The Wolf Den #106 - We Are Still Early!
Bitcoin Thoughts And Analysis
Hi guys.
Bitcoin is bullish. I hope that you have all made a lot of money the past few days and weeks retaining that bullish bias.
I think that this is just the beginning on larger time frames, but that some retracement would be both healthy and likely soon. It would give a chance to regain some strength and also for alts to catch up a little bit (wouldn't that be nice!) The potential bear divs on extremely overbought RSI on the 4 hour are what make me think this is possible here.
Also, I talked about Bitcoin at the end of the chart requests video!
MONTHLY CHART
Three successful tests of support at $10,540 and a huge candle breaking through the next level. I want to see this candle close above $12,300, but not a huge deal if it doesn't happen. If it does, I would look for that level to be retested as support and to be a decent entry.
DAILY CHART
That went well! Targets acquired and surpassed. Bulls really want to see that level at $12,486 defended on the daily, it's an important previous swing high. Nothing bad happens if it breaks, but it's a good place to look for an entry if you are watching for a retrace.
4 HOUR CHART
4 HOUR RSI hit 87. That is high! We have seen price rise at the end of this move on decreasing volume with a likely bearish divergence about to confirm. This is why I would not be surprised to see a bit of healthy retracement at this level. Still, this would give opportunities to buy a dip. Nothing bearish here - also clear there would likely be hidden bullish divergence within a few candles.
RSI should cool off, which could be a bit of a drop or some sideways action.
Altcoin Charts
Risky, risky, risky. There are a lot of alt coins sitting on support with bullish divergence and showing some bounce, but all of them could just be relief bounces and not real reversals. We saw this a couple weeks ago and had a few great quick trades.
Still, there are some I am interested in, and I took an amazing trade on ETH yesterday morning. Last week's BQX trade, which I think was the only one I shared, has been doing great, even with alts dropping.
You can probably throw a rock and find more setups like this, but here are the ones that jumped out at me.
COTI/BTC
Bullish divergence with RSI, sitting on support. Pretty straightforward! I am setting stop a few sats below the last candle's wick and looking for the above lines as targets. So easy to take a small loss on this, like many alts right now that are showing this same setup.
DOT/BTC
Polkadot is a great project, really has massive potential, so I am interested in finding positions on the coin. You can see that price bounced perfectly, to the sat, off of support. There is NO SUPPORT below this, so it's a bit of a do or die situation. I am ok with that, because the trade can easily be invalidated and released. There's also bullish divergence with oversold RSI on the 4 hour that has played out a bit, which is not shown. The real trade here is a break of the blue line. That's the safest entry, and could take a long time to happen if it does at all. That's the best confirmation this could be reversing. For now we have a scalp chance off of this support and a stop comfortably below.
SNTVT/BTC
I am an advisor and have a large bag that is locked up. I have watched this go all the way up and down, with no power to trade it. What a ride. Now it's on KuCoin, and there has been tremendous selling pressure which often happens when a coin hits an exchange. Regardless, we have a nice oversold bullish divergence and are approaching resistance. If I was trading this, I would take it on a break of that descending black line, if it happens. Simple.
XTZ/BTC
This coin has gotten absolutely destroyed. If you were a member here, then you may remember the SFP in the circle near the top, where I said I was done trading this coin. It's been a long way down from there. That said, price is sitting in a key demand zone and support and has massive bullish divergence with RSI on the daily. This is the best setup I am seeing. My targets are the bottom of the small range above and then the top of that range if price breaks back in. Above that is not on my radar for now, we will cross that bridge if we come to it. My stops are just below 160.
Trading Gaps
I have posted this article a few times, but feel it's a good time to revisit it. Traders talking about "gaps" all of the time - it's important to understand what they are, which ones matter, and how to potentially trade them.
Cobra Effect 101
By Sahil Bloom.
With the rise of government and central bank intervention in the economy and markets, the term "cobra effect" has experienced a revival. But what is a "cobra effect" and how does it work? Here's Cobra Effect 101!
The term "cobra effect" is used to describe a situation where the solution to a given problem makes the problem worse. It is commonly used when talking about the unintended negative consequences of government policies. Well-intentioned solutions may make matters worse.
The term originates from an ill-fated British policy implemented in India during its colonial rule. Concerned about the number of cobras in Delhi, they announced a policy that offered a reward for dead cobras. It started well - many dead cobras were turned in for the reward.
But soon, certain enterprising Indians concocted a plan. They began breeding cobras, killing them, and turning them in for the bounty. Annoyed by the abuse of the policy, the British scrapped it. Stuck with a bunch of (now worthless) cobras, the breeders released them.
So a policy intended to curb the population of cobras in Delhi ultimately led to an increase in the population. The Cobra Effect was born. The term is becoming quite prevalent in the modern era. Let's look at a few examples where we might be seeing it in action...
Bailouts? When the government bails out a corporation, it presumably does so with good intentions (to save jobs, etc.). But the bailouts may have unintended consequences if other executives perceive themselves to be "playing with house money" with a government backstop.
Executives are compensated on the basis of shareholder returns. Increased risk amplifies returns. Why not take on additional risk if Uncle Sam has your back? The seemingly well-intentioned government action may lead to more risk-taking and an increase in business collapses.
Monetary & Fiscal Policy? Aggressive, stimulative monetary and fiscal policy is undertaken in an effort to stimulate a struggling economy. But the typical government actions - lowering interest rates, QE, and direct stimulus - may have painful unintended consequences.
Low risk-free rates and the "Fed put" may lead to rampant speculative bubbles and painful bursts. The Cantillon Effect may appear, as the flow path of new money through the economy disproportionately benefits the wealthy, furthering inequality.
Axios reporter Dion Rabouin recently reported that some Fed officials are now pushing for "'tougher financial regulation' as concerns grow that monetary policy is 'encouraging behavior detrimental to economic recovery and creating pressure for additional bailouts.'"
So there are several ongoing policy actions that may have cobra effects. As an informed citizen, it is worth being educated on the subject and keeping an eye on the space. I'd love for you to join the conversation! What examples of potential cobra effects do you see today?
That was Cobra Effect 101! I hope you found it useful.
The Coinbase Effect ---> PayPal Effect
The “Coinbase Effect” earned its name after coins experienced positive parabolic price movement directly after being listed on popular U.S. crypto exchange Coinbase. For example, when Coinbase listed Litecoin and Bitcoin Cash back in 2017, both experienced a 100% price appreciation against the USD and even stronger momentum against Bitcoin. As the bear market hit in 2017, the effect began to die from a number of factors, including announcing the listings ahead of time instead of it being a surprise, readily available access to these coins outside of Coinbase, and a massive amount of coin listings on the platform. Together, these factors killed the hype.
Nonetheless, a few other popular coins including Chainlink and OmiseGo caught tailwinds of the dying effect in 2019 and 2020, respectively still catching massive gains.
This time around there is a possibility for a new effect, the “PayPal Effect.” With more than 10x the user base on PayPal along with the early stages of a crypto bull market, sentiment and potential are both high. This could be the perfect storm for a strong effect on the price of coins PayPal decides to add in the future. Keep in mind they already have committed to supporting Bitcoin, Litecoin, Ethereum, and Bitcoin Cash. There is no telling which coins will be listed first, but history tells us it is most likely to be a coin within the top 10 by total market capitalization. The top contenders to be added first minus Binance Coin and Tether are XRP, Chainlink, Polkadot, and Cardano. If I had to guess, Chainlink and Polkadot would experience the strongest effect from a listing of these four because they are currently the most hyped.
Traders and investors should keep an eye on a couple of variables before making a plan, namely, what happens to the price of the four listed coins when the service goes live, and initial reports released from PayPal regarding how their user base is interacting with crypto. It will be interesting to see the volume their users bring in order to find out if PayPal stepping into the arena is just a billboard for legitimacy or an actual institutional force. With this information, smarter setups can be taken based on a potential “PayPal Effect.”
My Ballin' Oates NFTs Drop TODAY!
Reminder that my first NFTs are dropping today at 3pm EST on Blockparty. It is a series of 8 pieces with 3 editions each which make up the whole song. Collect them all to unlock the full video. This is the FIRST LYRIC VIDEO NFT EVER.
The song featured was a viral hit when I released it over 5 years ago, with millions of plays on soundcloud and youtube.
Huge should out to my partner on this, digital artist Moxarra Gonzales.
Below is the song on soundcloud and one of the 8 NFTs!
10% of Bitcoin’s Supply Has Remained Stagnant
Mostly a fun fact on this news, but the truth is that more and more coins simply aren't moving. This is due to coins being lost forever and a growing number of long-term hodlers.
Paul Tudor Jones Endorses Bitcoin Again
Boom! Paul Tudor Jones has doubled down on his opinion of Bitcoin as the best hedge against inflation, and states that the rally is just in the first inning.
The Wolf Of All Streets Podcast Ft. Jameson Lopp
Jameson Lopp joined the Bitcoin community in 2014, attracted by both its technological and philosophical use cases. His passion for security and privacy led him to jobs protecting both high-level institutional-grade crypto holders and individuals. Having been the victim of a series of coordinated sophisticated attacks, Jameson has been forced to become a leading expert on cybersecurity. His unique experiences led him to develop his own company, Casa, which frees users from the stress of self custody.
Scott Melker and Jameson Lopp further discuss experiencing multiple bull cycles, the great lengths one must go to secure crypto, Bitcoin’s largest threats, a nation-state attack on Bitcoin, apathy killing Bitcoin, SIM swapping and SWAT attacks, buying a burner house, moving off the grid, Coinbase’s political controversy, Satoshi’s secret identity, the criminal interest cycle, going dark for good and more.
Chart Requests
ADA/BTC
This found support at the pink line, as I discussed was possible in the video. I would really want to see this back in the blue range to feel more confident that this is anything but a little relief bounce. The descending black line on the right would be an even better indication that this is reversing. I see this as a no trade zone but worth watching.
AMZN (AMAZON)
This one is a tough read, technically. Frankly, not a stock you need much technical analysis on considering the size of the business and the chance for long term success. It's clearly ranging, I think direction will be determined by a break above or below. Stock market looks somewhat similar. I don't see an immediate entry on a chart, but Amazon is probably a good long term buy at any price.
CAKE/BNB
Who doesn't like cake? This actually looks decent, it broke the descending line we were watching in the video and has held the ascending support. Anything above that ascending red line looks good to me, and it's an easy invalidation if a candle closes below. Key levels are marked.
FB (FACEBOOK)
FB is testing a key level at the moment, and successfully. This chart is confusing, like most stock charts, so I can't give any really confident analysis. Yesterday's candle had the making of a potential evening star pattern, but the open above today has invalidated that idea. There are big gaps to fill below, price may head there eventually, but for now it is technically working on flipping resistance to support. I personally wouldn't buy it here.
MATIC/BTC
Nice little bounce above the 123 support. This could be bottomed out if that area holds, so it's easy to find invalidation in my mind. I would not want to be in this below 118 or so, personally. I really want to see the blue line at 153 flipped back to support, and the black descending line broken. Those would be better reversal signals, because for now we need to assume these are relief bounces on alts.
SPCE
Another tough stock chart to read, like most. Clear ascending channel locally that appeared to break down, but now has seen price bounce and go back in. So, hard to read! I would say this is between levels for the moment and that the clearer trade was the break of the descending black line a couple weeks ago. We also have a pretty big gap in the chart, so price could come back down to fill that.
TSLA (TESLA)
Tesla appears to be in a bull pennant after the major move up over the past few months. I would personally have trouble being convinced to buy here, the valuation is multiples hire than it rationally should be. So it's riding FOMO - which could be enough to keep it going. I just can't wrap my head around it. For now though, the chart looks fine. Still parabolic, technically. If it does break down, it could go REALLY far.
YFI/BTC
It is really do or die for YFI here, so I could definitely see taking a position here. That does NOT mean it will hold, it just means there is decent risk reward. The red line is really the last chance before there's no support until the very bottom. That said, we really want this above the black line where it is currently trading. If alts are reversing at all, this could really be a good play. Again, I am not convinced AT ALL this is reversing. Just decent R/R if you are looking to trade it.
YFL/BTC
This is one of my biggest positions, but I have been in since day 1 and was buying at $15-$20 after that. Now I would be waiting for a break of the top black line, or better yet a move above the Ichimoku cloud. I explained this a ton in the video, it's worth watching. Regardless, this looks like it is consolidating against resistance and should eventually pop up.
ZEC/BTC
I had to zoom in with a magnifying glass to confirm, but we do have some bullish divergence on the daily with RSI. You can see price is in a huge descending wedge and found support here at a key level. Hard to tell if alts are getting a relief bounce or if this was real, but the black line looks like a nice entry at support, which is where it was discussed on the video yesterday. The real trade on this is still a break of the top black line - far away.
ZRX/BTC
3246 was a really key level here that has broken down. There's tons of EMA resistance above. I can't really get behind trading this, unless you are just targeting the black line at 3246 for now. A break above that and this could get more interesting, but for now I would expect a relief bounce to that area than a retest as resistance before heading back down.
Probably won't happen that way, rarely does! But that's what the chart says.
My Recommended Platforms And Tools
This is where I trade with leverage and can also trade spot with no fees.\
This is where I spend my days teaching and learning! Our Discord group is a one stop shop for everything you need to learn to trade and control your emotions. Feel free to DM me on Twitter or respond to this email for questions.
This is where I invest, commission-free. They now let you earn interest on your Bitcoin held in Voyager, so you can compound while trading. Not only that, you’ll get $25 in free BTC when you download & fund.
Rewards Code: Scott25
I use RoundlyX to buy small amounts of Bitcoin every single day. They automatically round up my credit card purchases (with 10x multiplier) and invest them in crypto. Absolutely brilliant. Passively invest money you don’t need without a thought. Further, they have integrated with Voyager (see above) to offer commission-free purchases.
Rewards Code: WOLF
This is one of the main places where I hold crypto to gain interest. Celsius also offers dollar or stablecoin loans against your crypto, starting at just 1% annual interest. Celsius is giving WOAS followers $20 to open a new Celsius wallet. All you have to do is enter promo code WOLF, then transfer and keep at least $200 worth of crypto in your wallet for 30 days.
My preferred crypto tax software.
Binance is finally available in Florida!
Concierge Phone Service for Americans that protects your from SIM Swaps and other phone related hacks. I cannot stress enough how amazing this service is.
Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
On-chain and fundamental analysis, research, predictions and indicators, all in one place. Highly recommend.
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor.