TMC Hype

Elon to take us all to the moon?

Elon Musk, CEO Tesla
  • Tesla invests $1.5bn in Bitcoin
  • Ethereum still grossly undervalued as DeFi's parabolic uptrend continues
  • USD strength still on the cards
  • EYES ON
  • TMC Club - Alex Watkins gets funded
  • What's happening this week

Cryptocurrency continues to gain traction as we have another massive week for the industry. Last week started with a scheduled 'buy and hold' on XRP that swiftly taught a costly lesson to retail and inexperienced traders after seeing a large pump and dump that would've left many with large losses.

As the week continued, we saw altcoins starting to flourish, led by Ethereum as it pushed into a new all-time high of $1,759 per coin but still looking undervalued compared to Bitcoin, which sits 120% above its previous 2017 high. This week kicks off with Tesla announcing they've purchased $1.5bn in Bitcoin, which has seen the total market cap for the cryptocurrency space propel over $1.3 trillion total, showing no slowing down.

Let's dig straight into this week's HYPE.

Tesla invests $1.5bn into Bitcoin

Electric car giant, Tesla, run by Elon Musk, announced in a filing to the SEC that they have purchased $1.5bn in Bitcoin and plan to accept the cryptocurrency as a form of payment in the future. Within the filing, they stated the purchase happened under an updated investment policy designed to 'provide us with more flexibility to further diversify and maximize returns on our cash.' 

This breaking news propelled Bitcoin into new heights, seeing an immediate move into new territory. At the time of writing, BTC is currently at a new high of c$44,700. Elon has expressed his interest over the past months in cryptocurrency, even changing the bio in his Twitter handle to '#Bitcoin', he also confessed to being a supporter of Bitcoin on social media chat site 'Clubhouse'. 

Michael Saylor, CEO of MicroStrategy, has been aggressively accumulating Bitcoin since summer 2020 as its main treasury asset, has lead the increase in institutional demand for cryptocurrency. Michael and Elon had previously had a Twitter exchange in late December 2020 where Michael offered to advise how Tesla could convert its balance sheet from USD to BTC.

Saylor and Musk's Twitter exchange in late December 2020
Saylor and Musk's Twitter exchange in late December 2020

Many other corporations are showing interest in following a similar path to MicroStrategy. Last Thursday, a virtual Bitcoin summit was hosted by Michael Saylor, with over 1,400 other publically traded companies. MicroStrategy shared all details on how big corporations can go about investing part of their companies reserve cash in Bitcoin. 

Grayscale Investments' colossal surge in AUM (assets under management) further proves the increase in institutional appetite for cryptocurrencies over the past eight months. The once seen precarious investment in cryptocurrencies is slowly shifting sentiment to the main risk being not investing. Grayscale has recently hit $30bn in net crypto assets AUM with over 90% of these inflows accounted for by institutional capital. 

Ethereum still grossly undervalued as DeFi's parabolic uptrend continues

Before the breaking announcement today from Tesla, which launched Bitcoin back into its state of dominance, it was looking as though alt season was upon us. Bitcoin sits now at over 120% above its previous 2017 high. Many altcoins, including the second largest, Ethereum, sit below or near their 2017 highs. In the charts below, we can see the overall market cap for crypto sitting near $1.35 trillion, nearing an 80% increase from its December 2017 peak of $764bn. When we remove Bitcoin from the equation, we have only just reached the December 2017 peak of $482bn. This shows many altcoins, including ETH, are still lagging and undervalued compared to Bitcoin, which typically always leads the beginning stages of a bull run. 

Crypto market cap
Crypto market cap
Crypto market cap, without BTC
Crypto market cap, without BTC

'Launched in 2015, Ethereum is an open-source, blockchain-based, decentralized software platform used for its own cryptocurrency, ether. It enables smart contracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control, or interference from a third party.' Investopedia

Ethereum's blockchain technology is similar to that of Bitcoin's however, the distinct difference is their purpose and capability. Ethereum's technology is superior to Bitcoins as it allows integration with many different applications. Bitcoin uses one specific application of blockchain technology. It's an electronic cash system that allows for payment via Bitcoin. Ethereum's blockchain similarly tracks ownership of digital currency but focuses on running the programming code of a range of decentralized applications. Bitcoin was designed to be a cryptocurrency to be used for spending. Ethereum has its own payment system, which is closely related to its ecosystem.

Ethereum is the king of DeFi (decentralized finance), and with the growing popularity of this space and the developments seen since December 2017, Ethereum still looks grossly undervalued. There are now north of 1.25 million DeFi users, a figure that continues its parabolic uptrend. With over $25bn locked up in DeFi projects, it's clear the ecosystem is maturing rapidly and will soon become institutional-grade. 

It is impossible to predict where we expect the price to head next when an asset is at an all-time high as there's no previous price action at these levels to analyze. However, we can speculate. When we look at the price action that developed at the December 2017 highs on ETH, it is incredibly similar to what BTC did before going on a 100%+ rampage. On BTC, we formed an ascending triangle at the December 2017 highs before breaking out on 16th December 2020. Bitcoin then went on a 110% run before momentum started stalling at c$42,000. ETH formed a similar pattern, which it broke on the 2nd February 2021. If ETH saw a similar run post-breakout as BTC, we can expect prices of $3,000+.

BTCUSD daily chart
ETHUSD daily chart
ETHUSD daily chart

USD strength still on the cards

Short term US Dollar strength is something that's been on our radar for the past weeks. With all the stimulus pumped into the US economy over 2020, we saw the currency seriously devalue over the entirety of the year. After such a weak year for the US Dollar, we expect a deeper correction is needed before a bearish dollar can continue. 

Our favourite setups going into this week are EURUSD and USDCHF. The EUR and CHF are heavily correlated, so the price action is near identical, simply inverted. After 250+ days of bearish dollar momentum, the monthly charts have now decelerated. Weeklies began their pullbacks, formed by reversal head and shoulder patterns on the daily timeframe that have now broken their necklines. We will be watching for retests of our confluence areas before looking to play some short-term bullish USD momentum to form the more extensive corrections needed. 

EURUSD daily chart
USDCHF daily chart
USDCHF daily chart

EYES ON

Jonny covered our full watchlist in last Friday's Insights episode. We have recently increased our live events and are now hosting themed Insights episodes at the end of every week (previously every second week). Make sure to catch the full replay here.

TMC Club - Alex Watkins gets funded! 

This week we want to give a huge shoutout to Alex Watkins. Alex shared with us that he recently got funded by a prop firm, taking on external capital to boost his assets under management. Huge congratulations to Alex and an inspiration for all of those wanting to follow in his footsteps. Within the club, Alex shared some of his insights into how he has got to a point where he could raise external capital. 

What's happening this week?

Monday, February 8th, 2021 @ 1pm PT
Market Update with Jonny Godfrey

Wednesday, February 10th, 2021 @ 1pm PT
Market Update with Jonny Godfrey

Friday, February 12th, 2021 @ 11am PT
Insights with Irek Piekarski


All the best for the week ahead and we'll see you in the club!

Cheers,
Jonny Godfrey & the TMC Team

TMC Hype
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