Who’s Buying the Dip? – Issue 26

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 recommend that you hold any further allocation until the $15K bottom is found in Bitcoin. Its up to you whether you hold current positions or trim. We are now off the radar and we could see crypto get totally spooked on little news.

Crypto News Bytes

Here’s what caught our attention this week…

Is Regulation Clouding Bitcoins Future?

This drop comes in the midst of perhaps the broadest U.S. regulatory push since crypto’s inception. One part of becoming a store of value is being very widely held, across a diversity of owners, and thus becoming less vulnerable to shocks. But bitcoin’s path there still goes through Washington. (wsj.com)

Bitcoin has never traded below previous cycle highs!

That’s the high the coin hit during its last bull cycle in 2017, which it reached at the end of that year. Throughout its roughly 12-year trading history, Bitcoin has never dropped below previous cycle peaks, according to Vetle Lunde and Jaran Mellerud at Arcane Research, so a break below it would be momentous. (Bloomberg)

Price and Value of Bitcoin Completely Decoupling

“We are watching a divergence. Price and value are completely decoupling right now for Bitcoin. What I mean by that is, price is down from a $69,000 high in November to around $23,000 today.

But hash rate hit an all-time high today. The Bitcoin network has never been more secure than it is today. If you then go take a look at the Bitcoin wallet addresses with 0.01 Bitcoin, 0.1 Bitcoin or 1 Bitcoin in them, those all three have all hit all-time highs.

The Lightning Network capacity also is hitting an all-time high.” (dailyhodl.com)

Tesla (TSLA) has lost over $500 million on Bitcoin

Tesla (TSLA) has lost over $500 million in value from its Bitcoin investment amid what people are now calling a “crypto winter.” (electrek.co)

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

Holder Net Position Change (30D)

The Accumulation Trend Score is a useful tool to observe these changes by assessing the magnitude and duration of on-chain Bitcoin balance growth or contraction. It displays the aggregate accumulation/distribution weighted for all cohorts.

  • Dec 2020 to Jan 2021 – Bull market buying, as investors entered the market and created the bullish impulse to the then $64k ATH.
  • Jan 2021 to Oct 2021 – Softening and general distribution, in part a result of declining spot demand after the GBTC premium turned to a discount (covered in our report here)
  • Oct 2021 to Jan 2022 – Post ATH buying demand which was later redistributed (as covered in Week 9, 2022)
  • Jan 2022 to May 2022 – Intermittent accumulation and distribution, culminating in the LUNA-UST motivated sell-off (as covered in Week 20, 2022).

In the current market, we have seen one month with an Accumulation Trend Score north of 0.8, signifying high positive balance changes across the market. This is a notable shift from the intermittent accumulation before the LUNA sell-off and may suggest an improved investor perception of value at prices at and below $30k.

Accumulation Trend Score

I believe one of the most significant changes is the decline in realized price to $23,340. As of this writing, we are trending below that figure.

I’ll conclude this week with clarifying who’s buying Bitcoin? The chart below indicates that Shrimps <1 BTC and have added +96.3k BTC to their holding since the Nov all time high. These shrimps are relatively unfazed as the continue too accumulate. So, the Shrimps have now copied the whales with 10k+ BTC Whale accounts. These Whales have a monthly position change peak of ~140k BTC/month, increasing their balance by adding +306,358 BTC since the Nov 2021 ATH.

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 $15,198.80.

Bitcoin/US Dollar Pair Weekly Count (updated on 06/15/2022).

GBTC (Bitcoin ETF)

Grayscale Bitcoin Trust (OTC GBTC) is an alternative for non-crypto account holders. See the prospectus.

Grayscale Bitcoin Trust BTC Weekly Count (updated on 06/15/2022).

ETH/USD Nasty count at $628.23.

Bitcoin/US Dollar Pair Weekly Count (updated on 06/15/2022).

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.

Grayscale Ethereum Trust Daily Count (updated on 06/15/2022).

HOLD adding to all Alt. Coins until further notice. Its up to you if you trim.

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.

LINKUSD Pair Weekly Count (last Updated on 06/08/2022)

CRV/USD continued to show some relative strength in this last drawdown. Continue to average in. More on Curve here!

CRVUSD Pair Weekly Count (Updated on 05/18/2022)

ADA (Cardano) needs some time.

ADAUSD Pair Weekly Count (Updated on 05/18/2022)

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.

Marathon Digital Holdings Inc (Updated on 05/18/2022)

Scott Henderson’s Risk Disclosure & Disclaimers

Follow me on Twitter @swingtradenotes for charts, quick thoughts and smart remarks.