Ethereum (ETH) ⬆️ Merge Surge Prediction!
Ethereum’s merge surge …. Tesla getting into DeFi … and one of the coolest projects out there (my altcoin of the week)…
I can’t even put into words how BULLISH I am on bitcoin (BTC) and Ethereum (ETH).
As you know, ETH $20K per coin is part of my 2022 predictions. ETH is drastically undervalued right now and this merger gets us one step closer to that surge.
I’ll also show you in the cryptoverse how:
- ETH will have a merge surge like BTC did after the halving in May 2020.
- Bitcoin’s record HODLers = bullish indicator for more growth ahead.
- Tesla is driving the next wave of crypto demand.
- My altcoin of the week — Pocket Network (POKT) — is a small-cap gem disrupting billion-dollar companies.
And be sure to watch till the end for your questions — including when to take profits, trading on Coinbase & the best way to track altcoin updates:
Hey everyone, welcome to this week’s IanCast. This week I want to start off going over why I’m still super bullish on Ethereum (ETH) and Bitcoin (BTC) and talk about some things with the ETH merge. Then over the past week, it was reported that Tesla is getting into DeFi.
I think that’s a huge step. I want to go over some things with that. Then I want to get into Pocket Network, which I think is one of the coolest projects out there. That’s the altcoin I want to talk about this week. Let me share my screen,
ETH Will Have A Merge Surge!
I am going to start off by talking about the merge this week because I think a lot of people are still curious about that. There’s this website called Ultrasound.money. If you’re interested in looking into the merge and the effects it’s going to have on ETH, I would recommend this site.
It has a lot of interesting metrics. Here you can see the amount of ETH that’s been burned since
the EIP-1559 went out. That was basically the network upgrade that said fees on ETH would be burned. Right now a small portion of those fees gets paid to miners, but most of it is burned.
This is obviously really good for supply. Overall, the amount of ETH paid to stakers is going to be a lot less than the amount burned on the network. This went out in August. It’s been about eight months. Since then, more than two million ETH have been burned. It’s a huge amount of money.
That’s $6 billion worth of ETH that’s been taken off the market. With that kind of burning, especially once we get the proof of work network out of there where people aren’t going to be mining ETH and driving the price up quite a bit, two million ETH per year is a lot more than what’s going to be issued to stakers.
I believe it’s estimated to be around 600,000. Right now we can see that once the merge happens it’s going to lead to some great things. Down here you can see the overall supply and how it’s grown for ETH.
In the early days, the supply increased quite a bit and the inflation rate for ETH dropped.
As you can see, it’s getting less and less steep as we go on. With this recent upgrade with EIP-1559 that happened August 4, it’s been basically flat. Very slightly inflationary still, but once that merge happens it’s expected to be deflationary going forward.
There’s one projection out there from Justin Drake who gives out some good data, it was put out last year and I wanted to highlight the last line which is the net yearly sell pressure reduction.
When ETH is burned and the supply goes down, it basically means that it wears on that sell pressure.
If there’s ETH coming off the market, inflationary pressure is essentially sell pressure because you are getting more and more supply added and you have to make up for that with demand. The post-merge environment is going to be the opposite of that.
It’s going to be ETH net coming off the market, which equals buy pressure from that basis. The sell pressure reduction he estimates in the median is about 7.1 million ETH that is going to be wiped out of the market. It’s super bullish.
He estimates the peak supply is about 119.5 million which is where it’s at right now. I think it’s right around that number. It might be 120 million but it’s right around here. He estimates this is the fee burn. Then he has an optimistic and more conservative one.
The middle ground here is 3 million burned per year just from the fees. As we can see, in eight months it has already been 2 million.
If we keep up with this trend it would be right around 3 million. Going forward, I think with ETH only getting more and more popular, since August we have been in a bearish environment and the fees have not been as high as they were before that.
In the end of 2020 and early 2021 these were much higher. So going forward I can see that being higher than 3 million. Even using that it would still be extremely good for deflation of ETH. Then he has the max proof of issuance, the amount paid to stakers every day.
The maximum would be 4,300 ETH. On a yearly basis that come out to less than one million. That would be a net reduction of two million or three million a year. That deflation really speaks for itself. I just wanted to show this because I think it gives a clear picture of how this is going to be affecting ETH going forward.
I am still very bullish on the merge. I believe this is expected to happen in June or July at this point. We should see that coming on soon. I know they just had their successful test a couple weeks ago. That was great to see. That was the biggest step forward we have seen so far.
The price of ETH doesn’t really reflect all of this yet .I think we have a ways to go. You can’t put into words how bullish on ETH I am.
What Does Bitcoin’s Record Holders Mean?
Bitcoin (BTC) is the same way. The supply dynamics are now, in some ways, the most bullish they have ever been.
This chart shows you the amount of supply of BTC that hasn’t been moved in over a year.
This hit a record high yesterday. It’s at 63.459$%. So almost two-thirds of the supply of BTC is being held for the long term. IT’s been locked up. These people don’t sell until BTC goes on a huge rally.
This is, in my opinion, only going to grow. It’s only going to grow until we have a huge rally like we did in 2017 or 2020 into 2021. As you can see, the orange line is the percent of supply that hasn’t been active in over a year. That will go down as BTC goes up because you see these people take their long-term BTC and take profits.
That’s natural for any market. That’s been the trend. Once BTC settles down a little, we start to see this move back up. That’s what’s happened now. From a supply side, BTC is very bullish, arguably the most bullish it’s ever been. We’re also seeing this with the percent of BTC on exchanges.
Right now we’re on a multi-year low here. It briefly dipped below 13% of all BTC on exchanges. Just to zoom out, we can see the last time it was this low was back in January and February 2018. It’s been more than four years since this small amount of BTC has been on exchanges.
That’s also a good sign. From both a long-term holder standpoint and exchange standpoint, BTC is looking bullish too. BTC and ETH, while still around 30% below their all-time highs, the prices are much lower than the months and years we are going to see going forward.
All we need, and I’ve been saying it for a while, is for the demand to come in. With BTC, it could happen at any time. With ETH, I think it’s going to happen after the merge. Some people are expecting a buy the rumor, sell the news thing with the merge.
Unless ETH goes parabolic before the merge I don’t think it’s going to happen. With BTC, the price might pump a little before The Halving and then sell off. That would be a small buy the rumor, sell the news trend. This past time it was in May at the last Halving and we didn’t see any real rally in BTC.
Of course after that we saw a huge rally. ETH is going to be that on a magnified scale. I am sure a lot of you have heard the term Triple Halving with ETH because the overall supply reduction is going to be the equivalent of three BTC Halvings. I think we’re probably going to see something like that where everybody is expecting the price to go crazy before the merge.
It doesn’t do that and instead it goes crazy after the merge. I think that’s the most likely case for ETH. One more thing I didn’t show with the merge simulator is you can see with this rate we’re expected to hit 3.1 ETH burned in the first year of the London network being implemented.
That would make inflation of about 1.9% a year for ETH because the issuance is 5.4 million a year at this rate. But if you simulate the merge you can see what the issuance is going to be after proof of work goes away. That goes all the way down to 500,000.
That pushes the deflation down to 2.2%. The supply is going to come way down. I think that’s going to be a huge driver for demand. Six to 12 months after the merge I think is when we’re going to see a huge inflow of demand into ETH.
Keep in mind, there’s been a lot of FUD around ETH with these other networks taking market share because the fees on ETH have been super high. We’re going to see a lot of money come back into ETH. A lot of people sold ETH to buy things like Avalanche, Solana, Cardano.
This might not all be necessarily bad, I think it was a drain on demand for ETH. I think we’re going to see a lot of demand come back into it once people really how big this merge really is.
Tesla Driving Next Crypto Wave!
Next, I want to get into Tesla because they had a huge announcement.
They are partnering with this company 6s Capital, which is powered by Maker DAO. It’s the issuer of the Dai stable coin. They have been expanding into real world assets. They have been a huge pioneer in that.
Partnering with Tesla is a huge deal. They funded Tesla with this loan powered by Maker Dai for $7.8 million. The way that works is they give that money to Tesla because Tesla wants to build out a bunch of repair centers. This is the path they have chosen to do it.
6s Capital takes out that loan in Dai and then the payments that Tesla makes on that go back into the Maker DAO vault that is controlled by 6s Capital. As you can see by this, 6s Capital has one of the biggest vaults on Maker Dao. They have this huge loan they have taken out.
It’s backed by crypto and that causes demand for things like ETH and Maker. I think this is super bullish. In the big scheme of things, $14 million isn’t a ton. Currently there is more than $9 billion of Dai outstanding, but I think we’re going to see this kind of thing really expand.
6s Capital is not only partnered with Tesla, they are also partnered with companies like FedEx, UPS, Starbucks, Tractor Supply and some other big names. I think we could see this get much bigger and not only add legitimacy to the Dai stable coin, which aims to be a decentralized stable coin, but it also adds legitimacy to DeFi as a whole.
If people see companies that they know, like brand names, using these services, I think it’s going to give a lot more confidence to people and especially institutions to buy into these DeFi apps.
What’s The Altcoin Of The Week?
I want to get into the alt coin section of this video. Pocket Network is a decentralized service that acts as the relayer for data requests. To put that simply, whenever you use a service on ETH — Uniswap, Aave or Maker — every single time you make a transaction there is information going to the smart contract on ETH from the app.
The app talks to the smart contract and a transaction is made. During that process there is a lot of data going back and forth. Right now, that data is sent by mostly two companies: Infura and Alchemy. These are both highly centralized. Pocket Network aims to be a decentralized alternative to these two companies.
We have seen Infura has had its share of issues.
Last week I went over how with data storage you have to keep paying a monthly fee or keep accessing your data over a monthly period to keep that data alive. Otherwise, it gets deleted. Now, Infura has also had issues with their data relayers.
As you can see here, this happened in 2020. It didn’t affect the price of ETH too much. Infura briefly went down and a bunch of exchanges had to disable withdrawals because they couldn’t communicate with the smart contracts on the ETH network.
I don’t think this was even the first time this has happened. You can see the issues with having a centralized provider for this stuff. Like I said, Infura and Alchemy are the main two. They are both highly centralized. They have huge data servers they fully control.
That’s not a good look for things in crypto. It has real potential consequences. Another thing with Infura is the company that owns it also owns MetaMask. That company is called ConsenSys. You can see the possible issues with that.
This happened just last month where transactions in Venezuela were censored on MetaMask. MetaMask obviously relies on Infura. They are both owned by the same company. Whenever you do a transaction on MetaMask, it’s using Infura to relay that data to and from the ETH network.
They said it was an accident, but at this point who knows. They were censoring transactions in Venezuela and this should not even be an option. They shouldn’t even have the ability to do this. The whole point of the crypto ecosystem is to be decentralized, uncensorable and a free monetary system.
This is another problem having these centralized data relayers poses. One other thing about ConsenSys, there were multiple reports of users being able to access crypto services in certain jurisdictions such as Iran and Venezuela. These were all centralized services.
One other thing about ConsenSys is they are part owned by JPMorgan, which you can see is another conflict of interest in crypto.
JPMorgan has been critical of crypto overall. The fact they own MetaMask and Infura is at least semi concerning for the ETH network in general.
You don’t want them to have a lot of control where they can manipulate things with data relaying. That could obviously pose a problem too. This is the article. “ConsenSys lawsuit reveals JPMorgan owns critical Ethereum infrastructure.”
They have a 10% stake in ConsenSys. A lot of that is infura. That’s just another thing I wanted to point out about what Pocket Network is trying to provide an alternative to. The other thing I wanted to point out about JPMorgan is they are not super aligned with DeFi, which is what ETH is known for.
They shut down the Uniswap founder’s bank account. So you have Infura and MetaMask partly owned by the same company that’s shutting down a company that relies on Infura and MetaMask. It’s confusing to me. Again, you can see what kind of issues this poses to DeFi it relies on these centralized and potentially compromised services.
Pocket Network has been growing like crazy because decentralization is a high priority in crypto in general.
They have spread their services wide just in the past six months or so. One of the things I wanted to point out was the amount of growth in their relays and their staking nodes.
It’s amazing. The amount of daily relays they do — again, every time you do a transaction on ETH or any blockchain, whatever app you are on communicates to the central blockchain. That’s called a data relay. So the amount of data relays that Pocket Network has performed in the last year has grown by 5,479%.
For March, the average amount they were doing was 248 million. This is how Pocket Network is decentralized. Anyone can run a node on Pocket Network, unlike ETH or some of these others. To run an ETH node, you need 32 ETH. There are some solutions in the works to this that are decentralized.
Really, this is a barrier to a lot of things, being able to run a node easily. Pocket Network makes it a lot easier. Every time a data relay happens, the nodes in the network get a fraction of the Pocket Network token. That’s how they incentivize institutions and people to run nodes.
They get paid every single time a data relay happens. With almost 250 million a day happening in March, that could be a potentially high pay out for these nodes. That’s some incentivization for providing this service and contributing to the decentralized nature of DeFi and crypto in general.
This incentive is clearly working because the growth here is 2,368% in the past year. As of this, it was 32,801 nodes on the network. That has grown to about 48,000 at this point. Just some amazing growth. We are barely into April and it’s already grown 50%.
One other thing I wanted to point out about Pocket Network is inflation of the token has been one of the main bearish points for it. By that I mean, as I said, every time a data relay happens all the nodes get paid. Right now they are also providing a service to the apps that use Pocket Network.
Let’s say Uniswap wants to adopt Pocket Network. They have to hold a certain amount of the tokens and they can stake it on the Pocket Network and earn interest on that. One of the ways they are aiming to curb inflation is to burn the supply held by applications like Aaves and these other ones.
Instead of paying interest, they would burn the supply held by applications. This might sound bad, but it’s good for a couple reasons. Number one, it would tone down inflation a lot. They wouldn’t be generating more tokens and adding to the supply by paying nodes and also apps.
Instead, they would be paying nodes. Every time they pay, the nodes the apps hold would also get burned. These apps use a service like Infura or Alchemy, it’s a 100% sunk cost right off the bat. They pay a fixed amount of cash. I know for infura I believe the minimum is $250 a month.
Whereas you can get the same service in Pocket Network for free, but you do have to buy the token. They advantage comes to the apps where they don’t have to pay everything up front. They hold a certain amount of tokens but they aren’t all instantly burned.
Instead, they can benefit from things like price appreciation. They can even stake some of the tokens if they want. They can buy some extra and stake them if they have some conviction. We’ve seen some already have. That’s a couple ways apps are still benefitting from this scenario of Pocket Network switching from paying interesting to burning tokens paid by applications.
Overall, the adoption of Pocket Network has been strong. It’s been the strongest on two blockchains: Harmony and Polygon.
They are active on 40 blockchains at this point, but Harmony and Polygon are giving them most of their business. This blue line is Harmony.
As you can see, the amount of daily relays is 100 million to 300 million on average. Polygon has actually outpaced it recently. The past few days, it’s been more than 200 million relays this is providing for Polygon. This is not much compared to Infura or Alchemy, but these companies have been around for years and years and created a duopoly on the network.
Pocket Network is seeing they are taking away that initial marginal market share, which is how any startup begins to disrupt. That’s how you can see the value creation in the market cap of that product. We are getting to the point where Pocket Network is right near almost 1 billion per day just between these four blockchains.
At the end of March they did about 800 million relays per day. Compared to Alchemy and Infura, again, this isn’t much. I think Infura was doing several billion in 2019 per day. But this marginal growth is super important.
The fact Pocket Network is able to survive and grow at this pace when you have such formidable leaders like Alchemy and Infura says to me that there is awareness and demand for a decentralized alternative. As I briefly mentioned last week, DeFi Kingdoms launched their own blockchain.
This is a huge play-to-earn game in crypto. It’s got a ton of players. It has billions of dollars locked up in in-game items. This is not a small deal that Pocket Network was able to launch on the new DeFi Kingdoms blockchain and immediately gain a lot of traction.
I think as we see more newer startups like DeFi Kingdoms gain popularity, I think a lot of them are going to use Pocket Network rather than these competitors.
Just to go over the valuation of these companies and explain the upside for Pocket Network, ConsenSys just raised money on March 15 that would put their valuation at $7 billion.
They are growing like crazy. Obviously, MetaMask and Infura are two widely used services. That’s a $7 billion valuation for them.
Alchemy just hit a $10.2 billion valuation on February 8. These are not small amounts of money. Pocket Network, I think, could see a multi-billion-dollar market cap in the short term, especially when they implement that network upgrade that reduces the amount of inflation.
Again, inflation can really push the token price down because even if the market cap is $1 billion, if the supply goes up by 20% you could still have a $1 billion market cap, but the coins would be down 20%. That would create a lot of selling pressure.
Just like with ETH, the inflation creates selling pressure on the overall coin.
Just to give a glimpse at Pocket Network’s overall valuation now, they are sitting at $855 million with a supply of just over one billion tokens. So $855 million versus something like $7 billion for infura and $10.2 billion for Alchemy.
I think there’s a lot of room for Pocket Network to grow. Number one, they are publically traded whereas Alchemy and Infura are both private companies. The valuation is a lot more transparent and a lot more liquid. That’s one reason. You can see speculation tends to drive prices up in a more solid and consistent way in things that re liquid and publically traded than they would in a private company.
Alchemy might have another capital raise soon that values them at $15 billion and ConsenSys might have another that values them at $10 billion. It wouldn’t surprise me at all with the amount of money going into crypto right now. We’re having all these capital raises and huge funding rounds pushing up valuations.
These aren’t going to stop at $7 billion and $10 billion. Likewise, Pocket Network isn’t going to stop at $855 million. I think Pocket Network from this point is probably going to have more exponential growth in their market cap, barring a crypto market crash or something like that where it wouldn’t be as fluid.
But I think the growth is going to be more exponential just because the growth of Pocket Network and the disruption of the competitors is a lot more exponential itself. That was all I wanted to cover with Pocket Network. I hope everyone found that useful.
If you are interested in other alt coins, leave them in the comments. I would be happy to go over what everybody wants. I have been finding this stuff interesting. Let me know if you have as well. I am always curious to find what other people find interesting because what’s interesting for you might not be interesting for me and vice versa.
Your Crypto Questions Answered!
Lastly, I want to go over some questions from the last week. Number one,
“When is it best to take profits along the journey when holding ETH or BTC?”
I wish I could give you a definitive answer of when to take profits. One thing would be something I mentioned before which is when long-term holders begin to sell.
This is usually around the top or the formation of the top. Even with this, if you sold when this orange line went down sharply, you’d be selling at $4,000.
Then the price went to $20,000. This could be a proxy to take profits, but there’s no definitive on when to sell BTC or ETH. It’s also obviously having to do with your own personal financial situation and when you need the money. Long-term holders selling is typically a sign BTC or ETH is either topping out or about to go on a parabolic run and top out soon.
Alternatively in March 2021 when BTC was topping out we had the supply that was held for more than a year go from 63% down to 55%. If it was like this it would have had a 15% drop. If you were waiting for a 15% drop from here you never would have gotten it.
If you sold after a 7% drop here you would have sold way too early. If you sold after a 7% drop here you would have been nailing it at the top. For a few reasons it’s very hard to time the top of BTC or crypto in general. It’s up to personal discretion and your own financial situation.
Next question is from Robert.
“Do you believe Coinbase is a safe site for investing in crypto? I have read accounts are subject to being hacked and Coinbase will not reimburse for losses.”
Any time you have money on a centralized exchange, you have seen the risks recently with the situation in Canada and also other places like Venezuela. Coinbase and Kraken CEOs have said they have to obey the laws of whatever jurisdiction they are doing business in.
If the government of a country they are in tells them to freeze accounts, they are probably going to do that. Coinbase I would say is relatively safe. There haven’t been many issues with it overall, but that doesn’t mean there won’t be going forward. It’s the easiest way by far to go from fiat to crypto.
But along with that convenience is the risk they could freeze accounts if they were told to do so by the government. That’s probably a very small percent chance of happening. There’s probably a chance of it happening and the CEOs have warned against it.
So if you do buy coins on Coinbase, there are ways to put that money on cold storage wallets like Ledger or Trezor that would prevent the crypto from being frozen. As far as Coinbase reimbursing for losses, they have actually launched a product called Coinbase One where you pay a monthly fee to have unlimited trading.
I’m not 100% sure on that, but I think it’s unlimited trading. They also provide up to $1 million in reimbursements for theft. So if your coins are stolen from your Coinbase account, there are a bunch of terms and conditions that has to meet for them to reimburse you.
But they do have something now that I think is a big deal in that reimbursement plan with Coinbase One. That’s a new development that I think is cool and interesting. I think that’s going to create some confidence for people and institutions as well.
“What is the best and fastest way to track alt coin updates?”
Honestly, I find Twitter useful for this. If you follow a lot of project on Twitter they usually regularly tweet new updates. Most of these projects have blogs on Medium or Substack or Mirror. Twitter, Medium, Substack and Discord I think are the best ways to track what’s going on with alt coins.
Things like white papers are good too for getting a grasp of what a project’s goal is and how things are going. As far as updates and information, Twitter, Medium, Discord. You can’t go wrong if you look at at least two of those things.
That’s it for this update. I hope everybody enjoyed it. Any questions, leave them in the comments. Any alt coins you want me to talk about in the future or just subjects in general, leave those in the comments as well. You can reach my on Twitter @IanDyerGuru.
Don’t hesitate to reach out there with questions too. I would be happy to go over those in future updates as well. Thank you everybody for watching. I will be out the next two weeks. After that, I will be returning to regularly Friday videos. I will see you in a few weeks.
Until then, everybody have a great couple weeks and a great weekend this weekend. Happy Friday. I will see you later.
Disclaimer: We’re not recommending our altcoins of the week. We are just sharing our opinions, not advice. If you want access to the altcoins that we recommend in our model portfolio with tracking, updates and buy/sell guidance, please check out Crypto Flash Trader
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I’ve been investing for more than 25 years. I started my career on Wall Street in 1991 as an assistant portfolio manager at Bankers Trust. I quickly advanced to prominent positions at Deutsche Bank and ING, managing multimillion-dollar accounts. In 2006, the owners of a $6 billion firm named Kinetics Asset Management recruited me to manage their hedge fund.