A weekly newsletter on actionable digital asset market insights and practical observations with a smidgen of green tea insights 🍵
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💭✍🏼 Food For Thought 💭 ✍🏼
Michael Greenwald's piece, The Digital Asset Olympics - Link
📖 Quote of the Week 📖:
"Winning makes you different and that difference is going to scare people" - Tim S. Grover from his book Winning
📰 This Weeks Most Interesting Digital Asset News 📰:
1. Taproot Upgrade is Live on the Bitcoin Network - TL:DR Taproot will allow DeFI and much more on the Bitcoin Network - Link
2. AMC Theaters Now Accepts BTC ETH LTC for Payments - Link
3. US Senate Hearing on Dmystifying Crypto on 17 November 2021 and streamed live (great way to get a policy leg up) - Link
4. Nike Is Trademarking Digital Goods for the Metaverse and NFTs: Read the Trademark Application - Link
5. Doctor's Without Borders Will Store Medical Records On the Blockchain - Link
6. Mayor Elect Eric Adams said that NYC schools should teach students about cryptocurrency and blockchain technology - Link
📈 Call Out Digital Asset Charts of The Week 📉:
Bitcoin: Percent Futures Open Interest Crypto-Margined
The chart above shows the percentage of futures contracts open interest that is margined in the native coin (e.g. BTC), and not in USD or a USD-pegged stablecoin. The recent market downturn in the Bitcoin price was in part driven by this because if a person put up BTC as collateral to go long the future (versus USD or USDC) then when the BTC price goes down the value of the BTC collateral also goes down and this triggers a cascading effect. The flush out we saw this week in Bitcoin price is actually healthy and only driven by derivative moves such as this---these moves affect price in the short term measuring in weeks but do not impact the long term measured over months.
Bitcoin: Net Transfer Volume from/to Exchanges
The difference of in volume flowing into exchanges (green) and out of exchanges (red), i.e. the net flow of coins into/out of exchanges. This on chain measure shows you that more BTC is still flowing off exchange than flowing in and this matters because when people are planning to sell---they move coins onto the Exchange and when they are HODLing then are withdrawing coins.
Ethereum: Net Transfer Volume from/to Exchanges
The difference of in volume flowing into exchanges (green) and out of exchanges (red), i.e. the net flow of coins into/out of exchanges. As I have been saying to some for months--the data shows there is a major Ethereum supply shock underway that I do not personally think is reflected in the market price. While I do not make public price targets or predictions the data shows that Exchanges are low on Ethereum meaning people are (i) staking ETH (ii) using ETH for NFTs and DeFI (iii) Hodling ETH. At some point likely between now and Q1 2022--the market price of Ethereum "should" phase transition to a much higher level to reflect the on-chain data.
Ethereum: Spent Output Profit Ratio (SOPR)
The Ethereum Spent Output Profit Ratio (SOPR) is computed by dividing the realized value (in USD) divided by the value at creation (USD) of a spent output. Or simply: price sold / price paid. "1" is the baseline for SOPR and you can see the ratio has temporarily dipped below 1 previously and recovered. This metric is use to show strength of the market and confirms the bull market remains in tact. If we were to see the metric fall below one and stay there over a sustained period it would signal that we are in a bear market. Where we see the ratio significantly above 1.1 we can use this to gauge how overheated the market is from an on-chain perspective. Currently we are warm but not yet "cooking with gas".
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Disclaimer:
This Newsletter does not provide, and no portion of this content purports to be, individualized or specific investment advice and I do not provide investment advice. All information provided herein is general in nature and is made without regard to individual levels of sophistication or investment experience, investment preferences, objectives or risk parameters and without regard to the suitability of the content for individuals or entities who may access it.
No information provided herein, should be construed as an offer to sell, or a solicitation of an offer to buy any security or investment vehicle, nor should it be construed as tailored or specific to you, or any reader or consumer thereof. You understand and agree that the content does not constitute specific recommendations of any particular investment, security, portfolio, transaction or strategy, nor does it recommend any specific course of action is suitable for any specific person or entity or group of persons or entities.
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