The Wolf Den Crypto Newsletter

By Scott Melker aka The Wolf Of All Streets

The Wolf Den #623 - All Money Is A Matter Of Belief





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November 17 · Issue #623 · 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. All Money Is A Matter Of Belief
  2. Legacy Markets
  3. The Importance Of Randomness In Key Generation
  4. Genesis Falls
  5. Celebrities Sued For FTX Promotion
  6. El Salvador To Buy 1 BTC A Day
  7. Binance To Relaunch Bid For Voyager
  8. My Recommended Platforms And Tools
IMPORTANT NOTE! Tomorrow is my wife’s birthday, and next week is a holiday and I will be spending it with my kids. I am taking a bit of time off, which has been planned for months.
There will be no newsletter until next Friday!
All Money Is A Matter Of Belief
All money is a matter of belief.”
- Adam Smith, the founding father of modern economics.
I don’t think that Adam Smith was referring to Bitcoin when he wrote this back in the mid-18th century, but I do think he was one of the first economists to truly grasp the concept of money.
My OG readers may remember issue #434, titled “The Ramen Revolution” in which I drew similarities between Ramen noodles in the prison system and Bitcoin. It sounds crazy, but it makes sense.
In prison, Ramen noodles are often more valuable than money because they are…
Very slow to expire - the noodles are a store of value like Bitcoin.
Recognizable, portable, and durable - the noodles are a store of value like Bitcoin.
Identical and consistent - Ramen is fungible like Bitcoin.
Hold a steady value - Ramen is a unit of account like Bitcoin.
My conclusion was, “Ramen is an obscure form of money that works exceptionally well… and so is Bitcoin.
So getting back to Adam Smith and belief, aren’t dollars just as obscure as Bitcoin? And is the value of the U.S. dollar actually based on anything more than belief?
I think the obvious answer to these questions is “yes” and “no,” respectively.
The best way to elaborate on the first question is to address the common criticism that Bitcoin is entirely digital. The irony is that 97% of fiat currency is digital as well and the paper we see in our wallet is simply that - paper. Yes, it is legally accepted for payment of debts, goods, and services, but if the government tosses it aside tomorrow, then so would we. The dollar has value because we believe it does. Without trust in the government, there is no trust in the dollar.
I know this sounds crazy, but in Iran, Vietnam, Indonesia, Paraguay and countless other countries, fiat currencies have lost value because of a loss of belief and trust.
Did you know that a single US $1 bill is worth 42,508 IRR (Iranian Rials)? But on the black market, it can fetch up to 320,500 IRR. Does that make sense?
All it takes is for the collective to lose faith in a currency and the money in your wallet becomes worth less than a blank piece of white paper. Or worse, governments out-print each other in a race to the bottom. Adam Smith is clearly right in saying that money is a matter of belief.
If I was the father of post-modern economics, I would say that the U.S. dollar is a call option on the success of our country in the future and that Bitcoin is a call option on the success of humanity.
Bitcoin works because the science works, the math works, and the system works.
Belief is removed from the equation. We know that the blockchain will continue to produce blocks and verify transactions as long as one person or computer continues to run a node. And for the first time in history, we don’t have to rely on governments, which inevitably rise and fall.
Eventually, the world will realize that fiat is the leap of faith and Bitcoin is far superior.
It won’t be easy, but the future is Bitcoin.
Legacy Markets
Stock Market Today: Dow, S&P Live Updates for Nov. 17 - Bloomberg
Key events this week:
  • US housing starts, initial jobless claims, Thursday
  • Fed’s Neel Kashkari, Loretta Mester speak, Thursday
  • US Conference Board leading index, existing home sales, Friday
Some of the main moves in markets:
  • Futures on the S&P 500 fell 0.2% as of 5:37 a.m. New York time
  • Futures on the Nasdaq 100 were little changed
  • Futures on the Dow Jones Industrial Average fell 0.2%
  • The Stoxx Europe 600 fell 0.3%
  • The MSCI World index fell 0.3%
  • The Bloomberg Dollar Spot Index rose 0.4%
  • The euro fell 0.3% to $1.0361
  • The British pound fell 0.4% to $1.1871
  • The Japanese yen fell 0.2% to 139.77 per dollar
  • Bitcoin fell 0.1% to $16,514.65
  • Ether fell 1.2% to $1,190.7
  • The yield on 10-year Treasuries advanced five basis points to 3.74%
  • Germany’s 10-year yield declined one basis point to 1.99%
  • Britain’s 10-year yield advanced three basis points to 3.17%
  • West Texas Intermediate crude fell 0.5% to $85.17 a barrel
  • Gold futures fell 0.5% to $1,767.80 an ounce
The Importance Of Randomness In Key Generation
Why Randomness Is Central To Crypto, But So Hard To Achieve | NGRAVE
Self custody has never been more important. I often preach that you should take your crypto off of exchanges, but that can be a daunting task for a newcomer who has been sitting comfortably on Binance or Coinbase. NGRAVE is my preferred hardware wallet, but you can use any product to self custody your assets. To be clear, I get nothing for recommending it - this is solely to help you. I use their product for a number of reasons, but the most interesting is the method in which randomness is achieved in their key generation process.
Check out the link above. Ruben, the CEO, discusses this idea of randomness in more depth.
Genesis Falls
We recognize how challenging this past week has been due to the impact of the FTX news. At Genesis we are entirely focused on doing everything we can to serve our clients and navigate this difficult market environment.
When a crypto CEO or institution tweets that “everything is ok,” it is seemingly a red flag and time to take notice. On November 9th, Genesis Tweeted “we hedged and sold collateral resulting in a loss of $7m… our balance sheet remains strong.” And then they had the audacity to end their statement with a not-so-subtle brag. “Yesterday was a top 5 volume day for our derivatives business as clients turn to us during volatile market conditions to manage their risk.
Seemed like they were telling us that everything was ok, right?
A day later, they released a statement saying that they had $175M locked on FTX.
Fast forward one week later and their minor loss is actually the entire lending business. They never mentioned the word “bankrupt,” and they did not say that the entire company is in trouble, but it doesn’t take a genius to see the red flags.
Remember, they also extended a $2.3B loan to Three Arrows Capital that was absorbed by the parent company, DCG, the same company that owns Grayscale and Coindesk.
Tree of Alpha
The fact DCG owns both Genesis and Coindesk, and Genesis is forced to halt withdrawals after a bankrun initiated by a Coindesk exclusive regarding Alameda's balance sheet is almost poetic.
Ouch. Let’s all hope that they do not fall to the contagion, but find a way out of this mess.
Celebrities Sued For FTX Promotion
FTX investor sues Tom Brady, Gisele Bundchen and others as crypto contagion spreads | CNN Business
It’s one thing to sue the executives of FTX that committed a number of crimes. Including celebrities is absurd.
A massive class action lawsuit was filed, originating from a firm in Florida. The plaintiffs and lawyers are making the case that the celebrities who endorsed FTX are at fault, including Tom Brady, Gisele Bündchen, Steph Curry, and Larry David.
Does anyone really think Tom Brady had any idea that FTX was a house of cards?
Almost nobody saw the collapse of FTX coming, including legislators and regulators who met with SBF on a regular basis.
It’s important to call out criminals, but going after individuals that filmed a commercial completely misses the target.
El Salvador To Buy 1 BTC A Day
President Bukele reveals El Salvador will buy 1 Bitcoin daily
I am not sure if this is news anymore. The El Salvador Bitcoin experiment has been iffy at best, with constant reports that adoption is almost nonexistent and that the people are disinterested in using the coin. Further, many view Bukele as a dictator and scoff at Bitcoiners who continue to celebrate him simply because he likes Bitcoin.
Regardless, the country continues to commit to adding BTC to their reserves and will buy 1 BTC a day.
Not much for a sovereign nation, but perhaps a good example of what retail should be doing while prices are depressed.
Binance To Relaunch Bid For Voyager
Binance's US Arm to Relaunch Bid for Bankrupt Lender Voyager: Source
Voyager went bankrupt. FTX submitted the winning bid to buy Voyager. FTX went bankrupt.
The silver lining? Voyager never transferred assets to FTX. Creditors, like myself, dodged a bullet.
Binance was a contender in the Voyager auction, and reportedly intends to relaunch their bid. This will take a while to play out - I will be following.
My Recommended Platforms And Tools
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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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