Bitcoin bears to 'dominate' Friday? And why alts are breaking out... | Market analysis

All right, welcome, everyone. This is cointelegraph. We are the leading source of news on blockchain and cryptocurrencies. We're going to be talking about what's going on in the markets today and during this week, and we'll take a look at what may come about tomorrow. So I'm your host, Jackson, and today I'm going to be joined by Marcel at the bottom there and Jordan over on the top right. These are two of our market analysts. I'm sure that you've seen Marcel before. He's been a staple face on the channel recently. And I'm happy to bring on Jordan for the first time on the show. So how's it going, guys?

I'm doing well.

Hi, Jackson. Thanks for having me. Hi, Jordan.

Hi, Marcel. It's good time. Good talking to you for the first time.

Yeah, yeah, yeah. It's great to have you guys here. So I'll just give a brief overview of the topics that we're going to discuss today. So. So first we're going to react to some of the markets news that happened this week. We've got two pieces of news we want to react to and just take a look at what those things mean and see how they're going to affect the markets. And then we're going to be moving into an analysis of Bitcoin. We'll talk about Ethereum after that. And we'll take a look at Matic, which has been an explosive coin. It's the coin of the Polygon Network, and we'll take a look at how that coin has been functioning. There's some big news surrounding that coin that happened this week. So we'll take a look at that. Then we'll dive into defi and have a look at some of the metrics of defi. Jordan will leave the charge there. And at the end, we'll have a few minutes to answer some of your questions from our analysts. So, guys, let's just get straight into it. So I'm going to go ahead and bring up the first piece of news that we're going to take a look at this week, and that is this. Biden tackles $40,000. Bitcoin tackles $40,000 as Biden unveils new 6 trillion federal spending budget. The money printer is going brrr in the United States, as usual. So some important things to note here is that Biden's new $6 trillion federal spending budget has been unveiled. That means he's going to be spending $6 trillion in 2022. That's a lot of money. So Marcel, when you first took a look at this news, what was your initial reaction to that?

Okay, so first we got a discern here the difference between a federal aid package and money in circulation increasing. Because it doesn't matter if The Fed prints $6 billion or $10 billion like they did over the past 12 months, if the money is just sitting on banks, if people are just buying stocks or gold or bitcoin with this money, it is not creating, it is not stimulating the economy effectively. It is inflating assets, it's creating inflations. You've seen housing prices soar, lumber price soar, used vehicle prices soar. So the Federal Reserve doesn't have that much power to effectively put more money in circulation. And if you monitor the they have a velocity of M2 money stock. I'll share my screen to show you guys and you're gonna see that despite the huge money increase available for the market, the velocity just plunged over the last year. So the money is not effectively circulating. So I don't think this should be a trigger for buying bitcoin per se, but it is an indicator that people will continue to hoard non inflatable assets such as S and P stocks, such as bitcoins, such as real estate. But I don't think it's a dielectric trick. We see how, okay, 6 billion inflows. So if 1% of this money flows to be. No, it doesn't work like that. Companies are going to hoard this money and individuals that get paid from this money as well, they're going to buy assets and they're going to sit over it. So I don't think it's going to accelerate the bitcoin adoption.

Yeah, so taking a look at this chart again, M2 money supply is the circulating supply. What exactly does velocity refer to there?

The velocity means how much of this money is effectively changing hands on banks, on financial transactions. So if the banks are not lending money, if the people are not consuming and companies are not investing, adding production and buying buildings and stocks, so the velocity goes down. There's more money issued, but there's the same money or even less money effectively changing hands and circulating in the economy. So the velocity goes down. So it just shows that Fed doesn't have that much power to effectively put money in circulation. If people think that recession is coming, nobody's going to hire people, nobody's going to expand their industry or their service. There will be no capital. Any money that goes in is going to be used to hoard to buy S and P stocks and to buy gold and to buy bitcoin and real estate, but it's not going to stimulate the economy.

And what kind of effect do you see this having on crypto?

Well, as soon as people perceive that inflation is not going to be transitory, as the Fed is saying, because we've seen the indicators, surprising expectations for 3, 4 months, as soon as inflation hits, I don't know what would be the level, like 4%, 8% per year. But at one time people said, well, but I'm still getting paid $40,000 per year. And now to buy a house, the average house in my area, instead of $400,000, I need to pay $800,000. It went up 100%. So effectively what they did was they got my income and reduced it by half. Because inflation, the official inflation for the government, can be kind of manipulated because it's heavily dependent on energy prices or food prices, and they can reduce taxes to kind of manipulate the inflation. But when I'm talking about buying real assets, people think, well, inflation is hurting me now I need to search for higher risk alternatives. Staying at bonds that pay 4% in a year or 2% a year, it's not going to make me wealthy because, in fact, I'm losing money. So people, when inflation hits a certain rate and holds for a certain number of months or years, people look for riskier assets, and then it will be good for bitcoin.

Got it, Got it. Yeah. And for everyone who's just tuning in, we're reacting right now to the Biden's unveiled federal spending budget for 2022, which is $6 trillion. So we just had Marcel's opinion on that. Jordan, do you have something you'd like to add there? What was your reaction to, to this piece of news?

That's a lot of money. Like, we keep printing all this money. I get what Marcel's saying, but eventually we're gonna run out of stuff for all the people to buy. Like the. In the past, past experiences, a lot of people have gone into hoarding mode. But the, the ability for the mainstream news to kind of push this message to get people out spending is really impressive to me, seeing how, how like they can just say something on and mainstream news channels and it gets repeated out through the whole, like, globe, and pretty soon that's the narrative that we're all following. So whatever they kind of get as a talking point on the mainstream channels, they push that and that's what people start piling on. Like even last, last Week's market turned down with it was the news was focused on Musk saying that, oh, he doesn't like bitcoin anymore. When that was not the main reason why the whole market fell, but because the mainstream news pushed that narrative so hard, everybody was kind of agreeing and the whole crypto sphere was turning on Musk and all this stuff. So I think if they push the message out there that no, things are going to be fine. I know they keep saying it's transitory, transitory, it won't work eventually, but I think for a while it will. And people are out there spending. They keep giving stimulus and unemployment stuff to different people. And people want to spend that money. They're not just holding it. And with the economy shut down, there's less goods out there that can be bought. So the prices are going to kind of keep ticking up, in my opinion, because of that. And I don't know, with them adding like cryptocurrencies to Venmo, PayPal, all these really simple ways for the average person to connect their bank with a service, transfer money over there and buy it, there's a potential that I think sooner rather than later, people might start going more into cryptos. And again, that also does depend on whether or not they push cryptocurrencies as part of the mainstream narrative, which they're kind of starting to do. They're talking a lot about more, so we'll see what happens over the next few years, the next few months to years, they kind of wish washy with how they. First they start talking bad about cryptocurrencies and they flip the script. I don't know. We'll see what happens.

Yeah, it does. Marcel, go on.

Yeah. Don't forget that almost every central bank is thinking about or studying issuing their own digital currency, even if it doesn't use blockchain. But one of the main functions that they can implement is, number one, they can put a negative interest rate. So if you hold 1000 crypto dollars in your account, it's going to be, instead of staking and gaining more, we're going to withdraw 1% from your holdings. They can also create money that specific design. Well, you cannot buy S and P shares, you cannot buy BTC with this money.

They.

This digital money can only be used to buy food or to improve your house or to whatever sectors they decide. So the cbdc, which is the central bank digital currency, will give them much more power to control such things.

Yeah, it does feel like we're at some kind of inflection point in history with this. So it will definitely be interesting to see what happens, how these CBDCs get implemented, where the technology brings us from here. So, yeah, I, I, I totally agree with those points, but I do want to move on to reacting to another piece of news here that our markets team broke down. Let me just bring that up on our screen. Yeah. Which is that the number of bitcoin wallets holding 100 to 1k bit BTC soars after Tesla's 1.5 billion buy in. So the main takeaway here is that the amount of bitcoin held by whales increased by around 14% after Tesla announced its foray into the cryptocurrency sector early February 2021. So I think this kind of ties in with the narrative of institutions getting involved in crypto. But Jordan, what was your take on this news? Are these numbers showing that there are now more whales in crypto because of the Tesla purchase or since the Tesla purchase? Do you think Tesla even affected it that much?

Well, one of the, the server companies that we kind of partner with or get some information from is called Jarvis Labs, and they have a well wall they follow and they called it Pablo. And this, well, wallet transfers bitcoin very regularly just before big, big market drops going, just, and it gets all in the conspiratorial realm of the Internet. But it seems like there was a clear and concerted coordinated flood campaign last week. It just happened to coincide with Elon Musk doing that thing. But again, like my editor here at Cointelegraph for like a month has been like, the market's gonna drop, Jordan. I'm like, okay, I believe you. And I get dropped. He's like, I told you. But the whole news is like, it's Elon Musk and all this stuff. So, like, like in the same way that the, the traditional finance realm has clear coordination with big parties, and players behind the scene can like, put in their bets. And before big moves happen, I think some people knew what was coming, whether or not it was just a big whale wallet, whale walls in coordination, kind of pushing the price down to cause a cascading effect. And then they throw this musk fight in to make it go down further. Yeah, a lot of these big whale wallets that control larger amounts of BTC willing to sacrifice 100 BTC to turn around and make 2 or 300. So it doesn't, it makes sense to me that the, well, wallets increase and it just shows that some of these newer participants are getting more active if they're newer smaller wallets compared to the thumb that are like 10,000 to 100,000 bitcoin.

What's your take on that, Marcel?

Well, Jackson, I'm not a huge fan of one chain analysis for checking how many wallets above 100 BTCs are accumulating or not. Because any trade off 300 BTC or thousand BTCs that take place, there needs to be a buyer and a seller of the same size. So if there's been a huge accumulation of 100,000 bitcoins below $35,000 as people are saying somebody sold and it couldn't be retail, it couldn't be small guys of 50,000 to $100,000 each for sure. So what I prefer to analyze in such cases, what happens after the crash, does it recover quickly to $40,000? Is market is scared enough that it's going to retest 32 and 31,000 multiple times. So I'm more worried about the market sentiment after the crash than what caused the crash. If it was a single whale, if the guy sold, bought, put options, derivatives, instruments to profit from, I don't know, maybe Elon Musk or something that China would be doing ahead. So I'm not a huge fan. And if you monitor also the thousand BTC plus wallets, they have been dramatically decreasing. Could be exchange or coinbase itself moving from a thousand BTC plus wallets to smaller wallets. I don't know. So it's really hard to guess reading from on chain data.

Yeah, that's, that's a fair point. But I, I, I think that's a good segue to kind of bring us into our next topic, which is bitcoin. So let's, let's, let's bring that up. We're going to be taking a look at, at the bitcoin market right now. What's going on in bitcoin. We'll be breaking down what's been happening so far and why tomorrow could be a very important day for bitcoin. So Marcel, I'd like to start this off with you because you're our resident bitcoin expert and there are a couple topics that you do love to talk about, namely options expiry and funding rates. I'll let you take your pick on which you want to start with, but I'd like you to give your breakdown as to why you think that tomorrow is a very important date for the market.

Okay, so I'll share my screen with a post that we did on Cointailer yesterday. One sec. So on Friday in the early hours at 8:00 clock UTC, we're going to have options and futures expiry. CME happens a while later at 3 o' clock UTC. But OkX, Derribit, Huobi, FTX, they all hold in the morning at 8 o' clock UTC, there's $2.1 billion worth of BTC options set to expire. And bears are dumb. As of course, as bitcoin recently plumed. Probably no one is expecting the price at $40,000 or or lower for this expiry. So bears have almost a $600 million advantage. What I mean is, in options different from futures, you have a call option which gives the buyer the right to acquire bitcoin, and you have the put option which gives the buyer the right to sell bitcoin and they don't need to be paired. Maybe at $35,000 you have much more call options than put options. So it's very different from futures where buyers and sellers are matched at all times. So what happens as the price plunges from 56,000 to $36,000, $40,000. Most of the buy options, the call options which you see are the green line here from BuyBT chart, they are stacked at $40,000 and above even $70,000. Now they are worthless. Nobody wants the right to acquire Bitcoin at $70,000 in 12 hours. Meanwhile, the put options, which gives the right, the buyer the right to sell at 45, 48, 50 are huge. So they have enormous advantage here. Some of them will roll over to next month, but some of them we will exercise and put selling pressure here on bitcoin. So as I said, it's going to happen at 8 o' clock tomorrow UTC and CME XPRII a while later at 3 o', clock, 3pm UTC. We also got to remember that CME has this kind of. I call it the CME ghost because people always say that 40 hours ahead of CME futures expiry, there's always a negative pressure on bitcoin and that's mostly because it really happened most of 2019. But if you check data from 2020 and most recent months, it just didn't happen. We were on a bull market and nothing stopped after, even if it dropped a little bit one or two days ahead on most of the periods, most of the months, the market just continued to rally. So the CME goes from 2018. I don't think it exists anymore. But people fear. Yeah, no, after the CME expiry, markets are going to recover. And you ask them why? Because Buyers and sellers and futures contracts are always matched. It's the same size. So I'm showing that on the options markets, sellers have a $600 million advantage. Can you show me that on the futures market, sellers or buyers have an advantage and their answer is no, they're matched at all times. So I think it's just a story from 2018 and doesn't happen anymore.

So what does this data mean for the spot price come tomorrow? Obviously, you were saying that there's a lot of selling pressure. I mean, should we be expecting some sort of large crash or do you think that the actual price effect will be a bit more, a bit less severe?

No, the bears have no, they want be paid more to pressure from 40,000 to $38,000. It's not worth the hassle. But they're surely going to try to suppress the price below 40,000, which is an important level of put options. So anything below 40,000 favors bears. And at least until 8 o' clock tomorrow, they'll try to keep this price below 40,000. So if you read it and if you think about it, maybe after the expiry, there's potential buying pressure because bears will wait the market to recover to 50 or $55,000 until they place bearish bets. Again, they're not going to buy puts or bearish bets. Place bearish bets after the market crashed 50%. No way.

Yeah. And going off that, we've got a question from the audience here. Who's asking, are we going to visit 30k or lower? And that's a, that's an interesting point to bring up because I believe there was an analyst. Let me find the article here. But I believe there was. Yeah, here we go. Let me share my screen. But there is an analyst who was saying that we could possibly see 15,000 as a target because the bitcoin price volatility hit a high in 2021 during this week. So, Marcel, I'd like to hear your opinion on this. Do you think that there's a chance we could dip below 30k?

Well, Jackson, in my opinion we shouldn't see any dips below 30,000 because I'll share my screen again, As I wrote on May 19, I gave three reasons why 30,000 would probably be the bottom. And first, you need to remember that on May 19th we had, I think, $8.6 billion liquidations. And for that to happen again, market needs to be overleveraged. The buyers need to be really excited so sellers can create a surprise crash and liquidate those orders. But after that $8.6 billion crash on Bitcoin. Here you can see the boat liquidations after that enormous crash on May 19. What happened is that the futures premium, which is how much the futures markets are trading above this regular spot exchange markets, which is the best indicator for bullish and bearishness, which was extremely high. It was trading the premium was or the futures was 25 to 30% and now it's reduced to 8%, which is slightly bearish. Neutral to bearish. So I don't think there's a chance in the short term for liquidations to cause a crash below 30,000. Again, that's my main point.

Awesome. Well, I hope that answers your question there. 20. Thank you for that. That was a great explanation. Marcel, I'd like to turn things over to Jordan now to get your opinion on on one of your articles that you wrote, I think two days ago, which you where you said, amid stablecoin inflow, cautious traders fear a dead cat bounce. I'll bring that article up just so you guys can see what I'm talking about here. And so, Jordan, I'd like to for you to talk a bit more about this dead cat bounce and why people are scared of it. I've seen there are a lot of there was a bit of talk on crypto Twitter about maybe bitcoin forming a golden pocket here. And so why do you think traders are so scared of this dead cat bounce potential?

Probably because especially for traders that were around in 2017, 2018, like going from 2020,000 bitcoin down to 10,000 real quick scared a lot of people. And this recent move kind of put the same fear in the lot. Like it happened really quick. But I think again, as Marcel was talking, I don't see a big cascade happening again in the future because there's always a buyer and a seller. And we're getting to the point where a lot of the people that have bought actual bitcoin are not going to be willing to sell it lower. So you're seeing a lot of stable coins come on to the where's the share screen. We've seen a lot of stable coins come under the exchanges, which means that people are putting their coins on the exchange in preparation to potentially buy. Like if you see right here as the price of yeah, I think this is bitcoin dropped and the amount of stable coins was going up. As soon as the price bottomed out and shot back up, the amount of stable coins dipped down. So people are putting the stable coins on the exchanges in Preparation to try and catch some of these moves. But again with the, the rapid move down and a lot of the newer traders in that aren't used to the volatility in crypto, I think that left some of them kind of frozen and not knowing what they wanted to do next. Well, some of the bigger traders that have been around, like I know one story of a guy buying a really wealthy person buying 750,000, 750 million worth of Bitcoin at 30,000. So the fact that people like that are putting in these floors in the market show that the bigger wheels that kind of have more of a deeper insight and a longer term perspective are more willing to jump back in. While it's newer traders that aren't used to the volatility are still kind of frozen. But I think that even if there's people trying or they try to push the market down, if they try to cascade it down to whatever that was, 19 or 15,000, there are other large players in the market that are gonna be in there buying it up. Like you can't, you can try and push it down. That doesn't mean that there's another family office or somebody else with 100 million to a billion dollars trying to buy at the price. So yeah, I think just the newer traders are kind of frozen, but they're the stable coins are on the market. And once this kind of shakes out, even my editor, we talk, he was always saying, oh, I'm gonna, I'm gonna wait till bitcoin gets above 45000 to confirm it. And I'm like, why not buy it at 35 000? I don't get like, if I'm risky, I'll buy the 35 even if it drops down to 20 or 25 000. If I think long term it's going up. Why would I wait for 45000 to get back in? That's $10,000 more. But I don't know, that's, that's. There's a trader and a Hodler mentality. I guess I'm more not so much a trader, but.

Yeah, fair enough. I like your point there about when you get to those low enough levels, the big boys come in and they start buying up everything. You know, you just imagine Michael Sailor down there with his mouth open, just gobbling up all those bitcoins that come, that come his way down at 30K.

Yeah. And I think like the history of the mostly you can look at gold in the CME and their ability to really control the price of gold through derivatives. And they're trying to do that with bigger cryptos, but they're not going to because the supply of bitcoin is out there. People have it. It's not locked in vaults by banks and stuff like gold is. So again, you can, they can cause cascading sell offs on, on individual derivative exchanges and stuff, but when you don't have in people actually out there willing to sell the actual bitcoins for that level the price, you might get a bifurcation in the price on like derivative exchanges versus actual bitcoin exchanges.

Yeah, you brought up a point here a couple of times and I want to bring up a relevant article to talk more about this. But you said that people are buying bitcoin to hold bitcoin and I want to know a bit more about that because, you know, I think a lot of people, especially when you get into these mania situations like we had back at, you know, 60K around there where people were just buying in, I mean, they might not know how to actually like hold their bitcoin, you know, in like a cold wallet or something like that. And you know, we just published this article today that the lack of knowledge is the main barrier to crypto adoption according to a new survey, the Economist Intelligent Unit here. So, I mean, do people, do people really get it that much, do you think?

No, we're still really early in this game. I still get people asking me if they can I buy a portion of a bitcoin. We got a lot of developers out there making some really cool UI and all this stuff. But part of it, like me, people need to come out and educate the populace about cryptocurrency. Again, they're probably not going to really take off until the mainstream news really picks that up and pushes it because that's where most eyes are. And like, trying to get people to come in and see cryptocurrency related news is, is a challenge in itself. So yeah, we're, it's still really early. We're all still beta testers, which is why we'll get paid, paid more for like pushing this forward because all of us still use some apps. I'm like, man, this is not easy to use. I don't see how anybody of the normal persuasion is going to be able to use this thing. So yeah, we're still early adoption and education is really still low and we still got a long way to go.

Agreed, I agree. And you know, it's always great to hear that we're still early because that means that there's a lot of money still to be made. So, Marcel, I want to come back to you because there was something else that I think you wanted to touch on specifically in regards grayscale.

But first I want to. I agree completely with what Jordan said. And we need to remind people that only 15% of the outstanding bitcoin lies on exchanges. So when people sell or dump and there's a market crash, like 85% of the holders, they don't care. If you check the hold waves, I'll show you the indicator. Like 70% of the holders didn't even move their coins for six months and longer times. So holders are not affected by price crashes. So people who's newbies in the markets, they think that everybody holds coins on exchange and if the market drops, everybody's going to sell. But that's not reality. If you check your hold waves, you're going to see that 20% of the coins have been moved for the past months and 34% moved over the last six months. The remaining 65% haven't been touched for six months or longer and they've been through a 50% crash and they did not sell. So what do you think is going to happen if market goes up 200 or 300%? They're not going to touch it. They're not traders, they're holders.

They've got those diamond hands and anybody.

Of that size knows that trying to even operate on a blockchain, times like that is foolish. Waiting like a day for your bitcoin transaction to go through.

Exactly. Binance goes down, coinbase goes down, everything just capitulates and then you're stuck there trying to figure out what to do. Yeah, for Marcel, let's talk about that grayscale thing now. What did you have to share there?

Okay, let me open here. So grayscale used to be the only instrument available on equity markets like resembling an ETF that investors had to join btc. But if you're a fund manager, if you have a 401k fund, you could not buy bitcoin directly on Coinbase or whatever. So you had to use some exchange traded fund or exchange traded trust in the case of grayscale. And grayscale became so big that they started in 2013, I think they reached $50 billion in Bitcoin, which is astonishing. For example, Gold ETF holds $200 billion. So a single crypto provider, trust fund provider reached $50 billion. So it was huge. And it used to trade with a large premium versus the BTC inside the fund. Why? Why that? Because retail could not buy directly from Grayscale. They had to wait some institutional clients to buy the Grayscale trust. This guy had to wait six months and then dump it on the market. So you had a lot of retail traders wanting to buy 401k, wanting to buy mutual funds, institutionals wanting to buy that could not go directly to Coinbase. So they paid a premium up to 50%, 40% and 30%. But after Canada launched its own ETF, for example, and it reached a billion dollars, so it coincided as well with the markets starting to. With BTC markets starting to level at $50,000 to $60,000, started ranging. So a lot of these grayscale investors say, well, I want to reduce my position, but you cannot go to Grayscale and say, well, give me my bitcoins back. I want out. I want to convert my GBTC shares in the equivalent BTC position. No, you cannot do that. That's not an etf. It's a trust fund. So you have to dump it on the secondary market, trading your regular broker, Fidelity or whatever. So what happens is that that premium that used to be 30% went negative 10%, 20%, 25%. So the holders became bag holders because they had their hands tied, they couldn't do anything. Either they took the 20% loss or they waited for the Grayscale to convert it to an ETF in the future, but there's no date set for it. So those holders are struggling. And there's still like $25 billion worth of GBTC left. Someday maybe this is going to be converted to an etf and if the holder wants to get out, he can withdraw his real BTC from it. But right now, no. So they're bag holders.

Gotcha. Gotcha.

Did you have something, Jordan?

I can see something.

Being a bag holder is how a lot of us get interested or really learn more about cryptocurrencies. A lot of people get in, the market's a flurry, then we get a bag holder, then it crashes in, like for the next year, like, well, I might as well investigate this cryptocurrency thing. And now here we all are.

Yeah. Marcel, you mentioned a couple times there passingly, the idea of an etf. And I know that we talked, I think, with Scott melker and Mike McGlone a few weeks ago about their thoughts on when we could potentially see a bitcoin ETF in the US do you think that is still on the cards for this year?

I don't Think it's on the cards for this year. The new SEC president, Gensler has been vocal. I don't know, he's been saying out loud that he wants to regulate exchanges. So I think before we have regulations for exchanges and the relief markets, we don't gonna see the ETF approved in the US but we have the ETF in Brazil approved trading over a billion reais. We had the ETF approved and trading in Canada. So that puts pressure for the United States SEC to approve it. But I don't think it's going to happen this year. So if you see my share screen, you can see the GBTC premium which peaked at 40% late 2020 and then plunged all the way to -20%. So most of these investors were not aware that such thing could happen and they were now at a loss. And I don't know, they're probably pissed because they can't get out. If they get out, they just write down a 30% loss because they bought it with a 10, 20% premium, now it's trading 10% below. So it's horrible for them.

Yeah, that sounds pretty brutal, I'll be honest. But you know, maybe if they hold it long enough, it'll end up in their favor. Got to have those diamond hands, you know. But you mentioned crypto regulation a few times and we have a question from the audience here who's asking, what are the major reasons many countries are trying to heavily regulate crypto? If the fundamental characteristic is that it is secure. Maybe you guys want to take a stab at that one.

Well, like to me, the, the power structure of any country or government is its currency. That's where the, the value of a country is maintained. So cryptocurrencies are borderless. You got people working, earning money in America or China or wherever, and then taking that value and putting it outside of the currency of the country that directly challenges any government or any country and they, they don't like that. Nobody ever wants to give up power willingly, so they're in it. Like true crypto fans need to accept the fact that if we want crypto to be widely adopted, it's going to be regulated and taxed. I know we, the, the cyberpunk's like, no, there's only so many cypherpunks in the world. The majority of the population is like mainstream, will do what the government tells them to do and follow the laws. And that's probably what's kept a lot of them out because the government's been saying that it's illegal so when the government says it's illegal and if as long as you pay us your taxes, we'll let you use it, a lot of people will follow that. And so that's kind of like even part on the adoption part for us crypto people. The regulation is what's going to help bring more people into the fold, unfortunately. So that's why they are pushing the regulation so much, in my opinion.

Marcel, I'm sure you have some thoughts on this.

Yeah, I agree, Jordan. Crypto regulation is needed for those institutional guys to come in and to buy and hold and to trade and even for the exchanges. Well, can I provide this trading? Not what kind of do I have to wait for two years until the SEC decides if the altcoin is a security or not? How can I check? So there needs to be a sandbox, a rule that, okay, you can list, you can trade it for one year, but you have to ask for the SEC to decide whether it's a security or not. And after one year, it's our deadline to tell you guys if you have to delist it or not. Because check out the situation on XRP, for example. XRP, the company, Ripple Co. Is being sued. The CEO and the founders are being sued. And they're effectively saying, okay, if you guys want us to kill the XRP token as it is and create a new token that's not issued by Ripple Labs, we can do it. Just tell us what we need to do in order to adjust. If it's paying a fine, we pay a fine. But tell us what to do. Because what happens right now is that both of exchange and ICO issuers are completely lost. So if you try to understand it from an institutional investor perspective, he's going to say, well, why? I'm going to get inside this mess that's such a gray area. Okay, I love Bitcoin. I see the fundamentals. I like the Defi industry, I like Ethereum fundamentals. But I don't want to buy a position. And in six months time they tell me that I cannot buy directly those shares. I need to trade an ETF or there's a limit of exposure in my fund. So until there's a clear regulation, out, even if it's a tough regulation, but at least there's something out that people can decide, well, do I want to join this market or do I not? But if it's potentially shifting so people are scared and they do not enter.

I think that's a pretty good breakdown. I hope that answers your question. Pranathi But I think we spent most of our time here on Bitcoin. So I want to move on to the next topic. We can briefly touch on Ethereum, which is exactly what I want to talk about next. So I think a lot of people have been viewing Ethereum this year with a large amount of interest, particularly due to the developments in Defi that blew up over last summer and have continued on to this year. And I think a lot of people feel that ETH has an incredible amount of upside potential, especially when compared with Bitcoin and looking at the year to date kind of percentage increases there. So, Jordan, I'd like to start with you given that I just gave a kind of background fitting into the more longer term perspective. I know you have some thoughts about eth 2.0 and what that could mean in terms of, in terms of ETH price over the next year or even longer. So Jordan, yeah, take it away please.

With ETH 2.0 is. I don't know if the reader followers aren't familiar, just switching over from proof of work to proof of stake, which I heard somebody once explain is like trying to change the tire on a car while it's moving on the freeway. But that's pretty good.

That's pretty good.

Yeah. But what is effectively doing, I think. Let me see, Which one was it?

Yeah, get that screen up there. And guys, thank you all for tuning in and watching this. Really appreciate it. If you haven't done so already, please go ahead and you know, hit that subscribe button. Support the channel. We love you guys. Thank you very much. Jordan, what's next?

Currently there's almost 4.9 million. I'm getting closer to 5 million. Each stake on the, on the E2 network and those tokens are locked up for a long period of time when you got D5 going on too. With a lot of the D5 platforms, the base currency or if they have liquidity pairs is ETH part of it. So a lot of these things are kind of adding towards making the supply of ETH decrease over time. And while it's, it's gone on quite a bit, quite a move earlier this year and it's, it's kind of due for a pullback and consolidation. I think long term, these different mechanisms locking up ETH will put more of a floor under the price and, and cause supply to decrease, which will increase the price on demand. So that's one possibility. But again, like I was saying, it's like trying to change a car on a tire on the car. It's Opened the door for a lot of these competing networks that offer, that are already proof of stakeholders and offer lower fees like these fees. The gas fee got up to 500 during the, the sell off last week. Like I don't care if, if I was trying to get out of the market really that would have been really tough to deal with paying like a thousand dollars just to make a trade on Uniswap or something like that. So while it does and it's the, the current chosen one, all the different funds, Raul Paul and all these guys are talking about you saying they're getting into it. I think that there's a lot of opportunity for other people to, to look at some of these rising chains even like Cosmos, Solana that like Solana's getting a lot like Eth was in 2017, 2018 with lots of air drops, all this stuff going on. A lot of people don't like that. It's a little bit scammy to some degree but it shows that they're trying to push activity on the network. So long term I think eth, it's currently the chosen network but the slow rollout of the development that's been. Ever since I got in. People have been hampering on the development of ethics and people take it as a foregone conclusion that it will be the, it'll be easily the choice in long term choice. But as, as things roll out here and more and more money comes in, a lot of the new funds and stuff coming in are being recommended to not get into Bitcoin east because that's not where the best returns are going to be. A lot of them like trying to get into Cardano and stuff like that. So we'll see how it goes. ETH is gonna, I think it'll appreciate over time and it's again it's, it's the current base layer for the next Internet as it is right now. But I, I like some other projects myself and I, but I hold ETH because I'm, I'm intelligent, you know.

That's an interesting take on it. And you know not everyone has 32 ETH lying around to supply lock for E 2.0. So there's definitely a certain crowd there.

And you gotta lock it up for longer periods of time too. You can't like the market's gonna peak out and maybe consolidate again and people are going to have their youth locked up so they're not going to be able to do that trade. But again if you're going with a HODL angle that's fine.

Exactly. I mean you gotta, you're investing in Vitalik essentially. Will he do it? But looking at a more shorter term time frame. Marcel, I'm sure that you have some stuff to talk about, funding rates and expiry dates, really regarding these.

Yeah, I just want to highlight one data which is the Dex exchange volume and the number one volume on Dex Decentralized exchange right now is pancake swap. It's trading more volume than Uniswap, as Jordan said, mostly because of the Ethereum fees. But you also got a pancake swap.

Is on Binance Smart chain, by the way.

Binance Smart chain, yeah. So what Jordan also said, which people need to understand that most of these Solanas and Second Layer solutions that are coming are aiming for interoperability. So one inch exchange, for example, now accepts multiple blockchains, not only Ethereum, and that's going to be shorting for the upcoming months. So I doubt that Ethereum will be able to hold the 80% market share on DeFi that it currently has has. So I think that competing blockchains with interoperability and second layer solutions until Eth 2.0 is in place, which is going to take, I don't know, one year, two years, they're going to start, they're going to grow and bite a little bit of this pie. So as for the derivative indicators, let's go to the basis futures 1 SEC exchanges. Okay, I'll share my screen. Yep. So Bitcoin, where is this okx? Okay, so we got to remember that about a month ago, Ethereum was trading at $2.1000 roughly on mid April. Okay, so if we check investors optimism, optimist level, bullish, this level on futures markets, we're gonna see that it was through the roof. About a month ago, Ethereum was trading at $2.1000. So a month has been passed. Okay, it went all the way to $4200 and it came back and now investors are bearish at its exact same price level, which is this ETH futures premium that we're seeing here. So anything above 20% is overly optimist. Anything at 8% or lower, it's bearish. So at the same price, with a space of one month, investors went from overly bullish to neutral to bearish. So crypto markets tend to exaggerate both ways. So I don't think we should take the, the picture that we're seeing right now. As a fact, because longs got liquidated, they're hurt. Some of them are waiting for Lower prices to come back. Some of them, as Jordan said, well, I'm going to wait for it to reach $3,000 until I buy because I want a confirmation. But we've seen with Bitcoin, it went all the way after the crash, it went to $42,000 and came back to $35,000. So not necessarily a price move. Easy confirmation. And if you check any sentiment data like the fear and greed or the futures premium, you're going to see that investors are bearish. Of course they're bearish. They just got liquidated on $15 billion in a week. Who wouldn't be bearish? But it doesn't really reflect the market sentiment. People should zoom out and see, well, we started the year at what price? Ethereum started the year at $700. We're currently at $2,700. How can you be bearish, man? You're just not thinking straight.

Yeah, I mean, I think a lot of people get caught up in the short term market moves, especially if you just got into crypto a month ago because Elon Musk was shilling Dogecoin on Twitter. It happens. Yeah, but that's why it's so important to be looking at the market data, especially when we have Marcel here, who's an absolute expert at this, to show us the way. So I think if neither of you have any more to add on eth, we can move on because we're still a bit crunched for time here and I want to. Our next topic I want to bring up here is Let me get everything sorted. That's not it, but we're going to talk about Matic. Going to talk about Matic, which is the native token of Polygon. Polygon was mentioned a couple times already during this stream and there is some big news that came out earlier this week which was that Mark Cuban is officially backed Polygon. And Polygon, I believe is a layer 2 solution for Ethereum to help with scaling. And yes, so we see here that Mark Cuban company's website seemingly affirmed his investment in the project. A lot of people probably take that as very bullish for Polygon. So Jordan, our resident defi expert here, what is your opinion on this investment seeming investment move by Mark Cuban?

I think it's a good move on his part. And just so it seems like there's a definite even between Mark Cuban and Elon Musk, some kind of coordination, like they're working together to try and help bring crypto up. But the fact that he mentioned it is put it on a lot of people's maps. Like a lot of people weren't unfamiliar with Polygon Matic before. Like even the fact that it's turned Polygon. Most people that are being crypto for a while know it as Matic because it was started as Matic originally and they pivoted to Polygon as a play to try and become the interoperability layer for Ethereum kind of because Polka Dot was actually still in a lot of that thunder and really promoting itself as the interoperability blockchain. So Polygon switched to that and is I really like Matic actually it's one of my like after I like I, I had a little bit of a gochi and then when they switched over to the Mac network and I got over there I'm like oh my God, I can actually transact on a blockchain for cents and not like hundreds of dollars. And the fact that Ave, the largest D5 lending platform now has, has kind of joined over ported over to Matic which it which helped boost it above both Compound and Maker, which were previously the highest ones. It bodes well. You got one inch and a lot of other exchanges or decentralized exchange aggregators, NFT projects which are going to be big in the future. I know there's some projects out there like Engine that have their own NFT angle but Polygon doesn't just make it Easy to transact NFTs, it makes it easy and low cost to transact anything on the Ethereum network. So all the die hard Ethereum people especially that don't want to cross over to another chain, especially not the Binance chain which a lot of people don't like CZ and Binance, they're going to be much more likely to want to scale up to layer two on Ethereum because it stays on the Ethereum network, it'll allow Ethereum to to go through its process and they can potentially port back to the Ethereum staking contract in the future. So yeah, with people really flooding into crypto now and he's not ready for the prime time. The fact that Mark Cuban put Polygon on the map for most people was done on purpose in my opinion.

And it's interesting that they've taken a long term investment standpoint on this because it seems to me, at least, and please correct me if I'm wrong, that if eth 2.0 does come around and introduces staking, the proof of stake change to the network, that that would increase scalability an incredible amount for the whole Ethereum network and would that not make Polygon sort of irrelevant in terms of. Because one of the main things that Polygon offers is scalability on the Ethereum network.

That's always a pop potential but eth isn't ready right now. We don't like to change. Humans are really hard to change if you get a bunch, especially noobs like it. No, most new people, a lot of new people know dogecoin more than they know Bitcoin because of Elon Musk and these guys. And they're probably, they're like I'm gonna always like dogecoin more the people that get on Polygon and use it. Especially if you're a liquidity provider and you got it locked in the, in the network, you're not going to want to go through the hassle of changing that over. It's even right now with the low fees environment versus the high fee on in Ethereum a lot of people haven't moved the liquidity over just because they're like that's a hassle. So I think it's, that's a possibility. But I don't see everybody pulling back from any other network they go to back into Ethereum just because Ethereum finally launches a 2.0 when it took. They've been talking about that for the last three years, man. And yeah, there's a lot of other networks out there and like Marcel was talking about the interoperability is a really big, the big word for this coming this during this bull run in the next one and lots of other chains out there are making cross chain bridges to Ethereum and I don't see people just willy nilly going back to Ethereum because of that. So Polygon has got its stuff established now and all these program projects are going to be launched on there. They're not going to want to port back to Ethereum in the future in my opinion.

Yeah, you got to remember that when Ethereum 2.0 is launched, every decentralized application needs to update the code to join the additional layers. It's not something automatic, instant and without risk. Maybe some of these dapps are going to say well I can change to another interoperability blockchain. I don't want to run the risk. We already have a $10 billion TVL why I'm going to risk this money. So yeah, I agree Jordan. People don't like change. So if there's an alternative solution that's working, stick with that.

Fair enough, fair enough. And Marcel, I think that you have something to add to this Polygon Matic conversation here. Let me just bring up an article that you wrote a couple days ago, which is that negative funding rates incentivize traders to long Matic and aave. Could you just explain a bit more in detail what you're talking about there?

Sure. So on mid May, as the out the total market capitalization of crypto surpassed $2.4 billion, a lot of excitement came to the market, especially on altcoins, because we know people love to take further risks. And somebody maybe just saw a tweet from Mark Cuban, he was not aware about crypto and he said, well, if Mark Cuban is shilling this coin, I'm going to buy it. So what happens that the funding rate for AAVEN and for Polygon, for example, they soared to 0.4% for eight hours. So we're talking about the perpetual contracts that they don't have a set settlement date. So every eight hours there's an adjustment. And if buyers are using more leverage than sellers, then buyers pay the fee. 0.4 fee per eight hours is equivalent to, I don't know, 80% per 8% per week, which is heavy for buyers. And for a long time, for most of March, for example, until mid April, the buyers were paying a hefty fee. And on May it went to a flat fee. Slightly. Slightly. Buyers were still slightly paying a fee, but nothing exaggerated. And on the May 19 crash, what happened is that sellers, we're the ones starting paying the fees, the funding rate. So if you buy a Matic future contract, you get paid 2%, 4%, 6% per week just to hold future contracts. That's not a very usual situation, but it happened as the market tanked. And this helps to create a certain bottom for the, for the crypto. And this happened both on Matic, on Polygon and aav, you can see that both the funding rates went heavily negative, which favors buyers because you get paid the funding rates just to hold the futures contracts.

Now was this a unique situation to these two coins or was this happening across a number of other altcoins as well?

Those were the most impacted where if you held a long contract, you got paid like 6%, 10% per week. It happened on a couple of other names, but not on such magnitude.

Got it, got it, got it. Before we move on to our final topic of the day, is there anything else you guys would like to add about Polygon or Matic?

It's also a really attractive buy just because it has native staking. So especially people that were able to get in a long time ago. Man, you're getting good, good, good return right now with Matic. But as I mentioned, it is Defy is one of the biggest chosen right now in crypto and Matic and Polygon after, like especially after Mark Cuban and stuff launched, it has popped up here as a second ranked D5 platform in terms of total value locked on the platform. So people lock Ethereum, Bitcoin, stable coins and the, the native tokens of the different platforms on the protocol to earn interest. I think because Matic is a pure proof, it's a proof of stick and they have different D5 protocols including quick swap on them. Matic is now the second ranked D5 protocol in terms of total value lock behind Ave, which is on top of Matic as well. So yeah, it's a really good buy. I think in my opinion it's probably going to be the chosen layer two solution for the crypto industry.

You heard it here first, guys. Heard it here first. Yeah. So I think that about wraps up our topic for Matic. Let's move on to the next one, which is we're going to be diving a bit into Defi as our final topic for today and this conversation I hope is going to be led by Jordan. So one of the first thing that I wanted to touch on here is an article that you, that you wrote. Let me get it pulled up here, let me share my screen. Right. Which is that Defi and stablecoins held up as the crypto market imploded. And I think you wrote another article as well that was also saying that while Bitcoin and Ethereum are kind of stalled out in this range right now, altcoins are soaring. So would you mind explaining a bit further why these altcoins are experiencing such a surge while Bitcoin and Ethereum are stalled out?

Well, similar to what was seen back in 2017, 2018, Bitcoin really peaked out and then started correcting and it was actually a couple like a month later that the altcoins took off. So it's almost like people rotate out of bitcoin and now Ethereum is kind of getting up to a level of a bitcoin, like top of the charts. It's like a blue chip crypto. So it kind of moves on its own and people, Ethereum, Bitcoin go up, people are excited, they rotate out of those into the altcoins which is might be what we're seeing now as Bitcoin and Ethereum have kind of fallen back, pulled back in. Price traders don't want to just sit around and wait for bitcoin Ethereum to make a move. So they're kind of starting to play around with the popular altcoins including Polygon A some of the other top coins and Z5 again got it really got the year started going like with a hot on a hot hot route and as you can see the total value locked. Oh I'm not sharing my screen.

Yeah, let's get that up there. Here we go.

As you can see the total value locked has been increasing steadily throughout the year and even with this correction this has a lot more to do with the price of individual tokens. Like as Marcel showed in that the whole hodler map people 85% of the token bitcoin didn't move so people are leaving their tokens on the exchanges. The the change in in total value lock has to do with the drop in price. As you can see here total defi users over time is kind of still going parabolic and going continuing to go up. Which means as new people come into the cryptocurrency ecosystem they learn about defined stuff and and they start integrating into these different communities and it's hard to get a clear handle on statistics in defy like even here on DAPS radar they'll give you different statistics and they say makerdao has more than AAVE and I don't even know if they can they don't they include Polygon so it's it they're really. I would really appreciate if if one side got together and offered really good statistics on D5 but as you can see this is the deck's daily volume especially on the 9th, the 19th during the sell off the volume shot way high. So activity on the different decks Dexes decentralized exchange and and defi lending platforms is continues to be at high all time high levels. The price drop is mainly what has pulled back and stable coins they were able to maintain their pegs for the most part. The only one that had a problem was Luna's Luna Terra Terra Luna's new UST stable coin I think it dropped down or at one point it got to a buck oh five. The the exchange rate between it and USDT was like A$5 but other than that people were were really were able to transfer out of altcoins into stable coins during the recent sell off which shows increased like an increased stability and strength for the whole market. Even Raul Paul had there's a really good tweet I don't have it pulled up where he was discussing that and he was Saying like one of the biggest asset, newest asset class just had like a 40 drawdown and all this stuff and nothing happened. There wasn't a government, government bailout that was needed. No, no cascading liquidations that required like massive bailouts, any of this stuff. So the market is holding up and doing what it's supposed to do without any kind of overarching government control and stable coins. And the D5 ecosystem really played a major part in the ability for it to do that. And I think Defy is the future app that will bring more people into crypto. A lot of people that don't know crypto, as soon as I've introduced them into Defi, they're like, what am I doing? Why don't they talk about this, you know, on the news, you hear it's just used by criminals and facilitates illegal stuff. Then you realize like, Defi is financial, the Traditional Finance 2.0 and you can actually earn a yield for your money. So yeah, that's the, that's the tweet from Raoul Paul. So yeah, Defy, it's, it's, it's one of the new foundations for the crypto market. And it's, it's still going strong.

Anything you'd like to add there, Marcel?

Well, I'm not a huge fan of Defi, mostly because when people say yield, okay, I bought Ethereum at $2,400, I stake it, I gained 6%. One year later it's trading at $2.1K. So where's the yield that we're talking about? And besides my point of view, if you're looking for gains in US dollar, if you're looking for a fixed income, you can buy Bitcoin, sell futures contracts with a premium, you can buy Bitcoin and buy protective put options or do covered call trades which yield you predictive gains in US dollars. A fixed term, there's no risk, it doesn't depend on price fluctuations. So I think it's really important for derivatives exchange to move out from SECS to decentralized. Like Deribit holds like 80% of the options trades. I love to see some Defi, even if it's on Ethereum, network or whatever, blockchain accepting trades for derivatives. It's going to be huge for the market, not only for Ethereum, So people need to understand that interoperability is underway and other networks will offer other benefits like lower fees or other products that Ethereum can't really handle. But I think it's good for the entire crypto market.

Got it yeah. Any final points you'd like to add there Jordan?

Yeah, just on the defi and earning a yield careful which platforms you use. Some offer the ability to earn in the token you stake while there's like pancakeswap It'll offer you 462% but you get cake tokens and so you're, you're, you're betting on the future of that token when you're sticking with these sons. So always keep that in mind. The higher the apr the more likely you're going to get a token that might not be so worth as much like whereas on like compound or maker you can get a 4 to 10% yield most of most under 20 but you'll get that token that you're staking so just keep an eye on that.

Yeah go explore Defi guys. It's a wild world out there and it's worth a look if anything. So that just about wraps up all of the top topics we wanted to cover. We'll just take a few minutes to answer some of the audience questions that they've had over the course of the show here. First one pretty easy one for you Jordan. Keith Rooney is wondering what is the app software using there to look at the total value locked in Defi.

That's Dune Analytics. D U N E A and A L Y T I C X you can there they have a whole list of tags. Dex Metrics is the one that I that I use the most.

Got it. Yeah. Yeah. Guys, if you have a question for Marcel or Jordan or even for me I guess feel free to write in the chat. We'll see if we can answer it just in the final few minutes before we wrap things up. I don't know if any of you, if either of you are too familiar with the rsi but someone's wondering if Ethereum is gonna is is going down after we see with with the current rsi. I mean I. We took a look at the Fear and Greed index earlier which was at like 27. I think those generally coincide a bit. Either of you want to comment on that?

I would say that as long as fundamentals are in place, the number of addresses active on the network, the TVL on DeFi, as long as the fundamentals are there, there's no reason to believe that a second wave of large liquidation is going to take place because as I explained futures were trading at a 40% premium which was exaggerated. Now we're trading at 80% which is neutral to bearish. So I don't think there will Be a sure we can revisit 2.3 or 2.4 thousand dollars easily, but I don't think we're going to see a huge dip on Ethereum considering the fundamentals.

Got it, got it, got it. And we'll take one more question. It looks like here from Sean Yang, maybe Jordan, you have some thoughts on this? What will happen to miners after Eth 2.0?

Well, some of them will stay on. There's different ways to earn with staking, but I think that's why we're seeing the pop in Ethereum Classic. I think a lot of Ethereum miners might migrate over and start mining Ethereum Classic. It's. It's supported even by Barry Silbert over at Coinbase, which means it's not going to go away overnight. It's the legacy chain for Ethereum, actually. So I think that that has some like a long term. It's just like a collector's item for some people and the miners will mind then. So, yeah, I think Ethereum Classic will kind of pull a lot of that and they might.

Isn't Ethereum Classic generally considered to be a scam or am I wrong about that?

No, you watch too much in mainstream news. It's a crypto platform. That's not. It doesn't get a lot of attention and it has suffered a lot of 51 attacks. But again, when miners no longer have Ethereum to mine, I think Ethereum Classic will kind of take its place. And a lot of, you know, if it's not the main chain, it's a scam. In crypto, like everything that's not Bitcoin's a scam. Even Micro Sailor was going off on that little rant.

Oh, that's an interesting take. I haven't heard that one before, honestly. All right, well, I think that just about wraps everything up. I just want to say thank you to the audience for watching us. Thanks for your questions. Thanks for being here. I hope you enjoyed this wonderful oasis of information we have before us. Marcel Jordan, if you have any final words, you feel more than welcome to share them now.

Sorry, go ahead, Jordan.

I was just saying Hodl. Don't get shaken out.

Two messages. First, don't use leverage. That's for pros. That's for hedging. Don't go 5x10x. Don't use it. If you not a professional traders. Second, remember, whoever bought Ethereum or Bitcoin a year ago, it doesn't make any difference if the guy paid $9,000 or $13,000. Right? You are buying because you see that inflation is accelerating in United States. The valuations of housing and stocks are getting responsible. And Bitcoin is a scarce asset. Ethereum is aiming to become a scarce asset. So it doesn't matter if the guy paid $9,000 or $13,000, as long as you have the fundamentals right and governments continue to print money forever. It's going up. So don't worry. Doesn't make a difference if you paid $2.1k on Ethereum, $2.5k either going to be really right in two years time or really wrong. So it doesn't matter about the $400 difference.

Take notes, guys. Take notes. And with that, I think we can wrap things up. Thank you everyone. If you haven't done so already, hit the like button. Subscribe to our channel. We'll be back on probably next week or something like that. Have a good.