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.
I would reduce my cost averaging % especially on Alt. coins until this TerrsUSD peg wans.
The popular vote won. The article will be published Wednesday evening.
The Weekend Issue will become a Friday night video covering major pairs like Bitcoin and Ethereum and any complicated counts on Alt. Coins. The main article will be turned into a midweek issue, which will cover any in-play 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…
You can now get paid in bitcoin to use Twitter
Twitter on Thursday announced it will now allow users to tip their favorite creators on the social network using bitcoin. The company introduced tipping as a test feature back in May as a way to experiment with helping creators earn payments from their followers for the content they post on Twitter. The company announced Thursday that its Tips feature will now roll out globally to all Apple iOS users this week and will become available for Android users in the coming weeks. (CNBC)
China’s Supposed ‘Bitcoin Ban’
A move by China’s central bank to criminalize all forms of cryptocurrency trading – effectively making bitcoin illegal in the country – has failed to meaningfully impact the price of the world’s leading digital asset.
NVIDIA (NVDA) Fined $5.5M
Graphics chipmaker NVIDIA Corporation (NVDA) has agreed to pay $5.5 million to settle charges leveled by the Securities and Exchange Commission (SEC) that it failed to adequately inform investors about the demand cryptocurrency miners had placed on its graphics cards. Crypto mining involves obtaining rewards earned in cryptocurrency for verifying transactions on distributed blockchain ledgers. (Investopedia)
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
Where are the Shrimps?
The cohort that is most at risk of selling in a panic are the Short-Term Holders (STHs), a cohort that we identified (in Week 16) have accumulated an extraordinary volume of coins over the last three months. If we look to the STH-MVRV Ratio (Z-Score), we can observe the magnitude of their current unrealized profitability. (Glassnode)
In the chart below, we can see the following:
- The on-chain cost basis of STHs is at $46,910, putting the average coin held by a STH at an unrealized loss of -17.9%.
- The STH-MVRV oscillator is currently at -0.75 standard deviations from the mean, which shows that the this is a statistically significant magnitude of financial pain for the STH cohort.
- More severe profitability for STHs is not uncommon, but is typical only during the worst sell-offs in bear markets (where oscillator is below the below blue line).
Did the Whales (LTH’s) start selling?
On the other side of the equation are the Long-Term Holders (LTHs), whom we also established were capitulating at the greatest extent in history. This trend appears to continue with an incredible deviation developing between two metrics taking place, identified first by TXMC: (Glassnode)
- Long-Term Holder Reazlied Price (blue): This metric shows the average purchase price of all coins in the LTH cohort, and it is currently declining at the most significant rate in Bitcoin history. This indicates that LTHs from the 2021-22 cycle are capitulating, spending, and redistributing their coins, specifically during the last 3 months.
- Long-Term Holder Spent Price (pink): This metric shows the average purchase price of coins being spent by LTHs that day. It is breaking notably higher this week, meeting with the spot price, and signalling that LTHs are panic selling at break-even on average.
Galssnode has pointed out that one of the most well known Bitcoin indicators, and a crowd favourite, is the Mayer Multiple. This oscillator is calculated as a simple ratio between price and the 200DMA. Despite its simplicity, it has provided a robust and reliable long-term bottom and top formation indicator for Bitcoin cycles and has started flashing red this week.
Yet, in this weeks report TerraUSD peg was unusually absent as a participant in Bitcoins weakness and nor was the Fed rate hikes noted as headwind that caused the USD to enter a historic rise that forced TerraUSD to cover position to maintain its peg to the US Dollar. Essentially, a short squeeze but in the opposite direction.
Barron’s suggest that the peg, was at least one more force that pushed Bitcoin to its lowest levels since July 2021, to below $33,000 on Monday from around $36,000 on Friday. Look no further than TerraUSD, a so-called stablecoin that is intended to be pegged to the U.S. dollar, and Luna, another cryptocurrency that helps Terra maintain its link.
While the largest stablecoins— Tether and USD Coin —are backed by cash or cash equivalents to help these tokens maintain their 1:1 relationship with the U.S. dollar, Terra is different. As an “algorithmic” stablecoin, TerraUSD primarily maintains its peg to the dollar through a market mechanism involving another cryptocurrency, Luna.
In short, I did not see that correlation until I read the Barron’s article on TerraUSD. As a result, its my view that it will likely be a headwind for markets with my projections for the US Dollar to rise to 105.86 because that is still some room. The run to stratus fear will be a whole other ball game. Please find my current analysis on US dollar below for your reference.
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 Major Pairs-Grayscale Trusts
XBT/USD (BTCUSD) weakness continues and with what I discovered to be TerraUSD weakness, it appears their peg is going to roil markets until the US dollar reaches 105.83. I guess I should be glad I’ve got a target.
GBTC (Bitcoin ETF)
Grayscale Bitcoin Trust (OTC GBTC) is an alternative for non-crypto account holders. See the prospectus.
ETH/USD Boy, that was a hit! Basically, right back to the Primary Wave Set-up. I’m waiting for the back test. I’ve been here too many times only to end up with a bigger hair cut.
If you don’t have a crypto account, you can also buy Grayscale Ethereum Trust.
Grayscale Ethereum Trust (OTC ETHE) is an alternative for non-crypto account holders. See the perspectus.
LINK/USD (revised profile March 6, 2022) Continue to average in. I expect some type of banking supervision soon. Once that drops, Bank of America will be all over these contracts.
CRV/USD continued to show some relative strength in this last drawdown. Continue to average in. More on Curve here!
ADA (Cardano) needs some time.
Scott Henderson’s Risk Disclosure & Disclaimers
Follow me on Twitter @swingtradenotes for charts, quick thoughts and smart remarks.