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The Wolf Den #582 - Regulators Make It Rain

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September 19 · Issue #582 · View online
The Wolf Den Crypto Newsletter
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In This Issue:
  1. Regulators Make It Rain
  2. Bitcoin Thoughts And Analysis
  3. Altcoin Charts
  4. Legacy Markets
  5. The Only Chart That Matters
  6. FTX Is Still Ready To Strike
  7. GMX Exchange Exploit
  8. Co-Founder Of Ethereum Anthony Di Iorio: Centralization Is Still The Biggest Issue
  9. My Recommended Platforms And Tools
Regulators Make It Rain
Regulators showed up to the crypto party last Friday and started throwing out reports like they were making it rain hundred dollar bills at the club. Every 3 and 4 letter agency under the sun dropped a report, as directed 6 months ago in Biden’s Executive Order.
There were hundreds of pages released to the public, not including comments and statements from other prominent figures. It was a regulatory orgy of epic proportions, with countless proposals tailored made just for us.
Aren’t we lucky.
All of the big players were there - the Treasury, U.S. Department of Commerce, U.S. Department of Justice, the White House, and the SEC. I’m pretty sure Biggie and Tupac showed up from the grave to sing back up for Bob Marley.
Earlier this year, President Biden signed an executive order - “Ensuring Responsible Development of Digital Assets.” He told the agencies to get their suggestions together within 6 months. Reading through each report from each agency and reporting back to you would make my eyes bleed, so I decided to share a list of the reports and dive into the White House’s Fact Sheet.
Here it is, in all of it’s horrific splendor.
FACT SHEET:  White House Releases First-Ever Comprehensive Framework for Responsible Development of Digital Assets - The White House
The Executive Order identified six key priorities: “consumer and investor protection; promoting financial stability; countering illicit finance; U.S. leadership in the global financial system and economic competitiveness; financial inclusion; and responsible innovation.
In my opinion, they botched each and every one of these directives.
My initial thoughts were that the fact sheet was a complete disgrace for the following reasons and more.
- It was a clear attack on proof-of-work. They implied that they will set environmental standards for mining.
- It pushed FedNow over crypto.
- They framed everything as a potential scam or threat, without extolling the virtues.
- The report harped on volatility and consumer risk, not on the benefits of owning the assets.
- The fact sheet concluded with a CLEAR push towards a Central Bank Digital Currency instead of crypto.
I went on a long rant about it on YouTube last week.
Why Are Markets Sinking After The Ethereum Merge? Important News For Voyager Investors
In the first section, it stated in bold that the SEC and CFTC should, “aggressively pursue investigations and enforcement actions against unlawful practices in the digital assets space.
Gary Gensler likely had a spontaneous orgasm.
They encouraged the Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) “to redouble their efforts to monitor consumer complaints and to enforce against unfair, deceptive, or abusive practices.”
That’s fine in a vacuum - consumers need protections. But it’s not fine when you only focus on the negative.
They called for “a framework to regulate nonbank payment providers,” “support for the development and use of innovative technologies by payment providers,” and “development of a Digital Assets Research and Development Agenda.” 
The problem? They implied that this was more specific to FedNow, the Fed’s new instant payment system. They are making a clear push away from crypto.
And how about these words on the environmental impact of Bitcoin?
“The Department of Energy, the Environmental Protection Agency, and other agencies will consider further tracking digital assets’ environmental impacts; developing performance standards as appropriate; and providing local authorities with the tools, resources, and expertise to mitigate environmental harms. Powering crypto-assets can take a large amount of electricity—which can emit greenhouse gases, strain electricity grids, and harm some local communities with noise and water pollution. Opportunities exist to align the development of digital assets with transitioning to a net-zero emissions economy and improving environmental justice.”
Yikes, man. Yikes.
In line with making sure the U.S. doesn’t fall behind, the administration explicitly said, “U.S. agencies will leverage U.S. positions in international organizations to message U.S. values related to digital assets. The US made it clear that they intend to push their overbearing regulatory regime on the rest of the world.
Not great.
The kicker was the clear push towards a CBDC.
A CBDC is the Fed’s wet dream - digital fiat that they can more easily manipulate and control.
This fact sheet was a hack job. I could not find a single encouraging or reasonably considered remark.
That said, CZ from Binance had an entirely different take, which is worth presenting.
CZ 🔶 Binance
It’s great to see the US moving towards a proposed crypto framework. Getting it right will help protect consumers, markets and spark responsible innovation. (1/9)
His contention is seemingly that “any regulation and clarity is good,” which is an opinion I have shared in the past myself. Even bad clarity is better than no clarity.
My feeling is that he is staying on the good side of regulators. I don’t blame him.
For a complete list of what released on Friday, look no further than below.
P.S. - I also included some recent SEC news regarding the hunt to make everything a security.
Treasury
U.S. Department of Commerce
U.S. Department of Justice
The White House
The SEC
Bitcoin Thoughts And Analysis
WEEKLY CHART
Not great, but still effectively just massive sideways chop since the June lows.
Bitcoin does look eager to retest the $17,600 area from June, having failed to put together any sort of sustained rally for the moment. If that happens there is a silver lining. A lower low will confirm the lower high at $25,212, meaning that a break of $25,212 in the future would be a break in bearish market structure. We would be lowering the bar from $32,375.
DAILY CHART
Very little to see on the daily, outside of the clear rejection at the blue 50 MA. Price to continues to make lower lows, although notably on decreasing volume. When you see volume dropping with price, you should be suspicious. Same if volume is dropping with rising price. A trend needs to be confirmed by volume.
At the moment, price is potentially sweeping the recent lows (%18,540) with a wick below. If we see that area hold on the daily close, it could be a sign that we head back up to a higher part of the range.
For the moment, there’s not much to love here.
4-HOUR CHART
The drop was preceded by overbought RSI with bearish divergence. RSI is once again oversold, so I will be looking for bullish divergence. May not happen, but that’s the signal I will be watching for.
Altcoin Charts
I do NOT share signals in this section. I share setups and charts that I am watching, in an effort to help show you how I view a chart and what criteria would be necessary for me to consider taking a trade. NEVER blindly buy something because it is listed in a newsletter or posted on twitter. You need to have a plan when you enter a trade. These are just ideas, and are almost always “if, then” scenarios. If a certain set of things happen, then I would consider a trade.
ETH/USD
I have been patiently and publicly awaiting this drop on Ethereum. I shared it on YouTube and in the newsletter multiple times.
Now we will find out if we actually want it!
I did fill my long standing buy orders at $1285 on this dip, a key level of former resistance that was never retested as support. I did not expect it to hit directly in the circle that I drew with such perfect timing - that was luck.
This is a long term position for me, not really a trade. After losing the bulk of my ETH on Voyager (for now), I am rebuilding my holdings.
Legacy Markets
Bloomberg Markets - Bloomberg
“Stocks slid with US equity futures in a cautious start on Monday as investors await a slew of interest rate decisions in the days ahead and after global equities notched their worst week since hitting this year’s low in June.”
Remember everyone, the Fed is making it’s first interest rate decision in 2 months on Wednesday!
Some key events this week: 
  • World Bank President David Malpass speaks in New York, Monday.
  • European Central Bank vice president Luis de Guindos speaks in Madrid, Monday
  • China loan prime rates, Tuesday.
  • Sweden interest rate decision, Tuesday.
  • Federal Reserve interest rate decision, Wednesday.
  • Big-bank CEOs including Jamie Dimon of JPMorgan Chase and Co. and Brian Moynihan of Bank of America Corp. testify before the US House Financial Services Committee, Wednesday.
  • Reserve Bank of Australia Deputy Governor Michele Bullock speaks at a Bloomberg event in Sydney, Wednesday.
  • Central bank policy meetings in Japan, UK, Indonesia, South Africa, Turkey and Switzerland, Thursday.
  • US Treasury Secretary Janet Yellen speaks in Washington, Thursday.
  • Eurozone PMIs, Friday.
Some of the main moves in markets:
Stocks
  • Futures on the S&P 500 fell 1% as of 6:05 a.m. New York time
  • Futures on the Nasdaq 100 fell 1.1%
  • Futures on the Dow Jones Industrial Average fell 1%
  • The Stoxx Europe 600 fell 1%
  • The MSCI World index fell 0.4%
Currencies
  • The Bloomberg Dollar Spot Index rose 0.4%
  • The euro fell 0.4% to $0.9976
  • The British pound fell 0.5% to $1.1360
  • The Japanese yen fell 0.4% to 143.47 per dollar
Bonds
  • The yield on 10-year Treasuries advanced three basis points to 3.48%
  • Germany’s 10-year yield advanced three basis points to 1.79%
Commodities
  • West Texas Intermediate crude fell 1.9% to $83.53 a barrel
  • Gold futures fell 0.7% to $1,672.20 an ounce
The Only Chart That Matters
Arthur Hayes
The only chart that matters post-merge.

Show me dat drop in $ETH issuance every day, and I will show you a BULL FUCKING MARKET! https://t.co/YfaslkJEDr
As Arthur Hayes points out, a lot has changed now that we have entered the post-merge era. I may write a full intro on what’s improved, but I’ll provide a quick overview for now.
Issuance is the most noticeable difference. Although it varies day-to-day, the proof-of-work chain would be issuing 4.9 million Ethereum per year based on current models. Now it’s just 600,000 per year. This means that supply expansion has dropped from 4%a year to .3%. Staking also saw a substantial jump immediately post-merge, which should continue to grow with time.
There are a lot of reason to be bullish long term on Ethereum.
FTX Is Still Ready To Strike
FTX CEO Sam Bankman-Fried Says Firm Still Has $1,000,000,000 in Cash Left To Deploy for Acquisitions - The Daily Hodl
In a recent interview, SBF said that “we had a couple billion going into this” (referring to the start of the contagion) and that, “another ballpark billion that is completely unencumbered.
To wrap up the interview, SBF was asked perhaps the most important question: why does FTX care? “It’s not going to be good for anyone long term if we have real pain, if we have real blowouts, and it’s not fair to customers. It’s not going to be good for regulations. It’s not going to be good for anything. From a longer-term perspective, it’s just that’s what was important for the ecosystem.
FTX is still waiting on the sidelines for more deals.
GMX Exchange Exploit
GMX DEX Reportedly Suffers $565,000 Exploit - BeInCrypto
Over the weekend, a strange exploit occurred on the AVAX/USD pair on the decentralized exchange, GMX. A highly-skilled and well-funded trader managed to create a sinusoidal pattern for AVAX by borrowing, opening, and closing long and short positions to manipulate the price and extract value.
The exploit worked because the culprit realized that GMX price moves based on an oracle rather than an order book. The trader opened positions on GMX, then slightly manipulated the price on a CEX i.e. Coinbase/Binance to favor the opened GMX position.
GMX has said that they are aware of the exploit and that they are capping open interest to limit this type of activity.
Another day, another creative way to exploit our industry.
Co-Founder Of Ethereum Anthony Di Iorio: Centralization Is Still The Biggest Issue
Podcast - The Wolf of All Streets
Anthony Di Iorio is one of the co-founders of Ethereum, along with Vitalik Buterin, Charles Hoskinson, Joseph Lubin, and Gavin Wood. Are they still friends? Why is Anthony still in crypto and what problems is he trying to solve now? Why is decentralization still one of the biggest issues in our industry? We covered this, the switch to proof of stake and much more in this incredible conversation with Anthony.
In this episode with Anthony, we discussed:
  • Why Anthony Di Iorio decided to stay in crypto
  • Projects Anthony is working on right now
  • Andiami
  • Las Vegas!
  • Infrastructure is still too centralized
  • When will we have decentralized systems
  • Next problem Anthony will solve
  • Ethereum: PoS was always a goal
  • How to measure the success of the merge
  • Going back to Ethereum
  • UX problem of crypto
  • DAOs could be a significant problem
  • Focusing on important things
  • Are co-founders of Ethereum still friends?
  • Does the merge put pressure on Bitcoin and crypto?
  • Best case scenario for Ethereum
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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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