Crypto’s price action is playing with our emotions like a cat catching a mouse for the first time.🪓
Kind of a mixed day today overall – a lot quieter compared to last week.
In today’s Litepaper, we’ll look at what the bulls and the bears see on the Total Market Cap chart in a Technically Speaking article. Additionally, an Oxford Ph.D. student got an F for Failure, and a peek at a possible agreement between Digital Currency Group and Genesis’ creditors.
This market makes us feel great for a while, then makes us feel like it doesn’t want us around, and then maybe it does, but then it doesn’t. Indecision and consolidation are the suck.
No major cryptocurrencies flew higher than anyone else, a relatively ‘even’ drive up across the board.
Here’s how the market looked at the end of the trading day:
|Altcoin Market Cap||
|Total Market Cap||$1.021 Trillion||0.55%|
If you go to Oxford, you’re probably a smart person. But even smart people can be morons. Take Wybo Wiersma, a Ph.D. student at Oxford. 🧠
Let’s follow this chain of events:
- In 2018, Wiersma created iotaseed.io – a site that generated randomized private keys (seeds) for $IOTA.X.
- Except the seeds were not randomized, Wiersma used them to steal IOTA from people.
- Wiersma converts IOTA into $BTC.X and $XMR.X and sends it to Bitfinex.
- Bitfinex becomes suspicious, freezes the accounts, and demands he identifies himself before they will unfreeze his accounts.
- Wiersma shows two fake passports, one from Belgium and another from Australia. Bitfinex keeps the accounts locked.
- Next idea on Wiersma’s list: try Binance.
- Binance notices some shady things happening from Wiersma’s accounts and freezes them, demanding he provides proof he is from the UK. Shows another fake passport.
- Victims notify UK and German law enforcement.
And then things get interesting.
A joint operation between Germany’s Hessen State Police, Europol, the UK National Crime Agency, and the UK South East Regional Organized Crime Unit ended with Wiersma getting arrested in 2019.
Wiersma’s apartment was raided. Authorities scoured his computer and tracked his activity. However, Wiersma refused to answer questions about his website and claimed he was hacked. No way that would work, right?
They let him go and sent him back to the Netherlands. 🤦♂️
But the long arm of the law kept working and found a Bitcoin payment to the host of Wiersma’s website linked to Wiersma’s VPN. Ouch.
After it’s all said and done, UK law enforcement converted years of studying at Oxford into 4.5 years of incarceration.
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Here’s an update to a story from the January 18, 2023, Litepaper:
Crypto giant Digital Currency Group (subsidiaries include CoinDesk, Grayscale Investments, and Genesis) has reportedly made an in-principle agreement with Genesis’ primary creditors.
Two pieces of the agreement involve refinancing loans that DCG borrowed from Genesis and the equitization of a $1.1 billion 10-year promissory note to Genesis in return for Three Arrows Capital’s (3AC) claims.
When final, the deal will be offered to other creditors, including The Winklevoss twins’ Gemini Earn customers.
Genesis and Gemini were both hit with charges from the SEC last month.
We’ll keep you updated as this story evolves. 📰
This is what is going through many analysts, traders, and investors’ brains today:
OMG, is it going to crash? Will it? Won’t it? Will it? Won’t it? 😱
Price action is choppy, and it’s giving bulls and bears alike some angst, especially when there are strong bullish and bearish warning signs all over the place.
Case in point: The wedge patterns on the Total Crypto Market Cap chart.
What The Bears See
Greedy bears see a rising wedge pattern and are probably frothing at the mouth. It is a bearish pattern, but it’s not that bearish.
According to Thomas Bulkowski (author of The Encylopedia of Chart Patterns), rising wedge patterns are “… some of the worst performing chart patterns.”
He also notes, “Downward breakouts have unacceptably high failure rates and small post-breakout declines.”
In other words, a breakout lower has a high chance to fail, and even if it is successful, it sucks (for bears).
Based on over 1,400 perfect trades, Bulkowski ranks the Rising wedge as 32 out of 39 (39 is the worst) – so it’s pretty bad.
While the expected behavior is for price action to move lower (breakout lower 60% of the time) – it’s limited in size and scope. As a result, it acts as more of a type of bear trap.
Analysts also observe regular bearish divergence occurring between the candlestick chart and the RSI – however, bears have been unwilling or unable to capitalize on that divergence. At least not yet. 🤔
What The Bulls See
The great trader and analyst Connie Brown (author of Technical Analysis for the Trading Professional, The 32nd Jewel, and others) stresses the importance of monitoring trendlines and patterns like wedges in oscillators.
For bulls, there is a falling wedge on the Relative Strength Index (RSI). Falling wedges are just the opposite of rising wedges. Bulkowski ranks the falling wedge at 31, with an upwards breakout occurring 68% of the time.
Does that apply to the RSI? No idea – Bulkowki’s work is done almost exclusively on stocks, so the performance of breakouts in an oscillator could be wildly different or even the same; it sounds like a fun thing to research for someone who isn’t me.
Bullish analysts do see one very positive development, however.
Hidden bullish divergence is a powerful warning sign that the current downswing is at threat of terminating and that a prior up trend will likely continue.
But there’s the keyword: trend. Hidden bullish divergence is only valid if the last move was bullish. 🗝️
Whether crypto is in a bull market or a bear market is an argument analysts, traders, and investors have made ad nauseam.
A quick note about the wedge patterns
In Technical Analysis, almost all pattern research studies are done using the stock market. However, performance ratios differ in markets like Forex, which are considered more range bound. So should we expect to see the same behavior in crypto?
Hard to know – there hasn’t been much professional research on chart pattern performance in crypto. Crypto certainly appears to be more of a trending style market like stocks, but we’ll have to wait until there’s more research done before finding an answer.
Bullets From The Day:
💰 Politicians who got SBF’s money might have to give it back or be sued. Lawmakers, political action funds, and other major political influencers who received money from Sam Bankman-Fried have been contacted by FTX’s new leadership. The statement says, “To the extent such payments are not returned voluntarily, the FTX Debtors reserve the right to commence actions before the Bankruptcy Court to require the return of such payments, with interest accruing from the date any action is commenced.” PRNewsire has more.
😯 J.P. Morgan’s (JPM) e-Trading Edit report suggests institutional money and interest could flow out of crypto and into AI. 835 institutional traders around the globe participated in the survey. A little over 70% of the traders said they have no plans to trade crypto in 2023. However, for 2024, the respondents anticipated nearly 65% of e-trading activity would be in crypto and other digital assets. J.P. Morgan’s 2023 Market Insights, Outlooks, and Forecasts can be read here.
😪 Crypto layoffs for 2022 were massive in June and November and even bigger in January 2023. According to CoingGecko’ research, Terra’s collapse caused a 13.4x higher layoff rate (3,003) in June 2022. In November 2022, the layoff rate was 8x higher (1,805). And in January 2023, the number of layoffs in the crypto space was 41% of all of 2022s – crazy. Over 80% of the layoffs in the crypto world were from cryptocurrency exchanges. However, crypto accounted for only 4% of the total layoffs in the tech sector. CoinGecko has more.
💂♂️ The U.K.’s financial regulators are throwing down the hammer. The Financial Conduct Authority (FCA) released a statement saying all crypto firms marketing to UK consumers, including firms based overseas, will soon need to comply with the new UK financial promotions regime. Those crypto firms must start preparing for those changes and were notified that the FCA will take robust action against firms breaching these requirements. The announcement warned that promotions that are not made using the proposed rules would be “…in breach of section 21 of the Financial Services and Markets Act 2000 (FSMA), which is a criminal offence punishable by up to 2 years imprisonment.” More from CryptoSlate.
Links That Don’t Suck:
🦅 Devs of crypto scam Dingo pump fees to 99% via backdoor
🦃 Crypto exchanges pledge to aid Turkey’s earthquake victims
🥣 Wisconsin school attempts cereal box dominoes world record
🚓 Brazil to grant prosecutors, police new crypto confiscation powers
🕵️♂️ FTX judge considers approval for independent bankruptcy investigation
🛑 Nothing, Forever, the Seinfeld AI show, has been temporarily banned from Twitch
🤔 Bloomberg Strategist: Crypto’s real recession has arrived, predicts massive milestone
😂Assassin’s Creed Valhalla’s Grammy win overshadowed by presenter hilariously butchering the game’s name
Credits & Feedback
Today’s Litepaper was written by Jon Morgan. Let him know how he did: