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.
Important
It appears TerrsUSD event has passed, but I’d still adhere to another light week of cost averaging in. I’m thinking we have at least a few weeks of downside ahead.
Back on a Schedule:
The weekly Crypto Trade Shots article will be published on Wednesdays and we will do at least one weekly Crypto video per week.
Crypto News Bytes
Here’s what caught our attention this week…
BITCOIN CITY IN EL SALVADOR TAKES THE METAVERSE IN THE OPPOSITE DIRECTION
We’ve all heard about bringing cities into the Metaverse, but this city will bring a part of the Metaverse to the real world instead. AR, VR, cryptocurrencies, NFTs, and the lot are the usual culprits cited when talking about the Metaverse. Built on already existing and slightly unrelated technologies, this concept and buzzword are supposed to meld physical and virtual worlds together in an almost seamless fashion. In most cases, it involves recreating many physical things in digital form, from avatars of ourselves to real-world cities and locations. There’s also a part that will bring digital artifacts into our world, mostly as overlays that can only be seen through screens or headsets. The Metaverse and its friends are already influencing changes in the real world, but perhaps none more daring and a teeny bit bewildering than an entire city founded upon the concept and the “image” of Bitcoin. (Yankodesign.com)
The Brazilian Stock Exchange will launch Bitcoin and Ethereum futures.
B3, the Brazilian Stock Exchange, confirmed that within six months it intends to launch its first official product aimed at the cryptocurrency market — Bitcoin (BTC) futures trading. The group’s chief financial officer, André Milanez, made the announcement during a conference call on Monday. (cointelegraph).com)
David Marcus Launches Bitcoin Payments Startup Lightspark
David Marcus, former cryptocurrency head at Meta, is launching Lightspark, another payments company that will use crypto as its central payment tool. The startup, which will have Marcus at the helm as CEO, also features some of Meta’s former employees and will explore the possibilities of using the layer 2 Lightning Network (LN) as a vehicle for bitcoin payments. (Bitcoin.com)
Bitcoin Miner Bitfarms Lowers Hashrate Outlook to 6 EH/s This Year
Canadian bitcoin miner Bitfarms (BITF) lowered its 2022 hashrate guidance to 6 exashash per second (EH/s) from 7.2 EH/s previously, citing adjustments to its ongoing expansion projects. (coindesk.com)
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
Boy, did TerraLuna just blow up or what?
Not only did we lose the TerraUSD peg, we may have lost the biggest Bitcoin buyer. There’s a rumor that this was all about a tax bill that Do Kwon (Luna’s Founder) did not want to pay and moved 50,000 bitcoin out of Singapore to avoid paying taxes and left Luna holding the bag. There is also a rumor that some whales were paid $1.00 per Luna while everyone else got pennies. I don’t know if it’s the truth or not! But, I can’t wait to find out!!!
In total, the crypto markets shredded $1 trillion dollars this month.
Its history, “algorithmic stablecoin” TerraUSD crashed, causing a flash crash in nearly every major sector of the crypto market — like BTC, DeFi, and NFTs — been impacted? No one was left out! Even equities tumbled right along with Crypto. From Sunday, May 8—when the TerraUSD stablecoin began losing its peg to the U.S. dollar and crypto markets began slipping—to Saturday, May 14, Bitcoin derivatives traders lost over $1.2 billion in liquidations, according to the data analytics site CoinGlass. As of the close of business on May 7th, The Luna Foundation Guard (LFG), had 80,000 bitcoins. What’s being reported now (under some sinister clouds) is almost unfathomable! The LFG Foundation’s reserves consist of the following assets: · 313 $BTC · 39,914 $BNB · 1,973,554 $AVAX · 1,847,079,725 $UST · 222,713,007 $LUNA (of which 221,021,746 is currently staked with validators). (Twitter)
At the time of writing, LUNA is now trading for $0.0002 (down 99.9998% from ATH), and UST is stabilizing around $0.1251, well below the desired $1 peg. (Glassnode)
The magnitude of LUNA supply inflation can be seen the chart below, where UST supply (green, RHS) is in linear scale, whilst LUNA supply (red, LHS) is in log scale. Over the course of one week, 7.5 Billion UST were redeemed (40% of supply), whilst the LUNA supply inflated from 343 Million, to over 6.53 Trillion, an annualised inflation rate of 99,263,840%. (Glassnode)
At one stage on 13-May, the LUNA blockchain was even halted as a result of second order effects on network stability and governance due to the hyper-inflating supply. (Glassnode)
As the UST peg traded lower, the Luna Foundation Guard began to deploy their recently acquired Bitcoin reserves in an effort to stabilise the peg. Their total reserves had built up to 80,394 BTC over recent months, with the largest acquisitions occurring between 21 March and 5 May. The total realized value of their holdings, with coins valued at the time they were added to the wallet, was $3.275 Billion. (Glassnode)
These wallets were completely emptied over a 21.5 hour window between the 9th and 10th of May.(Glassnode)
Summing up this week! It was one hell of a ride… I must admit that I’m surprised that Bitcoin has held up as well as it has. Any stock would have flushed to $10k with the weight of TerraLuna. That was bigger than Lehman Brothers, and we are still standing to talk about it. But don’t get cocky. The market never gives investors this much time to buy the bottom. It’s more like a bull trap to suck you in. My2Cents!
Usually, crypto adds value to my book. I desperately wanted more puts all week. Thankfully, being picky kept me above water most of the week. My bias is that all markets have a unknown level of decay here. Swinging the Indices short saved my rear. Everything is being repriced on higher inflation, and even a level of recessionary consumption is anticipating a declining consumer spending. Walmart’s miss is proof of that manifesting! Now, is that overkill? Time will tell. But, what I can tell you is this story will be told to great-grandchildren by the time we are done. Hopefully, its ripper we can brag about!
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) It is looking like we have a short-term top around the $31390 area, and it looks like the alternate count I identified in late February is the count now. It looks like the bottom comes in at around $20,967.00. That said, I’ll probably add back a lower Speedline next week on further weakness.
GBTC (Bitcoin ETF)
Grayscale Bitcoin Trust (OTC GBTC) is an alternative for non-crypto account holders. See the prospectus.
ETH/USD I don’t like those weekly Bollinger Bands. That’s an ominous sign of a downtrend setting up! I would either reduce my cost average or sit on the sidelines this week.
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.
Alt. Coins
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.
SOLUSD
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.
Crypto Stocks
MARA looks destined for that $8.80 print. However, if Bitcoin flushes, it will follow. I’m hedged at 5% of my Jan $40 calls with June $5 puts and September $7.50 puts. I also started scaling into Jan $15 calls… I’d be lying if I said I was not nervous about running out of time. I’m not able to see a clear timeline because Luna really screwed that up. So maybe I’ll roll out to June 2023 on the next strike when I roll. Maybe I’ll sell Moonchild’s $5 put and buy a $10 call instead at $5 if we get there! I like that idea…but I need more of a defined bottom to increase my risk here.
Scott Henderson’s Risk Disclosure & Disclaimers
Follow me on Twitter @swingtradenotes for charts, quick thoughts and smart remarks.
