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 have multitrillion dollar flows. That’s a total addressable market worth getting to know very well.
Crypto News Bytes
Here’s what caught our attention this week…
Regulation of Cryptocurrency and Digital Assets
Senator Lummis Cryptocurrencies Bill
- Will allow crypto trading platforms to register with the CFTC.
- Defines the terrain between crypto securities and commodities. – Most cryptos would be considered commodities such as Bitcoin and Ethereum. – CFTC would be crypto’s watchdog.
- CFTC would have authority over the spot markets in crypto commodities. – It gives legal clarity on how to handle customer holdings. – Clarifies the meaning of a crypto broker.
- Calls for an SEC/CFTC self-regulatory organization. – Creates an industry sandbox in which regulators let crypto firms test new products. – 100% reserve, asset type and detailed disclosure requirements for all payment stablecoin issuers.
- It requires certain disclosures to the SEC from companies raising funds through digital asset sales.
Legal Opinion here:
This is a very constructive bill compared to the inclusion of the (SEC) as Gary Gensler announced this week, where the SEC would take the lead and partner with the CFTC. Clearly, some wrangling is going on as to who controls what. I should have expected that, but it was not how I imagined it. My view is that the Lummis bill would increase market stability and the price and value of crypto. It is still unclear if this will increase investor protection and not stifle innovation in the crypto economy. Gensler’s comments, clearly added a layer of insecurity because we still don’t know what kind of regulation is coming. We only have proposals at this point and we really don’t know which direction has the votes to pass anything.
Will NFTs improve the Real Estate Industry?
NFTs are now entering and disrupting the $34 trillion global real estate market. With the ability to represent unique ownership and allow immediate transfers, NFTs in real estate are transforming real estate transactions into an open market for worldwide and instantaneous transactions. In this regard, LiquidEarth, is creating the first-of-its-kind real-estate NFT marketplace and peer-to-peer lending platform. (newsbtc.com)
PayPal Goes Main Stream and Allows External Wallets
In a surprise move PayPal users will be allowed to transfer Bitcoin, Ethereum, Litecoin, and other cryptocurrencies to external wallets. Initially, users were only allowed to hold the digital assets as a way to gain exposure to their prices. PayPal will allow users to transfer their crypto to external wallets and exchanges according to Jose Fernandez da Pointe, Senior Vice President of PayPal. (bitcoinist.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
Are we in a Prolonged Bear Market & Profitability?
I believe that Glassnodes belief that we are forming a cycle bottom, is spot on. Glassnode assessed past bear market structure to model a potential cycle bottom zone. They queried that confidence by quantifying the degree of “bear market pain’ in what I call FOL peak exhaustion that was felt across the network. Then they used a Net Unrealized Profit/Loss (NUPL) metric to map out the overall unrealized profit and loss of the network as a proportion of the market cap. which resulted in the confidence that NUPL can be used as a compass to assess this market pain threshold.
Since early May, Glassnode noted that the NUPL has fluctuated in a compressed range of 18.6% to 25.0%, indicating less than 25% of the market cap is held in profit. This resembles a market structure equivalent to pre-capitulation phases in previous bear markets. In the event of a capitulation, the NUPL has usually traded down to an unrealized loss of up to -25% times the Market Cap. Given the current realized price of $23,600 at the time of there writing, the matching price range of $23,600 to $20,560 is where NUPL would imply a full-scale capitulation scenario and is within $500 of my Elliott Wave count I started posting in March.
It is worth noting that NUPL cycle lows have been gradually climbing as a result of both lost and long-held HODLed coins. I’ll add that cycle bottoms in Elliott complete in a 5 wave pattern after Wave 3 which is usually a capitulation candle, which occurred with the push to $23,600. This impact may well be further intensified by the introduction of derivatives, which enable the hedging of risk without selling spot exposure, according to Glassnode and that is probably understated. But, it could also be overstated as to the downside risk as well, because larger purchases in derivatives can also cause a short squeeze in spot.
One thing that was notable this week! Miners’ Wallets?
Summation
If you’ve not entered Crypto, this is the perfect opportunity. I think we have one more push down towards the $20,500 level and then we should see a trend change barring any additional regulatory hurdles or black swan events. At that level, I’d be seriously looking at GBTC because this should occur before their July deadline with the SEC. We are clearly seeing miners’ stress as profitability is being stretched on numerous factors simultaneously. Bitcoins’ prices and poorly timed difficulty increases coupled with power inflation. We’ve seen everything before, except utility cost inflation. This will probably shake out some weak hands because their costs exceed their cash flow, which I view as a healthy culling. Hydro miners will be excluded and thrive in high utility environments. Keeping it brief, I see this as a buying opportunity! I like the tailwind here for GBTC, Bitfarms, and HIVE. Though, I’d like a better chart from HIVE, they will benefit greatly from Intel’s power-reducing chip by the third of the fourth quarter.
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) Our destiny is still $20,900! That’s My2Cents and I’m sticking to it.
GBTC (Bitcoin ETF)
Grayscale Bitcoin Trust (OTC GBTC) is an alternative for non-crypto account holders. See the prospectus.
ETH/USD Ethereum still looks destined for that $1350 range.
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 full allocation. 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.
Crypto Stocks
MARA still sitting on my hands! We did not push up enough to give the risk reward I needed. So, lets see what next week brings.
Scott Henderson’s Risk Disclosure & Disclaimers
Follow me on Twitter @swingtradenotes for charts, quick thoughts and smart remarks.
