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.
HOLD
I’m going to say continue to hold any further allocation until the bottom is found in Bitcoin. I cut GBTC, ADA, and LINK allocations after the Gensler news. I don’t like disorderly markets! As to trimming with capital gains exposure, get your CPA on a call or hire one. My main concern is that regulation and a bear market are not a good mix, and the counts could morph into 5 waves down. We will know more in 2 to 5 weeks when the new counts manifest from these weak rallies.
Crypto News Bytes
Here’s what caught our attention this week…
MicroStrategy Buy another $10 million in Bitcoin
Cloud software company MicroStrategy today announced another Bitcoin buy—spending this time $10 million on the cryptocurrency—despite the price of the asset dropping below $20,000.
The tech firm has now spent over $3.98 billion on Bitcoin, and owns 129,699 digital coins, according to statements from its CEO Michael Saylor. It is also at a loss of $1.3 billion since the price of the currency has dipped. (Decrypt.co)
Almost $4 Billion in Bitcoin Miner Loans Are At Risk of Default.
In short, Super Whales (Crypto Miners) sold to much Bitcoin and it is squeezing there guarantees on the loans that back the very mining’s rigs they rely on the to mine crypto in the first place. (Bitocin.com)
Three Arrows Capital is Ordered to Liquidate
On Tuesday, the distressed crypto hedge fund was ordered into liquidation by a Virgin Island court in response to mounting lawsuits from creditors demanding repayment of the loans they made to 3AC. The order may mark the end of 3AC’s business and will reportedly result in its assets being distributed in an effort to pay back the $666 million it owes to other crypto firms and meet its margin calls. The rapid downfall of 3AC, which once reportedly managed upwards of $18 billion in assets, represents one of the most significant casualties of the 2022 crypto crash so far. (Gizmodo.com)
Gensler again Attempt to Regulate Crypto from the bench!
My first question is, who is this guy!
In a recent CNBC interview addressing crypto regulation, Gensler singled out bitcoin as the only cryptocurrency he would label as a commodity. “Some like bitcoin, and that’s the only one I’m gonna say…my predecessors and others have said, they’re a commodity,” he said.
The rest of the cryptocurrencies, he added, should be classified as securities and regulated by the SEC: “Many of these financial assets, crypto financial assets have the key attributes of a security… the investing public is hoping for a return just like when they invest in other financial assets we call securities.” (Forbes)
But what no one seems to be talking about is Gensler departure from “The Responsible Financial Innovation Act which seeks to classify digital assets into securities and commodities and regulate them accordingly. This will ‘give digital asset companies the ability to determine what their regulatory obligations will be and give regulators the clarity they need to enforce existing securities and commodities trading laws.’ Gensler, seems to be willing to give up Bitcoin and regulate everything else from SEC. For example, bitcoin and ether, which fall into the ‘commodity’ bucket, would be regulated by the Commodity Futures Trading Commission (CFTC).” Yet, Gensler wants Ethereum to be a security. (Forbes). If I did not know better, I’d say this is gerrymandering. Where politicians redistrict voters so they are ether a democratic or republican district. Seems to me he’s very concerned about the SEC being left out of this regulation.
The Oracle of Crypto Warns More insolvencies are coming.
In a recent interview, Sam Bankman-Fried, the founder of the popular exchange FTX, warned that some crypto exchanges are “secretly insolvent” and may soon fail. Bankman-Fried’s FTX and Alameda Research have already helped Blockfi and Voyager Digital as the 30-year-old billionaire says sometimes you have to do “what it takes to sort of stabilize things and protect customers.” (news.bitocin.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
Almost all macro indicators for Bitcoin are at all-time lows, signaling potential floor formation. Many are even trading at levels with single-digit percentage points of prior history at similar levels. With numerous floor formation signals flashing, the question is, will this time be different? (glassnode)
Don’t get me wrong. I think Glassnode is one of the best out there. However, I find the omission of Elliott Wave charts misleading. Especially, in calling a bottom! Frankly, I feel naked without Elliott Wave.
Lets look at the evidence….
Week 26 Price Range
Charting The Depths
Over the past decade, several models have been developed, from both technical and on-chain foundations, in an attempt to find the lows of Bitcoin bear markets. Here we will use the 2015, 2018 and March 2020 lows for comparison, and try to identify confluence between models.
There are five models shown on the chart below, listed in order of highest to lowest:
- 🔴 Mayer Multiple of 0.6 ($23,380) price trading at a 40% discount to the 200-day moving average, with just 3.4% of trading days closing at or below this level.
- 🟠 Realized Price ($22,500) being the aggregate cost basis of the coin supply, typically provides resistance during bottom formation. 14% of all trading days have closed below.
- 🔵 200 Week Moving Average ($22,390) which has historically provided support during final bear market capitulation phase, and only 1% of days have closed below it.
- 🟢 Balance Price ($17,980) which accounts for the destruction of coin-days, and reflects a market price that matches the value paid for coins, minus the value ultimately realized. Just 3% of trading days have closed below this model.
- 🟣 Delta Price ($15,750) which is the difference between the Realized Price, and the all-time-average price. This level never been breached on a closing basis, and has provided ultimate final support in bears.
In the current market, spot prices ($21,300) are trading below the Realized Price, the 0.6 Mayer Multiple band, and the 200 Week MA, and recently broke below Balanced Price during the 18-June flush out to $17,600.
Only 13 out of 4,360 trading days (0.2%) have ever seen similar circumstances, occurring in just two prior events, Jan 2015 and March 2020. These points are marked in green on the chart below.
With the market trading below the $20k 2017 ATH, investor conviction and market profitability have been put to an extreme test. (Glassnode)
This weeks summation!
Holding Dynamics sure has changed! The compression continues to cause changes in the HODLer dynamics. Glassnode points out the absence of younger, more inexperienced investors, suggesting that’s a condition of a late-stage bear market, or is it that inflation is biting them the most? Anyhow, we should continue to hammer out a bottom, the question is that $12K, $10K, or an absolute flush $8.8K?
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) The count is nasty at $12,460.90.
GBTC (Bitcoin ETF)
Grayscale Bitcoin Trust (OTC GBTC) is an alternative for non-crypto account holders. See the prospectus.
ETH/USD $800 is still holding!
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.
HOLD I would continue to hold off on a new allocation for this week. Just keep track of your the # of weeks you did allocate and we will add them back once we have a bottom and a back-test.
Alt. Coins
LINK/USD (revised profile March 6, 2022) I expect some type of banking supervision soon. Once that drops, Bank of America will be all over these contracts.
ADA (Cardano) nice base!
Crypto Stocks
MARA is in some serious trouble here. After our next back test to that lower high, it might be time to add those puts.
Scott Henderson’s Risk Disclosure & Disclaimers
Follow me on Twitter @swingtradenotes for charts, quick thoughts and smart remarks.
