Your NEW Crypto Update: ETH Triple Halving, BTC, Altcoin of the Week
Welcome to a brand-new remixed IanCast! Don’t worry. Paul and special guests will still jump in from time to time.
You’ll still get my take on the stock market, but I’m going to focus more on cryptos since it’s one of the biggest opportunities I see for you.
We’ll call it our new Crypto Corner.
I’m sharing my screen, so you can see exactly what I watch in the cryptoverse. I’ve got:
- The bottom for growth, short squeezes, interest rate hikes and a pot stock update. (Click to 0:30)
- The scoop on the Ethereum (ETH) merger, staking, new ETH scarcity and its triple halving. (Click to 6:05)
- More blockchains meet DeFi (decentralized finance) = bullish for bitcoin. (Click to 14:08)
- Your altcoin of the week! (Click to 18:25)
Hey everyone, welcome to this week’s IanCast. As you can see, it’s just me. If you saw our episode last week, Paul and I were talking about our new format for the IanCast where it will just be me. Of course I will still have Paul and other members from our team on from time to time to talk about the markets.
The information, for the most part, will stay the same. One slight change is that I will be focusing mostly on crypto, but I still want to give an overview of what I’m seeing in the stock market from week to week.
Interest Rates Hiking and Pot Stock Updates
This week and last week there’s been a surge in growth stocks. To me, that’s been very bullish. It was interesting to see that big money was flowing into ARKK, which is the main growth stock fund we track, the ARK Innovation ETF. I think it was $1.8 billion in a six-week period.
That’s despite prices falling. I think it was from early February through mid-March. Behind the scenes, a lot of money was flowing into growth stocks, you just couldn’t tell from the prices. It looks like things are starting to turn around. Since March 15, when it bottomed out, it’s up 30% in just a nine-day period.
Things are looking good for growth stocks. There’s been a lot of short squeezes. I actually saw in ARKK the short interest is back up. Now it’s over 18% again. People are doubting this rally in growth after what’s been, at least in ARKK, a 60% crash. To me, that means people are going to go short.
They are going to keep getting squeezed. They are going to have to buy back and that’s going to be fuel for the rally later on. This is all in the face of interest rate expectations for the end of the year.
If you look at what people are thinking in the market for interest rates, the futures are telling us the market projects the Fed funds rate — the main interest rate in the U.S. — to be 2.18% right now by the end of the year. Right now they hiked it. It’s in a range.
They want to keep it between 0.25% and 0.50%. That’s almost a 2% increase, which would traditionally be eight 0.25% rate hikes before the end of the year. This is usually a bad sign for growth. I think growth stocks sold off in anticipation of this.
Now that there’s more certainty that the Fed has actually started raising rates, I think even though expectations for rate hikes continue to go up, people are more comfortable buying growth stocks because of that certainty in the market. I don’t think the Fed funds rate is going to be anywhere near 2.18% by the end of the year.
I think that’s just going to be more fuel added to the rally going forward. Between short covering, the plain fact that these stocks are not widely owned at this point, in addition to the fact money has been flowing into the ARK Innovation ETF behind the scenes and then you factor in the fact they are going up at the same time as these rate hike expectations, tells me all the fear has been priced into these stocks.
Right now, short squeezes, continued buying as it becomes clear the Fed is not going to raise rates seven or eight times before the end of the year and plenty of other things are pointing to these stocks continuing to rally. Definitely looking good on that front.
I saw pot stocks, which is something we covered from time to time, have bounced significantly over the past 24 hours. They were up big yesterday afternoon. Today they are up big pre-market so far. It looks like it’s going to be another big day because the Senate is looking to pass a bill on decriminalization.
There are some governmental things that I thought were going to be clear. I thought marijuana stocks were going to rally going into this year based on political elections coming up. It seems at this point legalization, especially decriminalization is a bipartisan issue.
I think there’s a lot of upside for pot stocks going forward, especially from a political standpoint as they become less regulated, more widely adopted in the U.S. like they are in Canada. A lot of these stocks, I think, are going to go up quite a bit. These are also heavily shorted and way under-owned.
It’s been rough for pot stocks the last year. MJ, the main pot stock ETF, is down 10 out of the last 11 months. It looks like it’s going to be up this month finally. A lot of people have lost faith in these stocks. A lot of people are out. That’s exactly when you start to see these rallies form.
Of course they are doubted at first, but the fundamentals for these companies are 100% there. I think these stocks have a lot of upside. I think we might have seen the bottom for these stocks and the upside is incredible.
That’s really all I wanted to cover for stocks.
The Scoop In Crypto!
I wanted to get into a few things in crypto, notably the scarcity for Bitcoin and Ethereum, and I want to cover one alt coin every week. Something like an alt coin of the week. Obviously this is the first episode of this new format, so things might change a little bit.
Let me go ahead and share my screen because I have a lot of visuals for crypto.
The first thing I wanted to point out is Ethereum (ETH), the scarcity in this, what’s going on with the merge and staking and things like that. I know a lot of people are curious about this.
This blue line shows the amount of ETH that’s been staked and are waiting for this merge to happen. What’s happening is the current ETH network is going from proof of work to proof of stake. With proof of work you have to mine ETH by solving these crazy hard algorithms.
It takes a lot of computing power to do. It’s overall tougher than proof of stake. Proof of stake is when the network is verified by people actually having validators with ETH staked in them. Each time a transaction happens on the network, the validators validate that transaction simultaneously.
That validates the network and makes it stronger. The more ETH that are staked provides a strong network because it’s more power that is verifying these transactions on the network. The point is, it relates to scarcity.
The number of ETH staked right now and can’t be moved has gone up in a straight line since this started in November 2020. It’s now up to more than 10 million, almost 11 million, ETH out of a total supply of 120 million. We are almost at 10% of the supply staked and waiting for this merge to happen.
After the merge, there’s going to be a short period where you can’t withdraw your ETH from staking. After that, people are going to withdraw. I think there’s this FUD out there that people are going to withdraw their ETH and sell. I don’t see that happening.
One of the reasons for that is the rewards for staking are going to go up. That’s a big thing that contributes to the scarcity. Right now, miners are getting a vast share of the overall rewards for the network. When you mine you are verifying via proof of work.
When you solve these equations you are granted a block of ETH, which is a bundle of ETH coins. That’s how you earn ETH. With staking, you earn ETH just be delegating your ETH to validators. It’s like earning interest on your ETH.
Right now the miners are earning about 13,000 ETH a day. The stakers are earning fewer than 1,000 ETH a day. When this merge happens, all the ETH the miners are earning are going to be given to the stakers instead. That’s a huge inflow of rewards that’s going to transfer from the miners to the stakers.
That’s going to provide a major incentive to stake on the ETH network. I don’t think a lot of people are going to withdraw when the staking rewards go up because they are going to be able to earn way more. Even if they do withdraw, I think there’s going to be so much more demand to stake ETH that it’s going to offset any selling that happens once these ETH are unlocked from staking.
This provides a grand overview of the scarcity of ETH. There’s one more thing to point out. ETH have been burned every single day. What I mean by burned is whenever someone does a transaction on the ETH network using Uniswap, Aave or any decentralized finance apps on ETH, you pay a fee with each transaction in the ETH token.
Part of that fee gets burned every time someone makes a transaction. This started back in August. It’s been not even eight months and already more than two million ETH have been burned. That’s a big driver of scarcity too. Before it was this big inflow every day into circulation.
Now, that’s being offset in a big way by the amount of ETH being burned. It’s almost like barely any ETH is being added to the network because all these ETH are being subtracted from the network in opposition to mining and staking rewards.
This gives a clearer picture on that.
It gives you the number that’s been burned, which is more than two million, and the rewards. This is what’s given to the miners and the stakers combined, which is about 3.12 million. The net issuance since this began last August is barely more than one million coins.
Usually that would have been more than three million, now that coins are being burned only one million coins are added to circulation. As demand goes up it will be almost nothing added to the network every day.
With dwindling supply and rising demand, which I think we’re going to see, it sets up a scenario where there’s going to be a major supply demand imbalance in ETH. We’re going to see the price rocket up as a result of that. Also, there’s going to be an influx of demand because of you stake ETH you are going to get increased rewards.
Just to provide an overview of staking, you can do it on a lot of exchanges. I know Coinbase and Kraken are the main two. Everyone who wants to stake ETH, they aggregate that and form a staking pool. They earn interest from ETH on that. They take a cut of that interest and you get the rest.
You can also so it in a decentralized way. I won’t go into detail on that for time’s sake. There are services you can use for that. There’s Anker. You can deposit your ETH in that. You can deposit it into Lido. Or you can deposit it into Rocket Pool. These are alternative ways.
Rocket Pool is the most decentralized. There are a bunch of ways now you can stake your ETH. I think this is going to get more and more popular over time, especially when the rewards go up and all the ETH that would usually go to miners go to stakers instead.
That’s the overview of the ETH situation. One more thing about that actually. The main reason I wanted to go over it is because the merge is simulated on all these tests networks over time before it happens. Right now it’s expected to happen in June. They have been testing it for awhile now.
The most recent test just went really well. It was a huge success on one of these test networks recently. That’s another good sign we are getting closer to the merge, which I think is going to result in a huge pump for ETH.
Some people call it the triple halving because it’s kind of like a Bitcoin halving where the issuance goes down because all these coins are given to stakers and they are less likely to sell than miners. Also, the fact that these transactions are offsetting the number of inflows into ETH circulation from rewards.
It’s a really interesting situation going on right now. I think we’re on the cusp of a big rally in ETH as it continues to get more and more scarce.
More Bitcoin And DeFi!
With Bitcoin (BTC) it’s a similar situation. It’s not going to be another halving; that doesn’t happen until 2024.
There’s a trend right now in BTC that I think is going to lead to more scarcity too. This started back in 2020. There was this trend of wrapping your BTC and putting it on the ETH network so you can do things like trade it or earn interest on it in DeFi.
As you can see in this chart, a ton of BTC has been added to the ETH network. It’s now reached about 334,000 BTC, which is almost 2% of the supply. There’s around 19 million BTC in circulation right now. 334,000 of that is sitting on the ETH network. That’s a bullish thing.
It has its disadvantages. It’s not actual BTC. You put your BTC in an account. There are services out there that keep your BTC and create a manipulated version of BTC that’s compatible with the ETH network. BTC and ETH are very different things.
They are different pieces of code and not compatible with each other. Normally you would not be able to transfer your BTC onto an ETH DeFi app. With things like wrapped BTC, they are able to create a synthetic form of BTC and grants people access to use their BTC in this way.
Otherwise, you can’t do much with BTC other than put it in cold storage or earn interest on it in some kind of crypto bank like Celsius or Voyager or something like that. This was a big development for BTC and ETH. A lot of people want to use their BTC in a decentralized way.
This gave people the opportunity to do that. As you can see, it’s become very popular. The main disadvantage to that is when you convert your BTC to wrapped BTC it can be a taxable event. Maybe if you’ve been holding BTC for a while you don’t want to do that.
A lot of people have been working on ways to transfer your actual BTC onto DeFi networks. The most recent development of this is Avalanche, which is another blockchain. I think it has the 10th largest market cap in all of crypto.
It’s a big blockchain that has been gaining adoption quickly.
They recently expanded their support for the BTC network, enabling BTC holders to securely transfer their BTC onto the Avalanche public blockchain and use it within the Avalanche ecosystem. That ecosystem has $16 billion in total value locked (TVL).
This is a huge development because you can still own your BTC and not a synthetic version of it and use it in DeFi. That is a huge trend I think is going to evolve rapidly this year and going forward. I don’t think you can do this in ETH, but it wouldn’t surprise me if they added compatibility too.
Again, a lot of people own BTC. It’s by far the biggest market cap. It’s the most popular crypto. If you give people access to be able to earn on that or give them access to DeFi, it’s going to take off even more. I think it’s going to increase demand. I think it’s going to enable people to keep their BTC on DeFi.
They are not going to be as likely to sell because they can finally earn interest on it or just use it in other ways. There’s a ton of different things you can do with DeFi. I think it’s going to drive demand going forward. Another thing is, there’s no tax implication with this.
That’s a big deal for people too. You’d be able to just transfer your BTC into Avalanche like you would transferring it between Coinbase and Kraken. That’s a big development for DeFi.
Your Altcoin Of The Week!
That leads me into the alt coin I wanted to go over this week: THORChain (RUNE). They have been doing this BTC DeFi merge for a couple years. I remember seeing this back in 2020. It was going unnoticed back then. Recently they have made a ton of developments.
They added compatibility where you can trade BTC for ETH, trade Binance, Litecoin, Dogecoin and they will be adding all these networks to their decentralized exchange. Before long, I don’t think you’ll be able to tell the difference between THOR Swap, which is their decentralized exchange, and something like Coinbase and Kraken.
With Coinbase, we take for granted that you can just trade BTC for ETH and that goes through just fine. Whereas on blockchains you really can’t do that at this point, except on THOR Swap.
Another thing with THOR Swap, and this increases demand for their coin, is that any time someone deposits BTC or ETH onto the network, because of the way decentralized exchanges work, the users provide liquidity to trade. Whereas Coinbase has a big treasury of BTC, ETH, Uniswap and all these other coins that allow people to trade.
Coinbase is the one that provides the liquidity for all these coins. They own all these coins and you simply just trade them on the exchange. With THOR Swap, it’s decentralized. The users provide the liquidity. You can deposit BTC or ETH into the exchange and other people trade them.
You earn fees from that trading. That’s another incentive of using DeFi. You can earn fees from providing liquidity to these exchanges. The point is, with THOR Swap with every single BTC, ETH, Dogecoin or whatever, 1.5 times that amount has to be collateralized with their coin.
So as more people come to use THOR Swap and deposit their RUNE into that or BTC or ETH or these other coins, there’s demand for RUNE because it backs 1.5 times the total that’s been deposited into the exchange. That’s a bid demand driver for the coin.
This is an innovative exchange in multiple ways. They not only integrate all these networks, they also create a situation where you are incentivized to hold their token because there’s so much demand for it. As this grows, and I think it will, the demand for RUNE is going to be boosted as well.
They are expanding right now. I can give you a glimpse of the THOR Swap exchange. This is the screen you would see as you get into it.
As you can see, there’s this huge list of coins they support. It shows you the coin, the ticker symbol and then native which is the blockchain its one.
You can have BTC on its native blockchain. You can have Binance coin on its native blockchain. There are a lot of others here — Dogecoin, Litecoin, Bitcoin Cash. Like I said, they are going to add a lot of others before long. They are in the heart of the development of this platform.
They are getting things out quick. They next thing they are getting out are synthetic assets. Basically, there would be synthetic BTC and synthetic ETH, which is kind of like wrapped BTC. It enables you to do a lot of other things. Obviously there’s a fixed supply of BTC.
There’s a relatively fixed supply of ETH. You can’t have everybody deposit their ETH and BTC on this network, but synthetic assets allow you to have infinite liquidity. These synthetic assets are going to be backed with RUNE tokens.
Say you want to lend out BTC and borrow against it on THOR Swap. You can do this with synthetic assets way easier than regular assets because it gets rid of that supply component that’s limiting to the amount of BTC they can support.
The synthetic assets are also going to be backed by the RUN token. That gives even more incentive to own the RUNE token. As demand goes up for the products by THOR Swap, the demand for their coin goes up too. A lot of really cool things are happening right now with this.
I think it’s going unnoticed by the market. Going forward, with them expanding into things like lending and borrowing, creating a stable coin and other things, I think it’s going to create a lot of demand. Obviously this is not financial advice. I am not saying to buy it.
I just want to give information on some of these alt coins every week that are going unnoticed and I think are doing interesting things on DeFi. Having these chains integrated on a decentralized exchange is something I haven’t seen outside of THOR Swap.
They have been doing it for a while and they are expanding greatly right now. As you can see with the volume, there’s been a huge increase. There’s been an increase in the liquidity supplied. Back on March 7 it was only $172 million. Here we are 2.5 weeks later and it’s already up to $321 million.
I think adoption of this is going to be rapid. That’s going to lead to more scarcity of BTC as well. People are going to be using their BTC in DeFi and it’s going to create more demand for BTC. Again, before all you could do was hold it. You couldn’t do anything with it.
But DeFi opens up a ton of opportunities to give you more options to use your BTC and earn money doing so. That was my coverage of THOR Swap and RUNE. Again, not financial advice. I’m not saying to buy it. I’m just providing what I hope to be helpful information.
Let me know if you enjoyed this new format and what I covered today. Any questions, definitely email us. Leave a comment on the video. Thank you so much for watching. Have a great weekend. Happy Friday. I will see you again next week.
Next week, I want to answer your crypto questions. So leave a comment or send us yours at BoldProfits@BanyanHill.com.
If you like the new format, give us a thumbs up below!
Thanks for watching our IanCast remix!!
Editor, Crypto Flash Trader
IanCast Note: We didn’t hit on one of our big topics this week: Tesla Inc. (Nasdaq: TSLA). But here’s a Tesla story you might not know. One of the Tesla “godfathers” found a black nanopowder that can “supercharge” a battery by 2,500%! That’s enough to allow a Tesla to travel across the country nearly four times, all on a single charge! Get the full story — including the investment potential (HUGE!) — here.