Green Tea & Digital Assets Weekly Round Up (December 5, 2021)

Green Tea & Digital Assets Weekly Round Up (December 5, 2021)

A weekly newsletter on actionable digital asset market insights and practical observations with a smidgen of green tea 🍡 insights (do not panic edition)

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The CBOE VIX index as of market close in the US on Friday shows you why Equities went down and Digital Assets. VIX above 80 has happened twice--Lehman Brothers collapse in September 2008 and the market realization that the pandemic would be material in March 2020. Since Digital Assets are held and traded by institutional investors that also hold equities, bonds, etc. VIX above 30 normally materially impacts risk assets generally. Now is a good time to watch and wait to see how things play out this coming week which may be impacted by variant news.

Money Supply M1 - (Broad Money Supply has exploded since 2020 see below for the weekly calculation ending February 1, 2021) for full definition see the footnotes - Link

See the growth the M1 Money supply from February 1, 2021 to now zoomed in -- It has continued to explode - this is "why" your house or rolex costs 2X+ its 2019 price (the denominator has exploded!) - Link

Note in the chart above, 18,115.3 Β (18 trillion) was the M1 broad money supply on February 1, 2021 and was 20,174.6 (20 trillion) on November 1, 2021. The spread here is 2,059.3 billion. 2,059.3 billion = two trillion, fifty-nine billion and 3 million dollars in M1 growth in 9 months!!! This is the chart to show you what money printing actually looks like. Β This means over 2 trillion in printed dollars are seeking to buy the same rolexes, homes, cars and crypto. This is why prices are going up.

πŸ“– Quote of the Week πŸ“–:

"People seem to have forgotten that Cold and Flu Season is the same time every single year." - Me

πŸ“° This Weeks Most Interesting Digital Asset News πŸ“°:

1. FTX Coinbase Ripple and Binance have all release public frameworks for policy makers to consider in regulating Digital Assets - Link Link Link Link

2. Bank of International Settlements Has Been Quietly Launched 6 CBDC focused innovation hubs in global financial centers - Hong Kong London Nordic Centre Singapore New York Fed

3. Fidelity Launched a Spot Bitcoin ETF product in Canada since the SEC has refused repeated attempts by market participants - Link

πŸ“ˆ Top 10 Β Market Movements by Market Cap over the last 7 days πŸ“‰:

πŸ“ˆ Call Out Digital Asset Charts of The Week πŸ“‰:

Bitcoin: Futures Long Liquidations

As you can see above, the futures longs just lost over $188 Billion in the market selloff.

Bitcoin: Stock to Flow Deflection

The Stock to Flow (S/F) Deflection is the ratio between the current Bitcoin price and the S/F Model from Plan B. If deflection is β‰₯ 1 it means that Bitcoin is overvalued according to the S/F model, otherwise undervalued. Bitcoin was already undervalued relative to the S/F Model before this weekends sell-off and remains so still. Note, relative to the Summer China ban sell-off, which is the lowest green trough above, Bitcoin sold off to around the $29,000 level--in July of 2021.

Bitcoin: Total Cross Exchange Liquidations

Based on this data I pulled from coinglass.com, about $1.37 Β Billion in Bitcoin longs were liquidated in a 12 hour period during the drop from $51,000 to $42,000 per Bitcoin. Note, Binance and Bybit do not provide full data so the liquidation was likely a bit more. Also, note, Digital Assets are the only markets that trade 24/7 365 and thus when there is a risk on/ risk off sentiment these are the only markets on earth to express those views currently.

Bitcoin: Spent Output Age Bands (SOAB) (I have focused on the view from 1 hour to 6 months) - This is a very important chart to review given the weekend activity

SOAB provides a macro overview of the proportion of daily spending for various coin age categories. Β The chart above shows all coins spent (i.e. sold or changed hands) from 1 hour age to 6 month age as of the Friday's selloff. This total represented 94.95 percent of all coins that changed hands during the selloff. Who holds Bitcoins between 1 hour and 6 months maximum? Answer: speculators and mostly hedge funds that book profits every month and every quarter. Their business model is trading--not long term investing. This chart screams to me that the people and entities that sold were likely trading shops that may have gone out of business or were forced to "sell it all." See my chart below that shows all long term holders SOAB and you can see they did not sell hardly anything to make up the full 100%.

SOAB can generally be considered within the following framework:

Older coins (dark colors removed from the chart above but see below for a visual comparison) are more likely to be held by smart money investors who have strong fundamental knowledge about the asset and protocol. Long term holders typically accumulate coins which are considered cheap in bear markets and realize profits during bull markets.

Spending of old coins often increases around periods of market volatility and may suggest a change in conviction to hold the asset, and the re-activation of dormant coins back into liquid circulation.

Younger coins (light colors above) typically dominate day-to-day network traffic and are typically associated with speculators, newer market entrants and day traders. These entities are assumed to be more sensitive to price volatility and thus more likely to re-spend coins in response to volatility. Look very closely at the 1 hour to 3 month percentage of

Spending of young coins may signal a a state where long term holders prefer to HODL their coins, and thus may suggest increased accumulation and/or higher confidence to hold the asset.

Bitcoin: Spent Output Age Bands (SOAB) (I have focused on the view from 1 year to 10 year long holders) - Compare this with the short term SOAB chart above and it becomes obvious this was a short term holder sell off that caused a cascade of liquidations.

As you can see above the SOAB of tokens from 1 year old to 10 years old on Friday only represented a grand total of 2.53% of the SOAB total. Yes, I know this does not sum up to 100% which I account for the delta as a glassnode variance in the data. The direction of the on-chain data here is what I want to emphasize not the decimal point percentages.

Polygon (MATIC Token): Number of Addresses (12 Month Growth)

Polygon (formerly Matic Network) is a Layer 2 scaling solution backed by Binance and Coinbase. The project seeks to stimulate mass adoption of cryptocurrencies by resolving the problems of scalability on many blockchains. You can see the growth in it's use as a scaling solution and growing alternative to ETH layer one transactions.

Decentraland: Number of Addresses

The total number of unique addresses that ever appeared in a transaction of the native coin in the network. This is a "metaverse" token that is all the range of talk. You can see the growth is real but still have further to go to reach serious levels. Worth keeping on your radar.

Ethereum: Net Unrealized Profit/ Loss Ratio (NUPL)(Updated)

Net Unrealized Profit/Loss is the difference between Relative Unrealized Profit and Relative Unrealized Loss. Inspite of the major selloff in Bitcoin this weekend--Ethereum held up well. My personal opinion is that this is explained by the lower level of hedge fund and trading focused "institutions" that hold large Ethereum positions as compared to Bitcoin. Also, a large percentage of Ethereum is locked into staking and cannot be traded in the same way Bitcoin can acting a dampener to down side price volatility (see below). In plain English – I think Ethereum is primed for an upside price movement driven by a lack of token supply avaiable in the market. More on this next week.

Ethereum: Total Value Staked

Based on the snap shot of the price above, and number of Ethereum, $34,859,456,284 in value is currently staked in the Ethereum 2 Protocol smart contract.

I hope everyone enjoyed this weeks write up, I know it was long but given the market action this week I wanted to provide extra on-chain context and some general macro context.

Green Tea Tidbits:

Drinking green tea has been found to delay aging, protect the skin from UV rays, improve skin tone, and reduce acne.

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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. Β 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.

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