Are we on the Verge of Epic adoption? - Issue 19

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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.

Moving Forward

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 we will publish a Midweek Issue 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. This is a temporary fix so I can free some time to work on completing Shooter’s Mini Camps.

Crypto News Bytes

Here’s what caught our attention this week…

Panama passes bill to permit use of crypto assets

PANAMA CITY, April 28 (Reuters) – Lawmakers in Panama’s National Assembly on Thursday approved a bill to regulate the use and commercialization of crypto assets in the Central American country renowned as a hub of offshore financial services. (Reuters)

Anonymous Donor Drops $1 Million in Bitcoin on Alex Jones

Never really like Alex Jones but its pretty cool an unidentified person donated over 1 million U.S. dollars in Bitcoin to an address advertised on the conspiracy website Infowars on April 23, Hatewatch found, potentially buoying the finances of embattled extremist Alex Jones. (splcenter.org)

Goldman Sachs Makes Its First Bitcoin-Backed Loan

Goldman’s secured lending facility allowed a borrower to use bitcoin (BTC) as collateral for a cash loan and has offered its first bitcoin-backed loan in the latest sign that Wall Street is moving further into crypto. Bloomberg first reported on the news. But this will be big!

The legendary crypto investor, Bitcoin Jesus names Dogecoin, Litecoin, and Bitcoin Cash

The legendary crypto investor once lauded as “bitcoin Jesus” has returned to the public sphere, praising Tesla TSLA -0.8% billionaire Elon Musk’s plan to buy Twitter TWTR -0.2% and naming the meme-based Dogecoin, Litecoin and Bitcoin cash, a fork of bitcoin, as the top “contenders” for the title of the world’s dominant cryptocurrency. (Forbes)

More Good Reads…

The Complete Guide to Crypto Tax-Loss Harvesting less than 30 minute read

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

The longer the base, the bigger the grace.

The market has now traded within an increasingly tight price range for almost three months, leading to historically low yields available in futures market cash-and-carry trades, alongside a persistent decline in trade volumes. Yet, I can’t help but focus on both Goldman Sachs and Fidelity’s news this week. Clearly, volatility is telling us something. Implied volatility priced into options markets has also broken below 60% this week, which is significantly lower than the 80%+ volatility that characterized much of 2021. Yet, I can’t help myself and ask how much of this pressure is Goldman Sachs and Fidelity’s trying to get positioned? Furthermore, transaction volumes on-chain remain muted, albeit with a growing trend of high-value ($10M+) transactions, and a macro-decline in volumes associated with exchange inflows and outflows which also implies institutional buying. (Glassnode)

In this weeks edition, Galssnode will focused on a a few big picture trends.

Compressing trade volumes, low implied options volatility, and rolling basis yields persistently below 3% in futures markets. All are leading to a leaking of capital out of Bitcoin markets as investors seek higher returns elsewhere.
The dominance of perpetual futures markets continues to grow, as these instruments have clearly become the preferred source of leverage.
Declining on-chain settlement volume, however with a growing dominance of large size transactions ($10M+).
Cyclical divergence between exchange related inflow/outflow volume, and total transaction volume. This accompanies a potential shift in momentum with respect to network utilization, and provides a potentially constructive reversal in the fundamentally implied valuation for Bitcoin.

Perpetual futures are increasingly becoming the preferred instrument for trading, a trend that can be clearly visualized in the dominance chart below:

Blue represents the dominance of perpetual swap trade volume compared to the total futures volume, showing a remarkable 92.4% dominance at present. This has increased from 75% dominance in Dec 2020 as the market broke through last cycles $20k ATH.
Pink represents the same dominance concept, but applied to futures open interest, which has risen from 50%, to over 66% dominance since Dec 2020.

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 those 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 have 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.

The moral of this story is that the demand side for Bitcoin is currently stronger than all previous bear markets. While the supply side for Bitcoin is currently better than in all previous bear markets, the takeaway is that over the last 12 months, we have seen trade volumes, implied volatility, and available cash-and-carry yields compress to historical lows, which appears to be motivating some capital to leave the Bitcoin space in search of higher returns. With cash-and-carry yields persistently below 3.0% and headline inflation running at 8.5%, this is becoming increasingly probable while existing LTHs are adding to their balances at prices that are lower than their personal average cost basis. This sell-side pressure is still being absorbed in its entirety at around $35,500.00, while future markets are implying that we are nearing a bottom. This implies a fair price is closer to $30,000.00. The longer the buy side holds, the more likely the bottom is in. But, if that fails, look out! We could retest the lows.

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) a relentless week. I feel like a sea saw. Next Entry: The long is a bit lower as of the close of Friday at $37,672.00. As long as that Speedline holds at $35094.60, the count should be fine. That Fidelity news is huge. Not only will Fidelity be pushing because of the fees, many consumers will take that as an approval of Bitcoin.