A weekly newsletter on actionable digital asset market insights and practical observations with a smidgen of greentea 🍵 insights
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📖 Book of the Month 📖
I am starting on this new book on January 9, 2022 and listed it in my newsletter there. If you are interesting in understanding history to get a sense of where the world may be going, I think you will enjoy reading this book (or listening) along with me! I will have a short write-up about the book under the Library section of the website after I finish the book.
Listen to this book for free with Audible The Changing World Order
💭✍🏼 Food For Thought 💭 ✍🏼
Pardon the typo from Jim below (we all make them). The gravity of the observation is why I re-tweeted it and included it here.
Kristin Forbes wrote a great opinion piece in the FT. This will give a sense of the ivory tower discussions. Kristin is the Jerome and Dorothy Lemelson Professor of International Economics at MIT-Sloan School of Management and a former member of the monetary policy committee of the Bank of England. I am including this specifically to illustrate how power actually works. I am sure you know that the Sloan School of Management is a T stop away from the offices of the Boston Fed? Bio
I am leaving this line from last weeks newsletter here on purpose to emphasize the point --- How does the Fed control monetary policy? Answer: Lowering and Raising Rates. Will they raise rates and break something? I have no idea but I also do not want to live through their "learning curve" with my money. More cash on hand please.
The Train to FedCoin is now boarding, all aboard!
I am super bullish crypto as an asset class long term; however, I have been macro aware since the 2000 crash and this part of the movie reminds me a lot like 2001 when Gen X and Boomers lost a boat load of money. Back then it was Worldcom and Pets.com even Amazon tanked. They did not call it Holding On For Dear Life (HODL) but the result was the same--most people held to 0 or sold the bottom and missed the multi year rebound in the case of Amazon. So what? If you have positions you cannot live with and ride out the down turn, your time to sell was the last week of 2021. If you still cannot stomach the volatility, I suspect you will get some kind of positive move in the next two weeks or sooner because that is how these things go. That would be your queue to exit stage left unless you are willing to see the movie through to the credits. You can always come back, just do not take more risk that you can stomach. I have said my peace.
The President has just told you that the Fed is clear to hit interest rates ⬇️ Buckle up.
Something major is going on over at the SEC. See my December 26, 2021 Newsletter for the other major call out in this area--something is afoot given the level of "public" acrimony ⬇️
💸 Companies and Deals I am Watching Closely 💸
- Animoca Brands Raises $358 Million at a $5 Billion Dollar Valuation - Link
- Mechanism Capital is Raising a $100 Fund to Focus on Crypto Gaming - Link
- FTX Establishes $2B Fund to Invest in Crypto Startups - Link
📖 Quote of the Week 📖:
“It takes something more than intelligence to act intelligently.” ― Fyodor Dostoyevsky, Crime and Punishment
📰 This Weeks Most Interesting Digital Asset News 📰:
- The IRS is coming after NFT investors - Link
- Intel to Introduce a specific ASIC Mining Focused Chip - Link
- EIP 1559 Comes from Ethereum to Polygon - Link
- Small Banks Are Bringing Bitcoin To Customers in the US - Link
- Crypto.com was hacked (this is why you don't keep too much value on Exchanges) - Link
- The Federal Reserve Board Released its Long Awaited Paper on CBDCs - Press Release Link and PDF Paper Direct - Link
- Moonriver Brings Ethereum EVM to Polkadot (see my Moonriver vs MoonBeam video on this topic) - Link
📈 Top 10 Market Movements by Market Cap over the last 7 days 📉:
Bitcoin: Price OHLC
Last week I introduced the OHLC chart for Bitcoin which shows the Open, High, Low and Closing price. In the chart above last week I have pulled the year over year chart from 01 January 2022 to 16 January 2022. I have provided the updated chart from the top of the year up to today. Specifically, if you are relatively new to Bitcoin and bought in 2022 you are more likely to be down just about 50 percent. Versus longer term holders that would have entered at much lower prices. I think this will matter given the broader macro factors that are now at play. As I have been saying here since December 2021, the possible shift in the central bank's stance is a major X factor that I am not sure people fully account for. If the Fed follows through on their actions coupled with a generation of investor (mostly Gen Z and Millennial) that has discovered investing in 2020---they are likely in for this generations Dot Com moment, among other things, in my opinion. Keep your head on a swivel!
Bitcoin: MVRV Z Score
The MVRV Z-Score above is used to assess when Bitcoin is over/undervalued relative to its "fair value". When market value is significantly higher than realized value, it has historically indicated a market top (red zone), while the opposite has indicated market bottoms (green zone). Technically, MVRV Z-Score is defined as the ratio between the difference of market cap and realized cap, and the standard deviation of market cap, i.e. (market cap – realized cap) / std(market cap). The orange line looks like it could lead the price into the green zone which was last hit in March 2020.
Bitcoin: Entity-Adjusted Dormancy Flow
I have updated the Entity-adjusted Dormancy Flow chart this week to show back to 2018's bear market area. To re-cap this is the ratio of the current market capitalization and the annualized dormancy value (measured in USD). Entity-adjusted Dormancy Flow can be used to time market lows and assess whether the bull market remains in relatively normal conditions. It helps confirm whether Bitcoin is in a bullish or bearish primary trend. I think this metric may be useful for you to get a sense of how Bitcoin might behave if we continue to see a further sell off given all my Fed/Macro talk above. If this metric holds and there were to be a further drawdown you could see Bitcoin touch the bottom of the green channel which would place its price closer to $20k (or lower) as I noted last week. Don't worry, if that happens I would be putting out an emergency note and personally I would be buying at least a nibble for long term holding not trading.
Total Value Locked (USD) in DeFI
DeFI markets show only a slight dip from last week. To be honest, I think folks have not "gotten the memo" of the policy change freight train that is barrelling towards them. If I was in DeFI and if there was a bounce, I would be look for the exits with the "price of money" i.e. interest rates now in play globally.
No ETH charts this week but it is still being burned and that is still supporting it's price. Bitcoin tends to lead all the other crypto markets which is why there is a focus on Bitcoin. If I see something I think is a divergence I will flag it--thus far the on-chain data has the direction of travel for the whole asset class going the same direction. Stay frosty.
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