#9 Crypto On-Chained
Today we look at Bitcoin and Ethereum on-chain data
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CHEAT SHEET
(You can print this out at work to follow along.)
What We Are Watching
Send us emails or write in the comments questions you have about why we like these tokens or what you’d like to hear more about.
LUNA has been on a tear upwards. It’s now approaching Weekly resistance and if that break the Monthly resistance will be the next test. If you’ve been long LUNA then taking some risk off now would be prudent. Look to exit majority of the position near $12.50 and wait for a pull back.
SUSHI, MATIC and AAVE have not seen the same exuberance as LUNA. We’d look to buy into these three names near the daily support levels : $7.58 for SUSHI, $0.91 for MATIC, $301.0 for AAVE .
Remember you can buy partial divisions of crypto tokens. No matter what the token price is currently at you can buy $50 of Sushi, $50 of MATIC and $50 of AAVE. All three of these tokens are available on Coinbase.
We further breakdown our case for these cryptos here : What We Are Watching
DeFi News
Crypto Billionaire, Mike Novogratz, pushes back on Elizabeth Warren’s anti-crypto stance stating Defi is more transparent than banking.
Portugal Tax Authority clarifies buying and selling cryptocurrencies is tax free.
You can now swap deposited collateral directly on AAVE using the Polygon Mainnet.
TAKE ME TO (BTC) MAXI TOWN
Last week we showed you a chart of PlanB’s Stock-To-Flow model. The model is based on Bitcoin’s supply being fixed (Stock) with a known cut every four years in the new supply issued per block (Flow). This cut in supply is considered to be the catalyst for Bitcoin’s price rise and four year cycle. The price rises because demand is fixed or rising and supply is being cut. This was the motivation for the Stock-To-Flow model. Using Glassnode, a data provider that shows insight into on-chain data (data from the blockchain) we can look at how far away the Bitcoin price is from the prediction of the Stock-To-Flow model.
As you can see in the chart above, Bitcoin’s price has never been this far under the predicted price of the STF model. While on-chain data is new and has yet to prove itself over a long period as a useful trading tool. We see potential value here. Looking at this chart there was only one fake signal if you planned to buy when the green line moved up and then sell as soon as it turned red. This was in 2017 where you would have had to with stand two -30% draw downs before the red signal flashed. You’d have closed the trade sweating with an almost 300% gain in just a few months.
This is essentially a bet on reversion to the mean but in this case the mean is the prediction of the Stock-To-Flow model. We’ll update you in a few weeks to see how this Stock-To-Flow Deflection has changed.
Possible Course of Action
Warning! Unproven On-Chain Analysis. Follow at your own risk.
You could get long here with the plan to sell the next time Stock-To-Flow Deflection returns to the mean ( line becomes red on chart) . Don’t worry if you are following the newsletter we will give you the signal.
Ignore On-Chain Data completely and stick to what works for you
Price Action Summary
The Bulls’ Defense:
Stock-To-Flow Deflection has never been lower. A reversion to the mean should be a great buying opportunity.
The Bears’ Prosecution:
On-chain data is new and unproven. The Stock-To-Flow Deflection could widen and the price fall further from the model’s prediction.
Recent News
Catholic Archdiocese Of Miami To Accept Bitcoin
ETH SHY BOY ZONE
A statistic we keep hearing about is the amount of Ethereum (and Bitcoin) on exchanges. Because Ethereum has a public blockchain you can track when coins are moving to and from exchanges. The idea is if ETH is leaving the exchange people are taking it away to hold long term or use for a decentralized application. With the planned launch of Ethereum 2.0 in August many are buying ETH, taking it off of exchanges and locking it indefinitely in Ethereum 2.0 staking contracts.
This data has only existed since early 2016. It has only had two bull cycles to prove itself. The pattern is clear in the chart. When ETH leaves exchanges the price rises over the long term and when ETH is brought onto exchanges the price declines over the long term.
Possible Course of Action
Buy a long-term position to hold until there is a significant uptick in ETH being moved onto exchanges.
Do nothing. On-chain data is new and unproven.
The Bulls’ Defense:
ETH is being taken off exchange to stake in ETH2.0. This creates a supply shock and a price rise over the long term.
The Bears’ Prosecution:
On-chain data is unproven and the price could fall even with ETH leaving exchanges.
Recent News
India to adopt Ethereum blockchain to prevent Birth Certificate forgery.
Details of the $1Billion Shiba Inu Covid Donation by Ethereum Founder.
Twitter Town Thursday
Everyone is heated today! Stabs and knife twists left and right.
Tired of being dunked on by traditional analysts, Willy Woo fires back. Saying the fear of a selling wave due to Grayscale’s newly unlocked shares will never come to pass.
Even though they are rocking similar hair styles, US Senator Cynthia Lummis, fires back at US Senator Elizabeth Warren who called Bitcoiners “Shadowy Super-Coders”. She points out to Senator Warren that current systems facilitating money transfers must be trusted but sometimes are not actually trustworthy. Lummis points out that Bitcoin’s transparent, public, decentralized ledger allows for these transfers without the need of a trusted third party.
Pomp, comes in swinging hard with rhetoric like, “Dear” and “Respectfully” addressing Senator Warner and asking her to come on his show. He says, “You can present your case I’ll present ours.” I wonder when he says “ours” if he means, the views of The Best Business Show, or that he represents the view of all Bitcoin and crypto enthusiasts. This guy doesn’t even self identify as a Shadowy Super-coder!
Leaving the stabbing and knife twisting realm…
Uniswap takes advantage of the publicity by advertising that they are hiring any of these Shadowy Super-Coders.
Will Clemente back again with the Big Balls Calls. He is using on-chain data to make definitive statements about the near completion of a 2 month re-accumulation process. This kid (19 years old) is definitely going to be famous if Bitcoin is able to make a new ATH this year. The whole, “Bitcoins moving to strong hands” narrative has yet to be proven. A sharp rise in the price back to 50k or even the ATH would make it hard to argue with the kid.
In his true style, @VitalikButerin (Ethereum cofounder), comes out swinging with his critique of the overuse of the Gini coefficient. The Gini coefficient is a single number that demonstrates a degree of inequality in a distribution of income/wealth. We think he’s taking a stab at Bitcoin Maxis here who argue Ethereum is too centralized and concentrates wealth. Careful! We recommend a big brain and a Bitcoin Maxi pad before reading this.
Please share with any crypto junkies or crypto noobs you think would enjoy our content: