
  • Futures on the Nasdaq 100 fell 0.4%
  • Futures on the Dow Jones Industrial Average fell 0.1%
  • The Stoxx Europe 600 was little changed
  • The MSCI World index fell 0.1%
Currencies
  • The Bloomberg Dollar Spot Index rose 0.2%
  • The euro fell 0.1% to $0.9971
  • The British pound fell 0.4% to $1.1489
  • The Japanese yen fell 0.3% to 143.54 per dollar
Bonds
  • The yield on 10-year Treasuries advanced five basis points to 3.45%
  • Germany’s 10-year yield advanced four basis points to 1.76%
  • Britain’s 10-year yield advanced two basis points to 3.15%
Commodities
  • West Texas Intermediate crude fell 0.6% to $87.94 a barrel
  • Gold futures fell 0.6% to $1,698.10 an ounce
Ethereum Merge Party!
Ethereum Merge Is Complete After Closely Watched Countdown: Vitalik Buterin - Bloomberg
Funny, I don’t feel any different. I don’t feel merged.
But there you have, the initial phase of the merge has gone off without a hitch. Ethereum has made the transition to proof of stake from proof of work.
We will be celebrating today with a massive livestream at 10:30 AM EST.
The New Era For Ethereum | Experts Discuss What Will Change Post Merge!
Bitcoin’s Hashrate Goes Up Only
Bitcoin Hashrate historical chart
Rain, snow, sleet, or hail, Bitcoin’s hash rate continues to move up and to the right. Barring no bans or restrictions on mining, the graph has made it clear that the total hash rate will continue to increase, regardless of market conditions. The current hash rate is sitting at an all-time high of about 210.895 Ehash/s, as Ethereum’s hash rate becomes a thing of the past.
Arrest Warrant Issued For Do Kwon
LUNA Founder Do Kwon Wanted By Korea, Soon Interpol
According to South Korean authorities, Do Kwan is still at large. An arrest warrant has been issued, but the mastermind behind Luna and it’s $40 billion collapse is currently nowhere to be found. The arrest warrant states that Do Kwan violated the South Korean Capital Markets Act and that Luna was illegally offered as an unregistered security. It will be interesting to see how this plays out, and the sentence laid down by a South Korean judge - there are no juries in the country, meaning one person will determine his fate.
BNB + Google Cloud
BNB Chain to collab with Google Cloud to bolster Web3, blockchain startups
Crypto entities continue to team up with traditional companies. BNB, Binance’s $45 billion utility token, is partnering with Google Cloud to bolster Web3 development and blockchain startups. Think of this announcement as a rival to Ethereum’s integration with Amazon Web Services.
What this means for BNB developers is that they can now also build on Google Cloud’s infrastructure, instead of just the BNB blockchain. Over 1,300 active BNB DApps now can exist on both platforms and can continue operations and expand. Through the partnership, developers will now have the unique opportunity to tap into Google’s Startup Success team and Google’s in-house experts when needed.
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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.
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