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In This Issue:
Does Bitcoin Appreciate 200% A Year?
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Coinbase Releases Research With Glassnode
The SEC Is A Scam
X (Twitter) To Launch A Peer-To-Peer Payments System
How Could It Not Happen?
BitBoy Takes A Stand
ETF To Pump Bitcoin To $200,000
Does Bitcoin Appreciate 200% A Year?
I briefly discuss the fake SEC Tweet in the news section. Also, TODAY IS THE BIGGEST DAY IN CRYPTO HISTORY, as we should see actual approval of Bitcoin Spot ETFs. Fingers Crossed. We should have something to celebrate tomorrow. Now back to our regularly scheduled programming…
On December 30, 2021, I published a newsletter with the identical title as today's - ‘Does Bitcoin Appreciate 200% A Year?’ In that edition, I presented the prevalent argument commonly employed to ‘orange pill’ someone, asserting that, on average, Bitcoin experiences a 200% annual gain.
As two years have elapsed since the initial newsletter, revisiting the article offers an opportunity to incorporate fresh information, reevaluate the validity of the claim that Bitcoin appreciates 200% annually, and project where Bitcoin would need to be to maintain this trajectory, if possible.
Let’s set some context with a little bit of history.
Bitcoin began its journey without a price. A look back at old archives and the original mailing list will show that Satoshi was freely distributing coins to early adopters from the stack that he accumulated mining. There was once a Bitcoin faucet that freely distributed 5 coins if you created an address and clicked a button. As interest grew from 1 person to 10 people to 100, cheap prices were agreed upon for large sums of coins at varying rates. We lack a solid record of price from this time.
It wasn’t until Mt. Gox opened in 2010 and miners slowly popped up around the world that the asset began to hold value. You could argue that Bitcoin technically rose millions of percent in the early days, but that does not reflect reality or help to verify our claim. Extreme volatility, typically in the early years of an asset, should be considered an outlier in determining an average YOY (year over year) return. Frankly, any figure of extreme upside or downside can skew an average over time.
Pokemon cards weren’t widely considered an investment until recently. To take their recent explosive growth and spread that over the cards’ lifespan and claim that the cards appreciate xxx% on average YOY would be ridiculous.
Amazon stock still climbs, but to attribute early gains from the bookstore to the webstore to today and calculate an average rate of return would be foolish.
You get the point. The same idea applies to Bitcoin.
With the disclaimers out of the way, let’s see how the original claim holds up. I decided to look at Bitcoin’s opening price on January 1st, starting in 2011. I chose 2011 because Bitcoin has unreliable price history prior to this year. Mt. Gox, the first Bitcoin exchange, was founded in mid 2010.
Bitcoin’s Historical Price Appreciation
January 1st, 2011 - $0.30
January 1st, 2012 - $4.72
January 1st, 2013 - $13.51
January 1st, 2014 - $754.97
January 1st, 2015 - $320.44
January 1st, 2016 - $430.72
January 1st, 2017 - $963.66
January 1st, 2018 - $14,112.20
January 1st, 2019 - $3,743.13
January 1st, 2020 - $7,212.63
January 1st, 2021 - $28,994.01
January 1st, 2022 - $47,738.59.
January 1st, 2023 - $16,619.10
January 1st, 2024 - $44,500
Now that a starting price is established, let’s start at $.3 from 2011 and suppose a 200% appreciation YOY until January 1st, 2022.
The result is $.3, $.9, $2.7… $53,144 - WOW. Let’s write it out to make sure our math is correct.
Bitcoin’s Price Appreciation From $.30 With A Fixed 200% Increase YOY
January 1st, 2011 - $0.30
January 1st, 2012 - $.90
January 1st, 2013 - $2.7
January 1st, 2014 - $8.1
January 1st, 2015 - $24.3
January 1st 2016 - $72.9
January 1st, 2017 - $218.7
January 1st, 2018 - $656.1
January 1st, 2019 - $1,968.3
January 1st, 2020 - $5,904.9
January 1st, 2021 - $17,714
January 1st, 2022 - $53,144
January 1st, 2023 - $159,426
January 1st, 2024 - $478,278
As you can see, the numbers begin to rapidly expand as we approach today’s date. Even if I went back and assigned values to 2008, 2009, and 2010 respectively as $.01, $.03, and $.1, the experiment would fit well until the later years. It’s actually quite impressive how long this model stayed on track. Unfortunately, I think it’s time to put this claim to rest.
The issue is that claiming that ‘Bitcoin appreciates 200% YOY’ is misleading in a number of ways. The statement is implied to mean that, on average, this is the return you should expect given a large enough sample of years. The number should hold up if enough data points are included, regardless of where you start on the timeline. That means it shouldn’t only work from 2011.
And this is where the problem begins.
Bitcoin is only 15 years old, with meaningful price action for a little more than a decade. Regardless, three cycles worth of data should bring us somewhere close to the 200% YOY average. The problem is that it doesn’t add up. I checked against a starting point of January 1st, 2012, 2013, 2014… and it failed miserably.
I suspect it would probably fail at more points too, but I only checked these three.
With that in mind, it would be inaccurate to say that, from 2012 until now, Bitcoin appreciates on average 200% YOY (same for 2013, 2014, and so on). This drastically reduces the usability of the claim, as it basically limits it to a narrow set of parameters. It’s true if you start on an arbitrary date in one specific year. Otherwise, it falls apart.
The further you pull back the curtain on this, the more complicated it gets. You could take the average price of each year instead of the January 1st price point for better verification, but the numbers still don’t add up and nobody making the claim is considering this. Do the 200%ers dig as deep as we just did?
The idea has been miconstrued.
The 200% claim can only ever weaken over time. Nothing can rise on average 200% YOY indefinitely - it would have to eat the value of every asset in the universe to keep up with that rate. Perhaps Bitcoin has a couple of explosive years to bring back some life to this claim, but again, it only works from an arbitrary starting point, not generally.
The claim is fun, palatable for a new person looking to get into Bitcoin, and the sentiment is accurate. Bitcoin has been the best performing asset since it was created. If we are being honest, this is largely a result of growth in the early days before it was considered a meaningful asset.
This is not to be taken as a negative - it’s more of a thought experiment on the way we present the asset to newcomers.
Fingers crossed for an official ETF announcement soon. I am looking forward to sharing good news, not commentary on doom and gloom or fake news.
Bitcoin Thoughts And Analysis
I never look at or share 5 minute charts, but I want to show you what happened when the SEC falsely tweeted that the ETFs were approved.
This is a head scratcher.
Bitcoin moved in a $3,200 range in under 20 minutes, up to $47,901 initially and then immediately down to $44,701.
Crazy town.
This was clearly a manipulated move, so I believe it is hard to extrapolate what will happen on a real approval. Someone hacked the SEC account in an effort to make money on this trade, so I do not expect the same price action on the real thing. Either way, it should be clear that you don't want to be anywhere near leverage when this news hits - it is still likely that both sides will get liquidated before the real move happens.
Be careful out there.
Altcoin Charts
For those who are new here, I share SETUPS and not SIGNALS. These are ideas that I am watching - if a certain thing happens, then the trade triggers. I am not telling you what to buy or when. I am showing you how I am watching certain charts and what has to happen for me to take a trade.
I have been watching this weekly chart for many weeks, so there are no surprises here. Yesterday, Ethereum wicked down below key support, before pumping massively. The candle is far from closed, so it is too early to celebrate, but for now we have significant bullish divergence with oversold WEEKLY RSI on Ethereum. If you want further confirmation of this reversal, wait for RSI to break the descending resistance as price almost always follows.
Either way, you know that I have been patiently waiting for the signal that Ethereum is preparing a sizable move. We are starting to see it.
Take a look at the hourly chart.
Everyone is concerned with what Bitcoin will do when the ETF gets approved... Yesterday's insanity gave us the road map... traders will rotate into Ethereum. Huge move the second it happened, major volume.
Legacy Markets
Stocks and bonds steadied as investors waited for key U.S. inflation data, hinting at the Federal Reserve's next move on interest rates. Oil prices saw fluctuations, initially rising due to Red Sea attacks threatening supply, but later retreated. The market is closely watching December's inflation figures, with supply chain disruptions and geopolitical tensions potentially affecting outcomes. An influx of government bond supply is imminent, estimated at $2.1 trillion. Bitcoin experienced volatility following rumors about SEC's approval of spot-Bitcoin ETFs, which were later denied by the SEC. The Japanese yen weakened against the dollar, with the Bank of Japan's policy impacted by slow wage growth. Japan's Topix index hit a peak, influenced by the weaker yen and lower bond yields. Upcoming Chinese economic reports are expected to provide insights into the global economic landscape, while Middle East tensions continue to influence oil markets.
Key events this week:
US wholesale inventories, Wednesday
The World Economic Forum’s global risks report is released, Wednesday
New York Fed President John Williams speaks, Wednesday
US CPI, initial jobless claims, Thursday
China CPI, PPI, trade, Friday
UK industrial production, Friday
US PPI, Friday
Some of the biggest US banks report fourth-quarter results, Friday
Minneapolis Fed President Neel Kashkari speaks, Friday
ECB chief economist Philip Lane speaks, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 was little changed as of 9:37 a.m. London time
S&P 500 futures rose 0.2%
Nasdaq 100 futures rose 0.4%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index was little changed
The MSCI Emerging Markets Index fell 0.3%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.2% to $1.0950
The Japanese yen fell 0.3% to 144.92 per dollar
The offshore yuan was little changed at 7.1800 per dollar
The British pound rose 0.1% to $1.2728
Cryptocurrencies
Bitcoin rose 0.4% to $45,630.86
Ether rose 4.6% to $2,424.55
Bonds
The yield on 10-year Treasuries declined two basis points to 3.99%
Germany’s 10-year yield declined two basis points to 2.16%
Britain’s 10-year yield declined two basis points to 3.76%
Commodities
Brent crude fell 0.3% to $77.32 a barrel
Spot gold rose 0.2% to $2,034.88 an ounce
Coinbase Releases Research With Glassnode
Coinbase Institutional has recently published its Q1 2024 report in collaboration with Glassnode, specifically tailored for institutions. The report delves into crucial metrics and trends that hold significant importance for institutional investors. It covers three key areas: the overall market, Bitcoin, and Ethereum. Notably, this comprehensive report designed for institutions is accessible to the public upon providing a name and email address. Below are my top three insights from the report.
The SEC Is A Scam
What an absolute shit show!
Unless you have been living under a rock, you undoubtedly saw the world explode in excitement on this tweet from the OFFICIAL SEC ACCOUNT stating that the ETFs had been approved.Naturally, we all assumed it was true because we take the SEC X account at face value. I ran with it, Coinbase ran with it, TV ran with it, literally everyone ran with it.
Gary Gensler’s account quickly “corrected” the mistake, but the damage to both the market and SEC was done.
Was the SEC tweet a fake, created by a hacker, or a draft released too early? Based on the fact that they hashtagged “Bitcoin” were vague in the language about who was approved and where, and that the SEC was liking random responses like “Bitcoin to the moon” in the replies, my guess is that they were clearly sim swapped and hacked.
I will dig into this more thoroughly as more information arises, because the takes and implications are astounding. The SEC’s job is to monitor and prosecute this very type of action. Congress is already asking for answers. The SEC literally has new rules about cyber security that put responsibility with the person sending the tweet, no matter what the situation. The SEC account manipulated the market. The implications are endless.
Say it with me on three… one, two, three, #FireGaryGensler!'
Here is a timeline of the fishy events…
X (Twitter) To Launch A Peer-To-Peer Payments System
Yesterday morning, X released a public blog highlighting the progress of X. The headline confidently stated, “2023 was foundational for X, and 2024 will be transformational.” The blog then outlined the achievements of the previous year, with a forward-looking vision for the upcoming year. One noteworthy statement from the blog read, “X is not just another app – it's becoming the everything app, seamlessly uniting experiences into one interface, for everyone.”
Towards the end of the blog, within the enumeration of priorities for the New Year, a notable statement stood out: “We will launch peer-to-peer payments, unlocking more user utility and new opportunities for commerce, and showcasing the power of living more of your life in one place.” It's worth noting that Elon Musk has consistently emphasized his opposition to any of his companies creating a cryptocurrency. It appears that he remains steadfast in this stance.
The article also highlights significant improvements such as the integration of AI, personalized content tailored for individual users, enhancements in advertising, and various other focuses. It's reassuring to witness the crypto community embracing a social media platform that staunchly advocates for free speech and is openly dedicated to continuous improvement and accountability. X deserves substantial appreciation from the crypto community.
How Could It Not Happen?
During a live CNBC TV broadcast, Jan F. van Eck, the CEO of VanEck, was posed with the question, “Do you believe it's going to start trading Thursday?” In response, Jan stated, “Yeah.” Another interesting piece of information I came across on Twitter is a legendary tweet from Hal Finney, and the dates align quite well.
BitBoy Takes A Stand
This is NOT important news; if you value your time, feel free to skip it. If you want a laugh, continue. Controversial crypto 'influencer' BitBoy Crypto is presently staging a protest outside the SEC office, demanding approval for an ETF. While I didn't watch the stream, the article suggests that BitBoy is convinced his protest will achieve success where other 'powerful' figures, such as Larry Fink, “couldn't get the job done.” It's apparent that we continue to have no issue making ourselves appear foolish.
ETF To Pump Bitcoin To $200,000
Bitcoin ETF approval decision deadline is already tomorrow, join Matt Hougan (Bitwise CIO) and Dave Nadig (VettaFi) to discuss the latest in Bitcoin ETF. John Wick will join me later at 9:30 am EST to provide his views on the market.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.