A weekly news and trading piece by Scott “Shooter” Henderson covering crypto currencies. Read my Future Of Money Primer and Using Crypto Trade Shots for the basics to follow along.
It’s time to seriously consider what percentage of your portfolio should be held in the Cryptoverse. Crypto is still very speculative, but, the risks and rewards are unprecedented. Travel with me as I navigate crypto, NFTs, DeFi and the Metaverse.
Shooter’s & Kirk Spano’s 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.
We also agree that NFTs and the Metaverse will be have multitrillion dollar flows. That’s a total addressable market worth getting to know very well.
Crypto Trade Shots will be split into two Articles.
A Weekend Issue that will cover News Bytes, Market Sentiment, and Major Pairs like Bitcoin and Ethereum. And then the Midweek Issue will be published, which will cover all sector stocks and alt. coins, as well as any new project write-ups, and will be published no later than Wednesday evening.
Crypto News Bytes
Here’s what caught our attention this week…
GBTC is making a lot of noise about the Grayscale Bitcoin Trust being approved as Spot ETF.
Fintech giant Stripe jumps into crypto
Online payments firm Stripe says it will start offering merchants the ability to pay for their users in cryptocurrency through the stablecoin USDC. Starting Friday, Twitter will let a certain number of creators receive their earnings from its paid Ticketed Spaces and Super Follows features in crypto. Its Stripe’s first significant push into crypto since dropping support for Bitcoin four years ago. (CNBC)
Europe’s Largest Electronics Retailer to Roll out Bitcoin ATMs
The German multinational chain of stores selling electronics – Media Markt – will reportedly install Bitcoin ATMs in 12 branches across Austria. Customers will be able to purchase the leading cryptocurrency at Kurant vending machines. (CryptoPotato)
Saudi Arabia Exploring Blockchain and Government
The Kingdom of Saudi Arabia is looking into the possibility of implementing blockchain technology across its government as well as allowing the use of cryptocurrencies. However, an official said the kingdom can only successfully build blockchain-based solutions if it hires people that are proficient in this technology. (bitcoin.com)
Bitcoin Miner Bit Digital Files to Raise Up to $500M in Equity
Bitcoin miner Bit Digital (BTBT) filed a prospectus with the U.S. Securities and Exchange Commission (SEC) for the sale of up to $500 million in equity from time to time, also known as an “at-the-market” (ATM) offering. (Coindesk)
More 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
Research: Supporting Evidence
Range-bound is the question, or a launching pad?
Over the past few weeks, Glassnode reported on investor value zones, exploring how the $35k to $42k price zone for Bitcoin has seen fairly significant investor demand inflows, with a large number of coins changing hands in this price range. What we have yet to see is a follow on impulse of demand to break free of this range, and as a result, it continues to act as a source of gravity on the market.
The current price low of $33k was set on 22-Jan, putting a pause on the 2.5 month price decline from the ATH set in early November. On the 22-Jan, the range of prices at which the Bitcoin supply had last transacted was relatively well distributed between $35k and $63k (think of this as an on-chain volume profile in technical analysis).
This shows a relatively consistent demand was in place for BTC both on the way up (Aug-Nov) and on the way back down (Nov-Jan).
If you compare this (blue) to the current coin price distribution, we can identify the following insights:
- A large amount of coin supply has been re-accumulated between $38k and $45k, which is the primary price range of the current market consolidation.
- Blue: Much of the volume profile from 22-Jan remains intact. Despite an additional 2.5 months of sideways consolidation, a large proportion of the market appears unwilling to spend and sell their coins, even if their coins are held at a loss. This suggests price insensitive HODLers hold much of the supply > $40k.
- Green: Coins that have been redistributed at a profit since the $33k low appear to come mainly from dip buyers ($32k and $36k), as well as a sizeable volume of ~60k BTC from the $3k to $4k price range.
- Red: pockets of redistribution at a loss have occurred as buyers who purchased after the Nov ATH realized that the dip was not over, and realized losses on the way down.
Their overall takeaway observation is that the pattern of both profits and losses realized over the last 2.5 months suggest that investors continue to see the $35k to $42k range as a value zone for accumulation. So, that is our preferred buy zones.
Were in this period of historic unrealized losses
Now that Glassnode has profiled the various price ranges in which investors hold their coins, they have dove deeper into the potential risk profile of additional sell-side pressure. The chart below presents the proportion of coins held by LTH (blue) and STH (red) that are at a loss.
You can see a split between a 15.2% LTH and a 15.0% STH, with a total of 30.2% of the coin supply held in loss. That is a negative development.
The current market profitability is significantly better than it was in the 2018 or 2020 bear markets. Back then, LTHs alone held more than 35% of the coin supply at a loss. Furthermore, we can see a macro increase in coins held by the less price-sensitive LTHs (black arrows). This is the result of accumulation and LTHs making value acquisitions, whilst also being willing to weather any price drawdowns that follow.
We can however see that compared to the May-July 2021 period, market profitability is in a worse position, with LTHs in particular holding significantly more supply at a loss compared to this period.
Existing LTHs are adding to their balance at prices that are lower than their personal average cost basis.
Long-Term Holders with coins above $50k appear completely unfazed.
We have a resilient inflow of demand between the $35k and $42k range that has quietly absorbed this sell-side in its entirety. The by zone!
A choppy couple of weeks and clear headwinds, yet if we look at what are usually historic events, Crypto weathered the Yuan devolution very well last week. The current environment is likely to keep us choppy within the value zone, yet HODLers sentiment should continue to absorb the sell side. The only thing I may change if my risk appetite were to wane (it’s not) would be to reduce the percentage of my cost average into alt. coins until this settles. Otherwise, it’s steady as she goes!
Shooter’s Crypto Picks And Sector Stocks
My conviction ideas on crypto and stocks with crypto exposure. Based on my AI assisted proprietary Elliott Wave technical analysis. Remember to follow along in chat if you are going to swing trade a portion of your account. I recommend trading no more than 20% of your account.
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.
Crypto Elliot Wave Counts / Set-ups / Next Entries Long or Short
XBT/USD (BTCUSD) At the beginning of the week, we fended off the prior week’s weakness, but once the Yuan peg was devalued, Crypto caught the cold. Hence, my comments last week that crypto is acting like a risk asset and not a hedge. Technically, one should trim at a close below $35,080. But, I’m not planning to trim at this point. I’m looking to add! I’m hesitant only because we could back-test the Primary Wave Set-up with this weakness.
GBTC (Bitcoin ETF)
If you don’t have a Crypto account you can also buy Grayscale Bitcoin Trust (OTC GBTC) this is the prospectus.
ETH/USD $2880 should be our floor now and we got a New Primary Wave 2 Set-up Long (no triggers yet).
If you don’t have a crypto account, you can also buy Grayscale ETHE This is the prospectus.
Grayscale Ethereum Trust (ETHE) One of the few negative counts. We need to stay above that Speedline or those lower counts are on the table.
Scott Henderson’s Risk Disclosure & Disclaimers
Follow me on Twitter @swingtradenotes for charts, quick thoughts and smart remarks.