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…
Ethereum Bounces on Kiln’s Success
Kiln’s execution layer was launched under proof-of-work in parallel to a Beacon Chain running proof-of-stake. The Merge happened on Kiln on March 15, 2022. This is one of the final steps for final implementation Ether 2.0 protocols which is anticipated to be launched in June. Arguably, unless issue were found it could happen at any time with this milestone.
SoftBank backs B2B platform Avenue Digital Assets
“Trading cryptocurrencies is now officially a reality with Avenue Digital Assets,” the company said in a Wednesday email to investors seen by Bitcoin Magazine. “All this with the same ease of our services that you already know, and integrated into your platform.”
SoftBank-backed broker Avenue Securities debuted native, no-fees bitcoin trading services on Wednesday through an integration with B2B platform Apex Crypto to meet a growing demand for BTC and cryptocurrency among its over 500,000 Brazilian clients.
Riot Blockchain now hold 5,783 self-mined bitcoins
Riot Blockchain reported March 3rd that it increased the bitcoin held on the balance sheet by 353% in 2021, compared to 1,078 in 2020. No they hold 5,783 self-mined bitcoins. I don’t like the share distribution games they have been playing. But, at $75K bitcoin one can’t help see this company will turn the corner no latter than 1st quarter 2023 and turn a profit. Stay tuned! The size of there holdings warrants some kind of position.
New Coinbase Class-action Lawsuit
The class action names 79 crypto assets that are allegedly securities and were sold by Coinbase. It claims every user who lost money on these assets should be reimbursed for the losses.
Grayscale Bitcoin Trust Rumor
The rumor has is that GBTC may be getting a pass from the SEC this go round. Apparently, the SEC has been getting some congressional comments to accept the application with pending regulation. This would be a slight windfall for HODLers with about a 27% premium to traditional spot premiums.
Research (Supporting Evidence)
Maybe some HODLers are getting sensitive?
We see a slight uptick in coins older than 6mths willing to sell, which represented 5% of all spending volume this week, a considerable uptick from prior months. What it does not represent is how many of those sellers sold to their own institutions or who was an insider in that activity on Coinbase. That 30K in bitcoin volume that left Coinbase was huge, and I can’t help but imagine that this uptick may have been largely cause by that move. My2Cents!
Shrimps are Shrinking?
Short Term Supply (STH) is currently near lows, yet it appears it is constructive for new entries. Around 82% of this supply is currently at a loss for STHs, which will continue with sell-side pressure. This also shows that young coins (less than 6 months) are also near lows at around 24.53% of circulating supply. That also means that around 3/4 of supply has remained dormant regardless of drawdowns.
We can literally Institution coming in now!
This next chart is very interesting considering institutional investors account for more than 85% of the volume of trades on the New York Stock Exchange. So, seeing signs that they are buying into the Crypto thesis is very encouraging before regulations are outlined. Kind of implies they know something we don’t.
The below chart outlines the illiquid supply shock ratio and I find it to be very bullish. That could be the single largest factor as to why we did not tag my lower counts and instead under shoot them. I’ve been looking for a reason for weeks to understand why the sentiment metric (Elliott Wave) shifts in a place where it usually does not. So, I suspect that buyers will keep buying any dip.
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: Now that Quad witching is behind us we can get back to adding to what’s working. Stay tuned, will add into strength. I added Solona and will helpfully get to SOLO Chicks project this week. In hind sight I should have added to MARA, ETHE, GBTC, AXS, LINK, FLOW, INTC, PYPL, CORZ, HIVE, and BLOK regardless to Quad Witching. Crypto was un-phased. 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.
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)
MARA Currently, holding 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 %. I regret not adding last week but rules are rules. It was Quad Witching week. I don’t add! I will look to add this week. (Chart updated 03/18/2022)
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 was surprised it caught the rally here. Constructive sign! I still 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. (Chart updated 03/18/2022)
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. (Chart updated 03/18/2022)
XBT/USD (BTCUSD) I think scarcity saved us. We opened the week lower at $38,805.33. Range tightened to $4,684.42. Our high came in lower than last week at $42,250.84, while our low came in at $37,566.52. Clearly, the Ruble/Bitcoin pair volume has helped the hash rate at the same time when low tier miners are shutting down rigs because of utility costs.
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 (Chart updated 03/18/2022)
GBTC (Bitcoin Trust) 90 Min Chart (Chart updated 03/18/2022)
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. (Chart updated 03/18/2022)
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.
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. (Chart updated 03/18/2022)
SAND/USD Its ready, continue to average in. (Chart updated 03/18/2022)
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.
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…
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