Here is this week’s Coinstack... please share with friends

https://coinstack.substack.com/p/buy-the-dip

Some good perspective from Ryan Selkis of Messari.
https://twitter.com/twobitidiot/status/1394837672477315073?s=21

According to ViewBase in the last 24 hours $254M in BTC has moved off exchanges into cold storage and $879M of ETH has moved off exchanges into cold storage... a sign that the we’ve reached the near term bottom.

I'm watching the market right now with an open mouth. Have never seen anything quite like this myself. BTC dropped to $36258 and ETH just temporarily dipped to $2436 and is now on its way up at $2574.

On a positive note, Ethereum is still up 17% in the last 30 days 🙂

April 19 - $2056
Right now - $2409

If you would have told me on April 19 Ether was going to go up 17% in the next 30 days I would have been excited.

Amazing day to be watching the markets. Best to zoom out to get perspective.

We are invested in one of the best asset classes of the decade. Gonna be a rocky road. But just buy on dips and hold till 2030 and we're all gonna do really really well.

Here’s the best explanation I’ve found yet for what happened the last week: https://twitter.com/btcization/status/1395053801061634049?s=21

Thoughts?

What I learned this week:

1. Always have 10% of portfolio available in stablecoins to buy big dips when they happen.

2. Have pre-set limit buy orders that execute at various price points under current, with larger buys at lower levels (great tip PK!)

3. Don’t use leverage even when liquidation prices are 50% below (I got $100k liquidated yesterday from a leveraged position I took on May 11).

As Degen Spartan put it today on Twitter: “just buy the dips, sell the rips, and above all else, no liqs”

For the large majority of people a buy and hold till 2030 strategy will work best, especially with an asset like ETH with so much underlying utility and coming cash flows to holders.

For active investors, a buy, hodl, sell a bit, and buy back in on dips may work better, but takes quite a bit more time and attention.

Days like yesterday are where we learn and grow and get our stripes.

Hope everyone out there is okay. A good moment to spend some time with our families and relax to see the bigger picture.

Here is a very good and simple explanation of the differences between the technology and monetary supply underpinning Ethereum vs Bitcoin that came out yesterday... Justin Drake makes it simple.

Definitely worth a listen today 🎧

Summary: Bitcoin is a decentralized ledger that can execute simple transactions like keeping track of a balance, like a spreadsheet. Ethereum is a full decentralized computer that can run all types of apps powering the future of finance.

https://podcasts.apple.com/us/podcast/business-breakdowns/id1559120677?i=1000522314009

MAY 19 WHALE MARKET ATTACK: A POST-MORTEM...

Here's my analysis on how the BTC price dropped from $42k to $30k and how the ETH price dropped from $3400 to $1800 so quickly yesterday...

1. At 12:30am UTC yesterday May 19 everything was looking okay and BTC was trading at $42k and ETH was at $3.4k. Other than having a rough weekend due to Elon's tweetstorms and some incorrect China FUD recycled from 2017, all was generally OK in crypto markets.

2. At exactly 12:40am UTC whales moved a net of 500,095 ETH onto exchanges to sell. At the time this was $1.65B worth of ETH. This caused the ETH price to drop from $3391 to $3009 within 6 hours.

3. At exactly 6:30am UTC whales moved a net of 13,555 BTC onto exchanges to sell. At the time this was $535M worth of Bitcoin. This caused the BTC price to drop to $37976, which further led the ETH price to drop from $3009 to $2651 within 5 hours.

Continued...

4. People in Europe and the USA began waking up, saw the price declines, and got fearful. Once the price points of $38k BTC and $2.5k ETH broke, cascading liquidations starting piling up, forcing those with leverage to auto-sell at market prices, and bringing down the BTC price from $38k to $30k and ETH to $1.8k within 60 minutes at 12pm UTC.

5. These artificially low prices recovered very quickly back to $37k and $2.8k within an hour. However, other large whales, perhaps concerned by the reductions in market price began selling, causing another temporary pullback to $35k and $2.2k.

6. Once the cascading liquidations and whale selling was complete, whales bought back in, getting lower average prices than they had previously.

7. The BTC price is now $39k and the ETH price is now $2.6k -- now with a LOT less leverage than before, which will allow it to likely move more upward as the bull cycle continues.

Continued below...

Analysis: A lot of people lost a lot of money (some on paper, some in reality through futures liquidations) and many regular people got scared and sold their investments and now won't touch crypto for some time to come.

That said, we are still in the middle of an overall bull market structure that I expect to continue into the Fall of 2021. This was just a particularly nasty 45% drop that we are now recovering from. I expect to see new ATHs by July.

It's a sign of market illiquidity that just $2B in net sales can move the BTC market cap by $200B and the ETH market cap by $100B. This happens as exchanges tend to have low liquidity during crisis moments, making prices go a LOT lower than they should, and causing a lot more cascading liquidations than are necessary. ThorChain (RUNE) is working on this issue of cross-chain liquidity as are many others. I very much look forward to the day when $2B in sales barely moves the market.

Let me know if you have any thoughts, further analysis, or questions or know of teams working on solutions to this type of price manipulation.

Please note that I have no evidence of coordination between the ETH dumper and the BTC dumper, however I do hope someone looks into that. This may have been coordination and pre-meditated or it may have been simply been two separate major market actors acting 6 hours apart. I'm writing this to help lay some groundwork for others to look deeper.

Source: Glassnode
Comparison graphs of ETH: Net Transfer Volume to Exchanges and BTC: Net Transfer Volume to Exchanges, with price overlayed

Link to original charts for those with professional Glassnode accounts: https://bit.ly/33ZQV1z

Here is a SPECIAL EDITION of Coinstack covering the events of yesterday... https://docs.google.com/document/d/1dvsuTQvYfgsjy-VCoZh0oMft7ryg64ti9kEcqXj2AtA/edit#

Here's the online version of our special edition about what happened yesterday... https://coinstack.substack.com/p/whale-market-attack-post-mortem

From Willy Woo...

Yesterday’s Coinstack issue was mentioned on today’s The Breakdown podcast by NLW from minute 5:30 to 7:00 regarding the causes of the May 19 crypto crash👍

https://podcasts.apple.com/us/podcast/the-breakdown/id1438693620#episodeGuid=e64cd4ba-e137-4179-90de-8a895a8ca118

Have a listen 🎧🎧🎧

A good summary from the new Goldman Sachs report on Bitcoin and Ethereum.

https://www.zerohedge.com/markets/amazon-information-goldman-initiaties-crypto-sees-ethereum-overtaking-bitcoin

“Many investors now view bitcoin as a digital store of value, comparable to gold, housing, or fine wine. But all true stores of value in history have provided either income or utility, and bitcoin currently provides no income and only very modest utility.

However, unlike bitcoin, several other crypto assets have clear economic rationales behind their creation. Bitcoin’s first-mover advantage is also fragile; crypto remains a nascent field with shifting technology and consumer preferences, and networks that fail to adjust quickly could lose their leadership. We therefore see a high likelihood that bitcoin will eventually lose its crown as the dominant digital store of value to another cryptocurrency with greater practical use and technological agility. Ether looks like the most likely candidate today to overtake bitcoin.”

What do y’all think about Internet Computer (ICP) so far?

https://internetcomputer.org/

I’m seeing it more and more right now on Crypto Twitter. Backed by A16Z and Polychain. Seems like the platform for the decentralized social web..

Just picked up a small bag ($3k).

I've built a new model that gives buy and sell signals for Ethereum based on its fundamental value from its transaction revenues (which are soon to be its cash flows to holders once EIP 1559 goes live in July and PoS launches in December).

https://docs.google.com/spreadsheets/d/1-0o-KePU8Pny4iQRw4xJ1EprHBdqOjAz2YoF5yj0DzM/edit#gid=940302222

This model, operating since August of 2020 gave its 3rd ever buy signal today at ETH $2100.

The same model would have given a sell signal on May 8, 2021 at $3903. Take a look. I'll be building this model into a web page over the next week that you can follow with live data.

Long story short: ETH is exceptionally cheap right now and you will likely do very well to buy in if you can. It's fair value should be $3339 currently based on it's trailing 12 months of revenues.

This model goes together with the long-term DCF valuation which gives a long-term ETH value of $15,763.

https://docs.google.com/spreadsheets/d/1-0o-KePU8Pny4iQRw4xJ1EprHBdqOjAz2YoF5yj0DzM/edit#gid=0

How’s everyone holding up out there emotionally?

For the record, 90% of my personal Nexo portfolio got liquidated tonight. I had what I thought was a “safe” 40% loan-to-value ratio on May 11. I should have kept it at 20% but I didn’t. A very big lesson learned.

Money comes, money goes. But relationships, friendships, and knowledge compound.

Right now, I’m sitting under the 545am stars in Bali, next to a river, camping with my wife Morgan. Life is good.

I’m about to turn off my phone for 8-12 hours but I just wanted to check in on folks. Please support each other in the comments if needed.

Know three things:

1. We’re in this together.
2. I’ve never been more bullish about Ether than I am right now. Cash flows are the only thing that ultimately back stop the value of any asset. And Ethereum has incredible cash flows ($1B so far this month) that will soon all be going to ETH holders via EIP1559 and the PoS merge.
3. I’ve never been more bullish about DeFi and smart contracts than I am right now. Smart contracts are the future for ALL of finance.

Love to all of you. No matter what happens, we’re part of something big.

Stay safe and hodl, friends. We’re in this for the long haul.

This is what happens to your crypto portfolio when you use too much leverage. And by your crypto portfolio, I mean my crypto portfolio. 😬

I was 40% levered on Nexo on May 12. By May 23, it was 83%, the max level before they liquidate your holdings. A $1.7M portfolio turned into $300k in 7 days.

Big lesson learned! Full write up coming this week on learnings and my new game plan.