A weekly news and trading piece by Scott “Shooter” Henderson covering crypto currencies.
Kirk & Shooters Crypto Thesis
The short story is that most cryptocurrencies are going to zero, but there will be survivors that rise to much higher price ranges. This is a journey of separating winners from losers.
We expect Bitcoin and Ethereum to be among the biggest, if not the biggest, winners. Along the way, we can trade the larger moves for added gains.
In the News
Here’s what caught our attention this week…
Ruble-Denominated Bitcoin Surges
According to Coindesk, Bitcoin in the Russian ruble increased to a nine-month high as the country’s fiat currency plunged to record lows due to the fallout from the invasion of Ukraine. Data tracked by Kaiko, a Paris-based cryptocurrency research provider, shows that ruble (RUB) -denominated bitcoin volume surged to nearly 1.5 billion RUB on Thursday, hitting its highest level since May.
Bitcoin Jumps 10% on Sanctions against Russia
CNBC reported that Bitcoin jumped 10.4% to $41,807.16, while ether rose 7.6% to $2,826.54. U.S. equities were down sharply earlier in the day before recovering a big chunk of their losses. Note to self! Buy Bitcoin on future Russian sanctions.
Shake Shack Incredible loyalty scheme
Shake Shack is running a Bitcoin promotion with Block’s Cash App. returning 15% of every purchase as Bitcoin rebate.
India, 20 Million Crypto Investors
Wow, I was not following India’s growth. That changed here. I totally agree with Diksha Madhook. We saw over a 700% increase in the number of participants in smaller cities like Guwahati, Karnal, and Bareilly, in the semi-urban areas. That’s 10+ million users of CoinDCK between the ages of 18-34 and over 10 million users on WazirX under age 35 on two of India’s largest crypto exchanges. In fact, she’s suggesting they are a “super power” for Crypto because they prefer Crypto over Gold. If this becomes a macro trend in Gold, it could be a significant jump in adoption of Crypto. Worth watching for sure!
Research (Supporting Evidence)
Are HODLers getting sensitive?
The UTXO Realized Price Distribution (URPD) helps us understand this crypto euphoria’s.
This weeks Glassnode analysis certainly fulfilled my need for data…
- 10-May-2021 just before the liquidation cascade sell-off event
- 20-July-2021 at the $29k low before the rally to ATH in late 2021
- 9-Nov-2021 at the current market all-time-high
- 27-Feb-2022 at the time of writing.
Much like my opening thesis about Crypto this article supports my belief in FOMO (fear of missing out) and FOL (fear of loss) is a huge driver. As markets get top heavy it ultimately draws in weak buyers with little conviction creating what is know as fragile markets. Weak hands have no stomach to withstand major price corrections and further soften markets as they sell into corrections. The result is what is known as a flushes which usually reverts rather quickly to the mean. Yet, HODLer appear to be buying every dip now and accumulating.
Micro-Trend
We now have steady declining deposits. A little troubling! Yet, in a regulatory and oversight environment I view informed intermediaries as a positive thing vs. having none at all. Cryptocurrencies are largely unregulated, but as they obtain legitimacy and new regulatory frameworks, this will only foster faster adoption.
Softening Exchange Outflows
Some signs that the weak hands are getting exhausted. This graph does a fantastic job of illustrating that we have not returned to May-July 2021 euphoria that occurred after the June 2020 drawdown. Yet, it also expresses perfectly how Wave A of an ABC manifests. So, this warrants a little caution (tighten stops) because B’s can be Moddy and it could easily reject higher prices at this crossroads. However, what it also reflects is that we are in a steady uptrend in the number of outflows which supports further accumulation has started again.
We have achieved 72% of the total supply of Bitcoin locked up in what is called aged Bitcoins (HODlers of Bitcoin for 3 months or longer). That’s significant for our next leg-up, which will likely occur either at the next Bitcoin halving. Which is an extremely bullish perspective considering the current micro trend. Which is very bearish. Yet, as history speaks louder than words we have learned when all HODlers of Bitcoin are bullish Bitcoin continues to ramp. Maybe, at slower pace here? Frankly, I feel a moon shot coming. For further reading of this weeks article, see Glassnodes article.
Historic Adoption Rate is on the Horizon
Adoption rates of cryptocurrencies and the internet. Emerging market have stronger adoption rate than the US. As we dig into methodology on estimating adoption rates, all we need to do is look at history for some insight. Shooter feels the best way to calculate adoption rates is to use known internet users divided by the active crypto wallets. To date, this seems to be the most accurate method to project future cryptocurrencies adoption rates. At the current rate, future adoption rates should be at least 3x from here.
In the Know (Secular Trends)
What is PTE (P2E)?
PTE (or “play-to-Earn“) The idea of earning money through video games’ in-game economies is not new. As long as game economies have existed, players have found ways to make money.
What is Defi?
Decentralized finance (DeFi) is a sector term for financial services on the blockchains, primarily Ethereum. The idea of DeFi, is to create the ability to do most things that banks support and more — lend, borrow, earn interest, buy insurance, trade, etc. — it’s fast and doesn’t require paperwork to complete a transaction. Just like crypto as a whole, the DeFi concept is a global, operating on a peer-to-peer network, in an open to all decentralized concept. The Mega caps are Ethereum, (ETHUSD), Wrapped Bitcoin (WBTCUSD), Chainlink (LINK) and Uniswap (UNIUSD). See a complete list DeFi cryptocurrencies here.
What is GameFI?
GamFi (GAFI) is an amalgam of gaming and DeFi. The notion of GameFi builds on the connection of blockchain technology, decentralized financial products, and gaming. Such as non-fungible tokens (NFTs), borrowing and lending, yield farming and stablecoins, among others. The largest market share resides in the rising stars AXSUSD, MANAUSD, SANDUSD. See a complete list GameFI cryptocurrencies here.
What are NFT’s?
NFT’s (or “non-fungible tokens”) are the latest crypto phenomenon that transform digital works of art and other collectibles into unique one-of-a-kind, verifiable assets that are easy to trade on the blockchain. Christie’s auction house sold the first-ever NFT artwork. Beeple sold a collage of images for a staggering $69.3 million and even Crypto Kitty has a collection. Our rising stars are Decentraland (MANAUSD), The Sandbox (SANDUSD), FLOW (FLOWUSD), Enjin Coin (ENJUSD), and ECOMI (OMIUSD). See a complete list NFT-related cryptocurrencies here. Top NFT’s here.
What is the Metaverse?
Metaverse is a digital world, where users interact with each other much like real life yet in a virtual environment. You use an avatar versus your person. One neat feature is that you get the best of both worlds, business, pleasure, social, and even gaming. Some Metaverse crypto and stocks are pure plays, that is, companies who do nothing but the metaverse. Others are hardware companies that already have successful businesses but we’ve found they will likely benefit from a new revenue stream. In many instances, the metaverse requires the use of augmented reality (AR) or virtual reality (VR) headsets. Software companies can also be metaverse stocks. Several growth stocks are poised to benefit from the metaverse trend, while other stocks are already members of the Tech universe with history and new technology.
What is Layer2 Blockchain technology? (New)
Layer2 or the “off-chain” solution allows for faster cheaper bitcoin payments. Much like peer-to-peer it allows two parties to exchange Bitcoin nearly simultaneously much like used to transfer data between adjacent network nodes in a wide area network or between nodes on the same local area network. According to golucidity.com, its main purpose is to scale blockchain transaction capacity while retaining the decentralization benefits of a distributed protocol.
>>>Shooter’s Not So Quiet Mind (Watchlist)<<<
Notes: The one thing about drawdowns is that they tell us a lot more about internals than what is visible to the naked eye. In Satoshi Nakomoto’s 2008 whitepaper, he used the phrase “peer-to-peer electronic cash”. I find it ironic that we see relative strength in the low cost peer-to-peer exchange called the Lightening Network. You may recall that Substack adopted the Lighting Network in August 2021 and more recently Twitter accepting tips through the Cash app. uses the Lightening Network. On another note, I did not act on Solona and SOLO Chicks project last week with all the noise about war. I also did not add to AXS, LINK, FLOW, INTC, PYPL, CORZ, and BLOK. I’m not sure about this week yet! Let me continue to encourage you to go create a profile and explore Decentraland and explore Twitter on Twitter or if your a Baller VC check out Flowverse.
Shooter’s Crypto Picks and Sector Stocks (Wave Counts)
It’s time to seriously consider what percentage of your portfolio should be held in the Cryptoverse. Crypto is still very speculative. However, the risk and rewards are unprecedented. Stay tuned as I jump into DeFi, Pay-to-Earn gaming, and other shining stars in the new year.
Make sure to adhere to a rules based approach to trading using technical indicators. And, we highly recommend trailing stops and/or stops at preset technical levels.
Follow along in chat if you are going to swing trade a portion of your account. We recommend starting with trading 5% or less of your total portfolio and no more than 20% even as you gain experience.
USER GUIDE
Continue to scale in small on all entries!
“Next Entry Window Long label” or “Set-up Long Label”.
Crypto Elliot Wave Counts / Set-ups / Next Entries Long or Short
MARA (revised earnings March 6, 2022)
Marathon Digital Holding, Inc. (NASDAQ: MARA) The Company last sold bitcoin on October 21, 2020, and since then, has been accumulating or “holding” all bitcoin generated. As a result, Marathon currently holds approximately 8,956 BTC, including the 4,813 BTC the Company purchased in January 2021 for an average price of $31,168 per BTC. On March 4th, 2022, the fair market value of one bitcoin was approximately $41,430.77, implying that the approximate fair market value of Marathon’s current bitcoin holdings is approximately $371 million.
Corporate Highlights as of March 4th, 2022
- Produced 360.3 self-mined bitcoin during February 2022, a 729% increase from 43.4 self-mined bitcoin in February 2021
- Increased total bitcoin holdings to approximately 8,956 BTC with a fair market value of approximately $386.8 million
- Cash on hand was approximately $106.4 million and total liquidity, defined as cash and bitcoin holdings, was approximately $493.2 million
- Increased hash rate 8% from the prior month after successfully deploying and energizing 2,800 miners in the month of February
- Received approximately 7,600 top-tier ASIC miners from BITMAIN during the month of February
- Existing mining fleet consists of 35,510 active miners producing approximately 3.8 EH/s
- After successfully breaking the mold on deploying behind the meter at scale, deployments are expected to continue to accelerate throughout the rest of 2022
- The Company continues to expect its mining operations to be 100% carbon neutral by the end of 2022
Historical and Potential Hash Rate Growth Based on Current Shipment Schedules of Previously Purchased Miners (Subject to Change)
Currently, holding Apr $30 calls / Jan 2023 $40 calls (Shooter’s Proxy for BTC leverage). I’ve been rolling 25% of gains into those $40 leaps. As the bottom becomes more defined I will increase that %.
CORZ (revised Chart March 6, 2022)
Core Scientific, Inc. (NASDAQ: CORZ) 100% upside? Even though my count is ugly! BTIG analyst Gregory Lewis initiated coverage with a buy rating and $18 price target, or nearly double the current price of $9.38. According to Core Scientifics website it operates 75,000 bitcoin miners producing 7.5 EH/s that minted 1,077 bitcoins in January 2022, 1,044 bitcoins in December, 2,498 bitcoins in the fourth quarter, and 5,769 bitcoins in the full year, representing year-over-year increases of 313%, 235% and 350%, respectively. The Company held 5,296 bitcoins at year end and as of January month end they held 6,373 bitcoin produced from operations. As of December 31, 2021, Core Scientific provided infrastructure, technology and operating support for a diverse group of customers operating more than 80,000 ASICs, which represented 6.9 EH/s of the Bitcoin Network. In 2021, the Company entered into agreements with customers to provide approximately 430 megawatts of additional hosting capacity in 2022. With these metrics I’m having a hard time believing my own charts. Stay tuned, I will be adding a starter position shorty that is in line with my MARA thesis.
Core Scientific (NASDAQ: CORZ).
I don’t like the chart. From a leverage perspective, we still have very few instruments to diversify any investments we make in crypto. Personally, I prefer regulated entities (publicly traded companies) vs. Crypto itself because at least their books are supervised. Then, I don’t think an idiot can screw up a 10x rise as adoption becomes main stream. So, in a pragmatic effort to diversify, CORZ Bitcoin holdings and future Hash rates made the current valuations stand out like sore thumb. Its way under valued compared to its peers.
BITF
Bitfarms Ltd (NASDAQ: BITF // TSXV: BITF) (A low cost producer under $7k a BTC)
Mining Production (Paraguay is up and running)
⦁ 2.3 EH/s achieved effective January 23, 2022, up 100 petahash per second from December 2021.
⦁ 301 new BTC mined during January 2022, up 51% from January 2021.
⦁ 9.5+ BTC mined daily on average in January, equivalent to about US$365,900 per day and approximately US$11.4 million for the month based on a BTC price of US$38,000 on January 31, 2022.
⦁ 299 BTC from mining in January deposited into custody.
⦁ 4,600 BTC in custody at January 31, 2022, inclusive of 1,000 BTC purchased during the month, representing a total value of approximately US$175 million based on a BTC price of US$38,000.
I will add to my Bitfarms (NASDAQ: BITF) this week as well.
XBT/USD (BTCUSD) The nuclear power plant killed it again. We opened the week higher at $39,134.83. Finally, got the higher range I was looking for last month at $8030.02. Our high was $45069.78 while we set a new low for the year at $37039.78. Yet, Ruble/Bitcoin pair volume play a decent role in that $45k print as Russian flocked to Bitcoin for some safety. That 1.5 Billion was 10x the normal volume.
If you don’t have a Crypto account you can also buy Grayscale GBTC this is the prospectus.
GBTC (Bitcoin ETF) Weekly Chart Wednesdays stop should taken you out in profits. I don’t think we go beyond my 1st Golden Box. However, I always know my counts in either direction.
GBTC (Bitcoin ETF) Daily Chart
GBTC (Bitcoin Trust) 90 Min Chart
ETH/USD Ethereum is showing some signs of relative strength. (revised March 6, 2022)
If you don’t have a Crypto account you can also buy Grayscale ETHE this is the prospectus.
Grayscale Ethereum Trust (ETHE)
Flowground: (FLOW) is not only fast, its seems resilient, decentralized, and developer-friendly blockchain, designed as the foundation for a new generation of games, apps, and the digital assets that power them. It is based on a unique, multi-role architecture, and designed to scale without sharding, allowing for massive improvements in speed and throughput while preserving a developer-friendly, ACID-compliant environment.
FLOW/USD Continue to cost average in.
Chainlink: Is a securely connect smart contracts with off-chain data and services. Chainlink decentralized oracle networks provide tamper-proof inputs, outputs, and computations to support advanced smart contracts on any blockchain. What has gained a lot of traction and my attention is the CCIP bridge which is intent on connecting all Crypto platforms to the hub, LINK. A unified Decentralized Contract Hub so to speak! Not only, does Oracle have a sound history in Banking, they are well established as a secure government provider. So, its my belief that when Banking goes blockchain they become the top tier provider in Decentralized financial contracts. If not more! All were waiting for supervision by the bank regulator, the Comptroller of Currencies, and were off to the races.
LINK/USD Continue to cost average in. Once the Banking supervision is settled Bank of America will be allover these contracts.
CRV/USD Its 0.09 cents from the count. So, I will add on some type of crypto bottom. I will post in the chat. More on Curve here!
MANA/USD (Decentraland) Its looks like the back-test is either done or about done…Continue to cost averaging in.
ADA/USD “NEEDS SOME TIME” The best money I’ve ever made in crypto was sitting on my hands and waiting! As soon as that three prints I’ll start cost averaging in again. I can feel it!
AXS/USD Its ready, continue to cost avg. in.
SAND/USD Its ready, continue to average in.
Metaverse Contenders
Roblox GTA V advanced to third spot of the top 10 streaming Games this past month. Just imagine when Play-to-Earn manifests in the Metaverse with games like Grand Theft Auto and Battle Royale. More about RBLX games here.
Roblox (RBLX) I added an 1/8 position size on Cathy Woods buying 30 million shares. Earnings Report!
Fourth Quarter 2021 Financial Highlights
- Revenue increased 83% over Q4 2020 to $568.8 million
- Net cash provided by operating activities of $122.2 million; Free cash flow was $77.3 million
- Bookings increased 20% over Q4 2020 to $770.1 million
- Average Daily Active Users (DAUs) were 49.5 million, an increase of 33% year over year
- Hours Engaged were 10.8 billion, an increase of 28% year over year
- Average Bookings per DAU (ABPDAU) was $15.57
RBLX We are at the crossroads. Its this week or next and we know if this is the bottom or we get a 3rd drive. If this is an XABCD the bottom is in here! I’m holding and I’m just itching to add…
Good Reads
Bitcoin Halving Cycle Resumes Less than 5 minute read
How Black Thursday Decimated Cryptocurrency Order Books Less than 10 minute read
What is Cryptocurrency Less than 10 minute read
Digital Assets / Investor.gov Less than 1 hour read (The Fed’s Opinion on Risk)
SEC Expands Alternative Trading Systems Definition (25 day to a vote) Less than 15 minutes
Internal Revenue Service (IRS) and Staking Less than 5 minute read
The Future of Crypto Banking Less than 10 minute read
Avoiding FOMO & FUD Less than 5 minute read
Regulation of Exchanges and Alternative Trading Systems Less than 1 hour read
