Weekly Update October 31st

Welcome to our Weekly newsletter!

Have we bottomed? When should we look at pulling the trigger on buys for a long-term run?

Hoping to answer all of that in today’s report. It’s a juicy one!

First off I have to say this isn’t an easy call – I see compelling arguments on both sides BUT I still lean on the bearish side until proven otherwise. Im going to break this down into a bullish / bearish case.

BULL CASE

Holders keep on holding – Amazingly holders of BTC are remaining resilient – Not hitting over 66% of the total supply being held for 1 year+ - This is an encouraging sign for the long-term story for bitcoin – NEVER in history has an asset being held so tightly despite the horrific macro situation.

Long-term holders started adding to holdings aggressively during the LUNA collapse / deleveraging event.

Liveliness also backs this up – Showing we are in a holding period with old coins maturing on the network – when this trend is down it shows long-term holders holding – when we trend up they enter distribution mode

Supply on exchange – Big moves down – This shows the total amount of BTC held on exchange decreasing as holders accumulate and take coins off-exchange and into personal storage.

Mystery 50k BTC withdrawal from an exchange last week – over 1bn$ in value – I’ve been waiting for some answers on what this was last week and it appears it could be a genuine withdrawal of 50k BTC from exchanges. Still searching for more answers but so far appears genuine

Net flows – As you can see here BTC outflows from exchange have been increasing and inflows reducing.

BEAR CASE

New address data – Something I track on a weekly basis – especially right now as this hits critical levels. As you can see here, we’re at an inflexion point where we need to see new address uptake above the blue line (365 Day moving average) – A sustained move above this level would add to the bull case but for now, it's to watch closely.

Total Transfer volume – Super low level here showing there’s little interest in BTC for now and the network remains quiet

Mean Transfer Volume – looking at the average value of each transfer we can see here that despite the odd large outflow (likely institutions), currently the network is dominated by small transactions – these points more toward retail buying outweighing institutional level transacting

Miners – Some possible significant issues here – The chart below highlights the cost for production right now sits at around 19k. Miners hold around 1.5Bn$ worth of bitcoin and we’ve seen recently with CORZ that some of these miners are on the cusp of bankruptcy – CORZ SOLD over 1,700 BTC over the last few months and now holds 24 BTC… you read that right… 24 BTC owned by the largest miner on the network. This WILL be seen with other miners and the sell pressure remains a risk.

No change in regime shift – We are still seeing bitcoin being shorted heavily on pumps. Highlighted in the chart below

USD – Everyone calling a top in the USD (this would be good for risk assets) – HOWEVER – I still think there’s work to be done here – I want to see USD fall below 107 – currently we’re in a consolidation pattern and we could still see a higher USD here.

Earnings – Everyone seems to be praising apple and going full bulltard on the ‘’Positive results’’ last week but digging into the detail it's clear to see there are problems. Everyone just went off the headline and assumes things are fine and companies are beating estimates. None calls out the fact estimates are already so low and valuations in some of the big names are still too high. Particularly apple. As I pointed out last week services growth was down… and down badly. So I see this as a ‘’head in the sand’’ type move from the market.

Meme coins pumping / Options activity is wild – So coins like Doge have been pumping, I have also called out options activity in the market is very strange right now with HUGE short-term volumes – Traders betting on daily / weekly direction but mostly daily.

For me, this type of activity smells of gambling / trying to chase lost gains and this isn’t a healthy sign if we are looking for that capitulation/demand destruction. It still tells me there’s too much money freely sloshing around in the system and we haven’t yet seen peak fear.

SUMMARY

It’s a tough call… On balance, I would say BTC is showing some really encouraging long-term signs so I’m not nervous about the long-term picture and any major dips SHOULD be bought. I do however see a lack of demand on the network and the short-term picture with miner sell pressure is holding me back from buying and siding with waiting for lower prices.

There are really only a few things I need to see to ‘’Go All In’’ here :

New address data – If we see this starting to trend up above the blueline mentioned above.

USD Breakdown confirmation

TOTAL 3 chart – For me, this is still in a bearish pattern and we need to see us move out of the highlighted zone to get bullish confirmation that we’ve been able to mop up any sell pressure.

Options – I want to see less gambling and more serious bets being made on higher prices further out than just a day or a week.

But really the main emphasis here is on the network… I want to see a pickup in demand.

Reddit NFTs

Reddit NFTs have exploded in popularity in recent weeks with over 3 million ‘Redditors’ which have now bought a collectable avatar - more than any other native lending marketplace. The NFTs themselves are profile picture (PFP) digital collectables and have been responsible for onboarding many non-native Web3 users into the space. Reported that nearly 3 million new wallets have been opened since the RedditFloor marketplace launched and users have minted more than 86,000 NFTs. According to the marketplace, the collections now have a collective market cap of over $122 million.

Interestingly RedditFloor is comparably different to the NFT marketplaces we know and use such as Opensea, Looksrare and Sudoswap. Reddit’s marketplace allows users to create wallets and mint and customise NFTs directly in the app. The marketplace also has few ‘crypto-bro’ terminology on the marketplace, even omitting the word NFT and referring to digital assets as collectables. Seemingly Reddit has sought to bridge the user-experience or familiarity gap by allowing non-native Web3 users to onboard without the need for a crypto crash course to get started… surely this is only positive for the space as a whole.

Musk, Twitter… and crypto?

After a dramatic 6 month period between Elon Musk and Twitter with legal battles and public scrutiny - the Tesla and SpaceX founder is finally at the helm of Twitter. The deal which cost $44 billion has now been finalised and Musk is already making household changes, firing at least 4 key Twitter executives and potentially looking to remove up to 70% of the workforce. Elon has proven himself as a pragmatic CEO and has an incredible ability to ship a product with Tesla, Paypal and SpaceX in the past. Are we about to see more of the same with Twitter, and will crypto be part of that?

Back in June, Elon was quoted saying “I think it would make sense to integrate payments into Twitter so that it’s easy to send money back and forth…currency as well as crypto”. Twitter this week also has been testing NFT Tweet Tiles and will the success of Reddit NFTs maybe this is a sign of more things to come. Just to add fuel to the crypto fire, Binance invested $500m into the Twitter acquisition and as the biggest exchange on the planet is well-positioned to assist with any crypto needs for the platform.

Core Scientific Stock Plummets 70% as firm considers bankruptcy

The largest crypto mining company in the world, Core Scientific has found itself in financial disarray facing critical liquidity issues and severely depleted financial reserves. The company saw its stock fall 70% in a single day following the news. Core Scientific held 1,051 bitcoins and roughly $29.5 million in cash, as of Sept. 30, the Wednesday filing notes that it had 24 bitcoins and about $26.6 million in cash, indicating it sold between about $18 million and $20 million worth of BTC in October. The company stated its reserves could be entirely depleted by the end of the year, and the issues had stemmed from lower bitcoin price, litigation with bankrupt crypto lender Celsius Network and the increases in electricity costs and global bitcoin hash rate.

META losing heavily

META’s stock price fell a further 15% after hours after some more poor financials related primarily to their Metaverse division. Meta’s Reality Labs business - which is the metaverse arm of the company - once again recorded some astronomical losses for the business overall, leading to stock dumping. Reality Labs recorded losses of $3.7B in Q3 of 2022, which followed losses of $2.9B and $2.8B in the first and second quarters of 2022 already. Compounding on top of losses of $10B in 2021 - investors and the correlated stock price have shown significant concern as over $20B in losses have been recorded on the metaverse bet alone. Time will tell if the company can deliver on their vision.

Crypto security | Protecting your assets

Investors and traders alike are familiar with the potential possibility of losing money on the markets due to price fluctuation, especially in times like this where prices are sinking, looking for a bottom to end the bear market. In order to control the losses, in this case, a good risk management strategy is the safety net that helps to protect your capital. Having market crashes is not the only way of losing money, other risks come in hand with just being involved in the crypto space where a risk management strategy is of little to no use. But there are a handful of different things that can be done to be protected in those situations.

Since crypto reached all-time highs there have been an increasing number of scams that give thieves access to the victims' accounts and crypto assets. According to a recent analysis done by the Federal Trade Commission; consumers have lost over $1 billion since the beginning of 2021. Just recently in May, over $300,000 worth of NFTs were stolen from Seth Green, after the actor connected his crypto wallet to a scam website pretending to be a credible NFT project.

Source: Federal Trade Commission

Probably most of us have heard or even experienced such tragic events, the threat is real and there is no better reason than that to build up adamant protection against such attacks.

There are some of the same steps, such as creating and using strong passwords that you'd normally use to safeguard any of your other digital accounts/assets. However, there are some unique characteristics that crypto accounts have like seed phases that require additional security implementation. Especially, in actual times when the industry is yet to have the regulatory framework necessary for the retrieval of any stolen and even lost crypto assets, in the future this will probably be not needed at all.

In the next lines, I will cover several different effective ways to protect your crypto assets such as cryptocurrencies or NFTs from being purloined and you will understand why it’s worth taking the time and effort to properly secure your digital assets from being stolen.

Passwords

There are essentially two rules about passwords: Make them as strong as possible and don't forget them. Even if this sounds very logical, it is usually easier said than done, the combination of those two arguments can be difficult and requires some good balance. To put into perspective why this is harder than it seems at first light, let’s have a look at the following data table:

Source: Hive Systems

As you can see, the only fairly good passwords would be those in orange, yellow and green colours. And those require at least 11 characters but with a mix of five different character types, if that's too hard to remember you might try with 14 lowercase letter characters, such a word(s), something as strong as “adamantium” (10 characters) will be compromised in just 4 minutes, while “antifraudulent” (14 characters should take 4 years to crack. Cool ones uh!? Here comes the real issue: you don’t want to have just one or two passwords and use them for different things, ideally you want a genuine and unique password for each different use.

In the end that's a lot of complicated and unique passwords to remember, which is the reason why considering using a password manager could be a great idea, especially if forgetting your password could lead to losing access to your assets! Password managers make it simple and secure to store and use your passwords from one place. I strongly recommended choosing devices that come with high-level (military) encrypted code storage and two-factor authentication (2FA) for extra security and with protection from dust, fire and flooding.

PRO TIP: If you decide to choose this option make sure you purchase ONLY directly from the official site and brand-new devices. Buy two, use one on a daily basis and store them in a safe place like a secondary backup device.

Wallets

Your crypto wallet serves as the gateway to your crypto assets. There are two different kinds of wallets, the “hot” and the “cold” ones. The main difference is that hot wallets are software that operates online (always connected) while cold wallets are hardware tangible devices that work offline (unplugged); if you are not familiar with all the other differences between the two, have a look at the next image:

Source: 101 Blockchains

Crypto wallets store the private keys that prove you own your crypto assets and let you buy, sell or trade on blockchains, but don't hold the actual coins or tokens.

The most used wallets are “hot” ones because they're accessible, free and easy to use, while “cold” wallets have to be purchased and require a minimum degree of understanding, but in general they are affordable and quite intuitive. That’s why concerning security you may want to consider using a “cold” physical wallet.

A hardware wallet allows you to store cryptos and NFTs on a physical drive that allows you to connect it to the internet to access and then disconnect it afterwards. Hardware wallets are generally more difficult to hack into, essentially because they are offline most of the time but also because a physical interaction such as pressing a button, is required to confirm transactions. So they're the safest option when storing digital assets, especially those of high value.

PRO TIP: Once again; if you decide to choose this option make sure you purchase ONLY directly from the official site and brand new devices.

Seed phrases

Most crypto wallets have a seed phase for additional security in addition to regular passwords. Think of the seed phrase as a master password that is set up the moment you create or set up a new wallet, regardless if it’s cold or hot.

A seed phase is a 12 to 24-combination word code that allows you to sign in to your wallet on other different devices, but it also can be used to recover your account if you forget your password.

Cool abilities like that are made to reinforce security but come in hand with some major risks that should have all your caution to prevent them. Basically, anyone who learns your seed phrase could have access to all your crypto assets stored there, no matter if it’s a cold or a hot wallet. Scary right? But don’t panic, the solution is very simple!

First of all, the worst idea would be to store your seed phrase somewhere online, if you think of it, having the keys to your kingdom in the middle of the most accessible and populated space in the world seems like a terrible decision. It might be convenient for you, but I encourage you to discard the idea.

To be extra safe I might even recommend you to not even copy and paste it, or type it in your devices, not even screen capture it. Hackers are able to use programs that can trace all that digital information. So how do you do it? Use pen and paper or anything non-connected to the internet. Write your seed phase down as it shows up and then stores it in a safe place, somewhere very safe! After that, you can be as creative as you like to reinforce security even more (check the image!)

Source: Zdnet

And of course, I encourage you to NOT share it, no matter the circumstances, seed phrases are meant to be private, keep them that way. If a website or a company asks you to share your private keys under any condition, it is most definitely a scam and you should stay as far away from it as possible.

PRO TIP: If your seed phrase is either lost or stolen, but you still know your password, immediately log in to your wallet and generate a brand new seed phrase, then move your assets to a new wallet

Direct messages

Platforms such as Telegram, Discord or Twitter are some of the non-official homes of crypto and NFT communities. They are the place where the individuals that belong to certain communities thrive and interact among them and to projects, but it's also where hackers and thieves go to find their victims and compromise their accounts.

As a rule of thumb never trust unwanted messages, especially if they come with any kind of link or file to click and open. Usually, those kinds of messages come from sophisticated profiles that might look identical to project-related staff, but the truth is real staff most likely will never DM you first. Triple-check who you are talking to, and use verified channels to find the correct websites and never share your screen.

Messages about winning giveaways, receiving “free” money, being invited to a great project, being selected to a secret program, having airdrops, needing your help, etc… are very likely to lead you to lose your assets and fall for scams. Use your common sense and if in doubt verify in the proper channels with the legit and right people.

Essentially if you get contacted out of the blue about an ‘amazing’ cryptocurrency investment opportunity that just seems too good to be true, then it probably is. Never give away your personal information or log in to your digital wallet through suspicious links present in emails because it is most likely to be a scam.

PRO TIP: Disable direct messages from people you don't follow or are not your friends

Source: Agroman

Social Media Platforms

Scammers use ads on social media and even Google search to target crypto enthusiasts. In 2021, bad actors purchased Google ad placements for fake websites that impersonate popular crypto wallets to target people and the scammers were able to steal over $500k worth of cryptocurrency.

Cryptocurrency giveaway scams are promoted on YouTube, Twitter, Facebook, and other social media platforms. These giveaways almost always appear to be from celebrities or famous personnel within the crypto community. In 2021, over $2 million in cryptocurrencies were scammed by Elon Musk Twitter impersonators alone.

Since there have been many legitimate giveaways on social media as well, you must do your due diligence and research before you engage with them.

Source: gadgets360

DApps and website interactions

As the popularity of crypto grows, so does the use of wallets to interact with websites and decentralised applications. Even if you decided to trust a giveaway, participate in an unexpected free NFT mint, or saw a link shared by the staff on their official Discord server think that there is a possibility that those links could lead you to lose your assets. That is why it’s very important to be vigilant. Here is some preventive advice to help you avoid falling for scams in the ultimate instance while interacting with links, websites and DApps.

• Verify what you’re approving: A big red flag usually is “Set Approval For All”, but when making a transaction, always be sure to verify that the details and permits are correct before approving the transaction. By verifying the details of each transaction, you can help ensure that your assets are not stolen by hackers.

• Manage infinite approvals: By using revoke.cash, you can easily manage your infinite approvals and revoke access if you feel an application no longer deserves it.

• Remove unused connected sites: It is important to be aware of the websites that you are connected to. If you are not using a site, be sure to disconnect from it. This will help protect you from potential attacks in which hackers gain access to your data.

• Lock and unplug your wallets: When you are not making transactions a way to protect yourself from potential attacks is to “close the door” by unplugging your cold wallets or locking the hot ones.

• Manage token approvals: If you no longer want to use a token, you can unapprove it by clicking the “Revoke” button next to the token name on EtherScan. This will help protect you from potential attacks in which hackers gain access to your funds by using your approved tokens.

Source: Blind Boxes

PRO TIP: Create a wallet to interact with any site and have in it only the funds you might need for the action you intend. And keep your assets in other wallets as storage units where you send your assets but never use them to connect or interact, only do send and receive transactions with the vault.