Crypto Market Update and Investing Report 12.14 : Bitcoin On Chain Metrics

On Chain Metrics | Major Crypto News | NEWBIESs lesson of the day: What is leverage?

Crypto Conquest

Published in

Coinmonks

7 min readDec 15, 2021

Overview

Crypto Market Insight: Bitcoin On-Chain Metrics
Crypto Market Update
Major News 12.14
NEWBIES’ lesson of the day: What is leverage?

Crypto Market Insight: On-Chain Metrics

Bitcoin and Ethereum exchange supply sit at a 3-year lows. This is indicative of traders taking BTC/ETH off the exchanges to hold long-term in cold wallets. The recent drawdown in price is having little influence on the strong supply downtrend. There are 2.3 million BTC and 17.19 million ETH left on exchanges. The low supplies are increasing the probabilities for supply shocks and we may see them transpire if a Bitcoin spot ETF is issued in the coming months.

The chart below is directly from the Glass Node weekly update. The chart covers perpetual open interest in Bitcoin. I added arrows to highlight where perpetual interest reaches peaks and troughs. Perpetuals are leveraged positions that begin climbing on price lows, reach peaks on the price highs and then get flushed out or closed. BTC price tends to have significant drops after perpetuals interest peaks. This chart is highlighting that recent price drop in bitcoin was greatly affected by high volumes of leveraged positions that have recently been flushed out. The market will be MORE spot driven since the drop.

The following chart is the Net Unrealized Profit/Loss (NUPL) and is utilized by CRYPTOBIRB, a notable Bitcoin trader. He uses this chart to spot market tops and sentiment in the market. Peaks in the past were marked with euphoria and this cycle has yet to mark strong euphoria.

The charts are showing evidence the current cycle is still strong despite our recent selloff. It’s recommended to follow the long-term trends in market indicators. Short term price changes are typical of any volatile market, but fundamentals tend to be more stable. Trust the fundamentals, price can be very deceptive. The selloffs are thus good points to increase positions cheaply. There is evidence that long-term holders tend to accumulate during these drops. Short-term holders tend to buy tops and sell at the first sign or market fear. It’s best to trade like a long-term holder. Utilize tools such as the Bitcoin Fear and Greed index below.

Crypto Market Update

Bitcoin (BTC) is flat for the day -.04%

Total Market Cap (TOTAL), largely influenced by BTC is also flat -.42%

Total Market Cap minus ETH/BTC (TOTAL3) is interestingly up 1.75% as funds re-entering crypto are going into altcoins. This could be a small indicator of buyer confidence.

Terra (LUNA) is up 7.93% as the altcoin price rebounds off the $57 support zone. The red hot, Defi focused, layer-one could be setting up for another run.

Dogecoin (DOGE) is up 14.50% after Elon Musk hints at Tesla accepting dogecoin as payment. DOGE got as high as +33% but traders are beginning to take profits.

Bitcoin Fear and Greed index 21 extreme fear
Google Trends 38
Max Pain (Dec 30 Options) 48k

How to use The Fear and Greed Index for investing

Major Crypto News 12.14

Hester Price, a commissioner for the US SEC is pushing back on the regulatory body’s agenda for not including clarification on digital assets. The narrative continues to thicken in relation to regulations as the SEC continues to remain in the dark when it comes to cryptocurrencies.
Nike takes a big step in terms of entering the digital space with the acquisitions of RTFKT. RTFKT brand specializes in the NFT market for metaverses. Nike recently filed a patent to protect its logo and phrase “just do it” in online worlds.
Umbrella Network (UMB) has launched a $15M oracle accelerator program. UMB is on my radar as one of the few Chainlink competitors. It’s beginning to make major moves in the space and with a market cap of $32M compared to Chainlink’s (LINK) $8.3B, there is plenty of room for growth.
Ukrainian Bank is launching a CBDC pilot with a local bank via Stellar (XLM).
FTX (FTT) has signed a partnership deal with the Golden State Warriors to launch NFTs in early 2022. This is small news that is highlighting the trend in the NFT market.
Bitcoin CME futures have slipped into “backwardation” as bearish sentiment grips the market. Backwardation begins to occur in futures when there is major sell pressure on the product and the product begins to sell lower than the spot price. Markets tend to not stay in backwardation for long periods of time.
TeraWulf (WULF) a green Bitcoin miner, falls 24% in its trading debut on its first day of trading on the stock market.
Dogecoin (DOGE) surges after Elon Musk said that Tesla would begin accepting dogecoin as payment.

NEWBIES’ Lesson of the day

What is leverage?

Leverage has been a prominent topic in the couple of weeks and if you’re new to the game you might be a little confused. “Shaking out leverage”, “leverage ratio is too high” and “leverage needs to capitulate before we can go up” is some of the recent phrases that you may have heard. So today we’ll explore the definition of leverage and tomorrow we’ll talk about its influence in the crypto markets. The five minutes it takes to understand leverage is worth your time.

Leverage is using debt to amplify an investment position.

If a person buys some bitcoin directly, you are not using leverage. That person holds the equivalent of 1:1 (position:price) ratio. For every 1 point in bitcoin price increase/decrease, the holder gains/losses one point. Pretty simple. A trader can hold this position indefinitely even if bitcoin goes to .01 or $1 million.

A leveraged trader will in a sense “borrow” capital to open a position with the potential to multiply returns OR to multiply loses.

An example. A trader has $100 and wants two stocks of company ABC valued at $100. A trader may “borrow” a $100 from the trading firm to purchase two stocks. This trader is then in the ratio of 2:1 (positions:price). For every dollar in price up/down, the trader gains/loses two dollars. The trader is taking on double the risk and double the reward.

The trading firm will have a $50 stop for this trade, so that the firm takes no losses on borrowed money.

A 2:1 leverage position is taking on double the risk. Now imagine taking on a 10:1 leveraged position! A $100 position would be stopped out at $90. That is exactly what many traders are doing in bitcoin every day. It’s risky and it has a strong effect on the market when these positions begin to get stopped out.

The crypto markets are very volatile (prices rises/price falls) and leverage positions pose a very large risk to the trader. Unless you are very experienced, it’s never recommended to take on this risk. The chances you get stopped out and loss all your capital is extremely high. Stick to hodling long-term and you will reap the benefits of high volatility in the markets.

Here is a video to help you better understand leverage.

WEEKLY COIN WATCHLIST

Bitcoin (BTC)
Near Protocol (NEAR)
SushiSwap (SUSHI)
Polygon (MATIC)

Tomorrow should be an interesting day with the FED announcement in the morning. Expect some volatility in the markets.

Stay patient. Fundamentals are on our side.

Thanks for reading fam!

-TraderGabi

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To reap the benefits of this newsletter it’s recommended to read it every day to stay in tune with crypto markets. It will put the reader in the 2% of market participates that are well informed. The reader will begin to see opportunities that are not apparent to most and will open up many more. The newsletter is composed of many hours of daily research in charts, on-chain metrics, news and developing narratives condensed to a 5-minute update. It’s my contribution to a crypto community that has contributed so much to me.

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