The Wolf Den #113 - Invest In Assets You Understand
Bitcoin Thoughts And Analysis
Bitcoin remains bullish, both from a fundamental and technical perspective. News pours in every day about billionaires investing in the asset and the chart continues to look definitively positive. Let's take a look.
MONTHLY CHART
What a difference a week makes... last week, the monthly candle looked like it was being rejected, with a bearish SFP on the previous month. It is still "too early to tell," but the current picture is much more positive. The only monthly level left above the current price is the all time high. There's nothing but thin air in between. We want to see this month close above the blue line. That's really it on this time frame now.
WEEKLY CHART
There's one additional level of resistance on the weekly that does not appear on the monthly, which is at around $16,174.
What's more interesting is to look at the structure since the 2018 lows. The weekly break and close above $13,868 was the first REAL confirmation of bullish price structure. We made a large time frame higher high, confirming the higher low from March 12th.
You read that right - we JUST officially became super bullish on the larger time frames on last week's candle close.
DAILY CHART
Zooming into the daily we can see the bullish structure since the March 12th lows. Higher highs and lows rising up, with the break of the red line being a macro higher high. Awesome. Price presently appears to be consolidating under resistance in a pennant of sorts, which (as I ALWAYS SAY) can likely become a flag with a break of the ascending support.
4-HOUR CHART
Zooming in further, I can show the idea from above. This is not a confirmed flag at all, JUST AN IDEA!
The blue boxes are all of the areas of interest for me. 50 MA, 200 MA, two support levels and a clear break of the recent highs. A lot of chances to enter, depending on what price does. If this does drop and form a flag, I will buy very heavily just above 14K, in confluence between the theoretical flag bottom and horizontal support level that is yet to be tested.
IntoTheBlock - The Prevalence Of Long-Term Investing In Bitcoin
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB). ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data.
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.
This Week: The prevalence of long-term investing in Bitcoin
On Oct. 31 2020, Bitcoin’s original white paper by Satoshi Nakamoto turned 12 years old. Since its inception, Bitcoin’s use cases and narratives have shifted significantly, from peer-to-peer cash to anonymous darknet currency to digital gold, just to name a few. Throughout these changes, the prevalence of long-term investing in Bitcoin manifests its transition into a store of value asset. Its price growth and deflationary supply schedule incentivize long-term holding of Bitcoin rather than spending in mundane transactions.
The metric that most closely resembles the number of Bitcoin holders is the total number of addresses with a balance. Though a Bitcoin user may have more than one address, centralized exchanges also tend to aggregate users’ funds into a few addresses. Therefore, the total number of addresses with a balance acts as a valuable approximation to the number of Bitcoin holders. Throughout the last 12 years, the number of Bitcoin addresses with a balance managed to increase in every year except 2018.
See the Bitcoin AddressesStats
As can be seen in the graph above, the number of Bitcoin addresses with a balance is currently at 32.73 million. This trend points to an increasing amount of people investing in Bitcoin, accelerating in recent months. Furthermore, by classifying these addresses by their holding time, we can determine that most holders see Bitcoin as a long-term investment.
At the time of writing, over 65% of Bitcoin addresses, which aggregate a total of 21.28 million addresses and 11.37 million BTC, have been holding it for more than 1 year, and this number has increased by 20.6% over the last 12 months.
See the Bitcoin Ownership by Time Held Stats
Bitcoin’s unspent transaction outputs (UTXOs) serve as a system to account for ownership of Bitcoin and avoid double spending. By tracking the age of created UTXOs, we can establish the holding time of Bitcoin addresses. Over the long-term, the percentage of addresses holding for over a year (displayed in colors green to blue) has increased significantly, only diminishing during bubble periods such as 2013 and 2017.
The prevalence of long-term investing in Bitcoin manifests its transition into a store of value asset. The long-term support from holders points to the common belief that it will appreciate or at least retain its value over time: a key characteristic of a store of value.
Altcoin Charts
The trades from Friday are going great! That was a rare "clear" opportunity to trade alts which has remained intact thus far. Those trades are all still relevant, open and worth revisiting.
I remain bullish on the potential for altcoins from this level, but that does not mean there are a ton of trades worth taking at any given moment. Bitcoin seems to be watching and waiting for other markets to settle, and a sizable move in either direction will likely hurt alts.
ALGO/BTC
I like this potential setup because ALGO is at somewhat of a "do or die" spot here. It's tucked right under the massive descending resistance. Consolidating under resistance usually leads to movement up. A clear rejection and this trade will never trigger. That's a good situation.
A break of this line should signal a macro reversal. Price could come back down to retest as support if it does break, so keep that in mind when sizing your position. I would personally take a smaller position on this one, with stop below the all time lows. Give it plenty of room to breathe. Key levels are marked.
ETH/USD
Funding was getting expensive and I was watching for consolidation, so I exited my ETH long from $386 on Phemex a couple of days ago.
As you can see, ETH continues to make higher lows and higher highs. The structure is definitively bullish, so now it's just about finding and entry. Price is currently in a bull pennant, but as I always say, the bottom often breaks and becomes a bull flag. So the best entry here is a break of the descending top resistance or to wait for a lower entry if it happens to break down.
My targets are still the top of the range, shown in this chart as a black line at $488. This chart remains bullish unless it makes a lower low, so there could be a drop and opportunities to get in, but hard to count on it.
INJ/BTC
Injective is a new coin to Binance that has justifiably received a lot of hype. It's a really cool project with a ton of potential.
I am interested in the chart because it has clearly made a series of higher highs and lows, which gives it a clear invalidation for a trade - below the second red arrow on the bottom. Also, we have a clear ascending blue support, so you can trail a stop up below that level as price continues.
The blue zone is the key on the chart, which has very little price history. If it can hold here (it's still a "falling knife"), then it should continue up to the other black lines.
Buy in the blue zone, on the blue ascending line or the horizontal black line. Stop below any of those, or the second low. Pretty straightforward.
YFII/BTC
This caught my attention because the chart has largely followed YFI, which had the same bull pennant and broke out to the upside. Volume seems to be increasing here at the end of consolidation.
The trades here would be either a break of the top blue line and the horizontal black line above and retest as support - something like the top blue box - or a break of the pennant to form a bull flag (descending channel) and a test of the lower line as support.
Legacy Markets
Stock traders and investors are getting a taste of what it's like to be a crypto trader every day. Yesterday the market had its largest gap up to a new all time high ever, opening 6% above Friday's close. It was short lived, with price dropping hard through the day and closing even lower again today.
I am NOT touching the stock market for now. I am still in my current trades, but very little interest in trading stocks for the moment while there's still so much uncertainty.
At least we can close the book on the argument that a Biden election would have a negative knee jerk reaction, as price clearly reacted positively to the news.
Safely Secure Your Crypto Before It’s Too Late
f you’ve been in crypto for a while, your portfolio likely saw a large jump with the most recent pump. Now is the time to really start considering safer storage options if your crypto is sitting on an exchange. Especially with Black Friday right around the corner, cold storage options such as the Trezor, Ledger, or NGRAVE are worth considering. Keeping crypto in hot storage (connected to the internet) just isn't worth the risk, especially as your portfolio grows in value. For a more in-depth analysis of our thoughts on how to safely store your crypto, read the blog post above.
"I'm Waiting To Buy Lower"
"The four most dangerous words in investing are: 'this time it's different'" - Sir John Templeton
"I'm going to buy a little cheaper" or "I'm selling now to buy lower" have to be close behind in this race!
Traders often zoom in too far and lose site of the forest through the trees. If you believe that an asset will rise in price, then you are playing with fire to attempt to buy lower. Price may never reach your buying zone. Further, it may reach that zone, scare you that it has dropped that far, and then compel you to move your buy orders even lower.
No single thought in trading and investing has cause people to fomo in at a higher price than this! Believing that you will buy lower, missing that chance and then seeing price rise is a guaranteed recipe for losing money. That's usually when you end up buying the top.
Tulip Mania
By Sahil Bloom:
In 1637, the Dutch Republic erupted into a speculative fever over an unlikely item...the tulip. Tulip Mania has become a legend synonymous with market euphoria and bubbles. But is this tale all it's cracked up to be? Who's up for a story?
The tulip is a spring-blooming flower native to the valleys of the Tien Shan Mountains in Central Asia. It is believed to have been introduced to Europe in 1554, when an ambassador of the Holy Roman Emperor sent tulip bulbs and seeds to Vienna from the Ottoman Empire.
Tulips gained in popularity as people were attracted to their rich color and ability to grow in sub-optimal conditions. They soon became a coveted status symbol for the wealthy. The Semper Augustus, with its colorful, flame-like streaks, was the most desired of them all.
By the early 1600s, the Dutch Republic was entering a golden age. Many financial innovations popped up during this time - the first stock exchange, for example. But it was another financial innovation that would propel tulips into historical lore: the futures contract.
As tulips grow slowly and may take several years to bloom, paper contracts were written that entitled the buyer to the future tulips. These contracts were freely-traded. So in addition to the physical market for tulip bulbs, a thriving paper market was established.
By 1634, the prices of tulip bulbs were rising sharply. Traders would meet in special taverns. In these taverns, no bulbs ever changed hands, just the paper contracts. Speculative buying (buying on the expectation of further price increases) took hold. The frenzy was on.
Companies were established to buy and sell tulips. As with all financial bubbles, tulip mania became a self-fulfilling prophecy. Rising prices beckoned new speculative traders into the market, which further drove up prices. Prices continued to skyrocket through early 1637.
At the peak, one tulip bulb sold for ~5,000 guilders, roughly the price of a nice house in the Dutch Republic at the time. But as is common in speculative bubbles, the burst came suddenly. When no buyers arrived at one trading session, the price of tulips fell precipitously.
Traders who had paid exorbitant prices for tulip contracts were left with worthless pieces of paper. Many refused to pay, arguing the paper contracts were unenforceable, leading to further panic selling and further price declines. Tulip mania was officially over.
The event was made popular by Scottish journalist Charles Mackay in his book, entitled Extraordinary Popular Delusions and the Madness of Crowds. But many of his claims, including the devastating impact of the bubble on the Dutch economy, have been questioned or disproven.
Historian Anne Goldgar conducted extensive primary research on the incident, finding no evidence of a widespread financial impact from the bubble. In fact, she found only ~40 cases of people paying more than 300 guilders for a tulip bulb.
Importantly, Goldgar found no evidence that working class people went bankrupt betting on tulips. The Dutch Republic was not broken by the incident and very few people were truly impacted by it. A fascinating historical incident, yes. As sensational as the legend, no.
This is the story of the facts and fiction of tulip mania. So as bitcoin continues its rise and the inevitable calls of "tulip mania" commence their lazy refrain, keep calm and carry on! In the words of Preston Pysh, "There go those tulips again..."
YFDAI — Leading The DeFi Revolution
For months, DeFi’s euphoric climb has shattered expectations as protocols have seen billions in total locked value within a relatively short period of time. This exponential growth has not only brought excitement and optimism to the DeFispace but also solidified the narrative that financial services should be available to all regardless of country, class, or background. DeFi allows for anyone with little more than an internet connection to interact with financial tools that were otherwise only offered by large centralized financial institutions.
While the DeFi movement has proven to be a new catalyst in decentralization, it nevertheless has run into its own share of glass ceilings and growing pains. The most obvious of these are the infamous “rug-pulls” and scams that have plagued the entire industry. Scams in the DeFi space have become so rampant that DeFi has largely become a minefield for many investors. Furthermore, many DeFi protocols prioritize the hype of early return rates with no proper way to address the inevitable inflation of the token. Thankfully, a project has finally risen to address the main pain points of the DeFi industry. This project is none other than YFDAI.
What is YFDAI?
YFDAI is a DeFi protocol that doubles as an entire DeFi ecosystem. It provides users with a full suite of DeFi services packed in an easy to use interface for the best DeFi experience possible. YFDAI utilizes a robust burning mechanism that promotes token valuation and utility all while users access key features and earn rewards from farming, staking, prediction market trades, borrowing, lending, and insurance coverages. Additionally, YFDAI hosts a cocktail of other services that reach far beyond its farming and staking protocol. The YFDAI LaunchPad incubator and SafeSwap exchange for instance seek to transform the minefield environment that is DeFi by constructing a space that supports legitimate DeFi projects and protects investors.
YFDAI’s Unique Features
A full suite DeFi protocol that incorporates an easy to use user-interface
Fully audited by blockchain auditing firm, Blockchain Consilium
Fully locked Team, Advisor, and marketing tokens via time-released smart contracts
No mint function
Financial License from Estonia
Robust burn function resulting in a low 13,950 total supply
Low circulating supply
Sustainable staking and farming
SafeSwap decentralized exchange for secure, high-quality projects.
Insurance coverages
Publically revealed team
Profit-sharing from popular YFDAI services to farmers and stakers.
Support from top DeFi partners such as DuckDao, Ferrum Network, and DexTools
No Pre-Sale
Founders personally funded development
Locked liquidity until Dec 2021
Monthly transparency reports on token movements
Applied for Estonian Exchange and Ewallet license
Applied for E-Money License
Licensing will provide Wallets and users funds with Insurance
Staking Live 72% a Year
Farming live — deflationary model has seen price rise
21,000 Tokens — Deflationary to 13,950
Current Market Cap under 5 Million
Services coming soon
Launchpad — will end rug pulls and Exit Scams
SafeSwap — Uniswap Fork to list only vetted and legit projects
SafePredict — Predictions Markets
Lending/Borrowing
Insurance
Ecommerce Marketplace
Centralized Exchange
Debit Cards
Additional Benefits for Stakers/Farmers
SafeSwap — 5% of profits distributed.
SafeSwap Advertising 25% of profits distributed.
SafePredict 25% of profits distributed.
Borrowing/Lending 25% of profits distributed.
Farming of Launchpad Projects
Whitelist to LaunchPad Pre-sales
JP Morgan Believes Bitcoin Can Compete with Gold
With the maturation of each new generation comes new investment preferences, and JP Morgan thinks that millennials will be a strong driving force behind Bitcoin. Millennials are currently between the age of 24-39, sitting right at the cusp of entering their peak investing years, which begin in their 40’s-50’s.
In a recent report, JP Morgan said that the interest of Millennials paired with corporate interest together can close the market cap gap between Bitcoin and gold sooner than we expect. Gold’s 2.6 trillion-dollar market cap would require Bitcoin to increase 10x from its current level to surpass gold. We see this flipping as a real possibility in the future because fundamentally we believe Bitcoin offers more value than gold. If the big money believes this to be true, then there is no reason it shouldn’t come to fruition.
Billionaire Investor Turns Bullish on Bitcoin
Legendary investor Stanley Druckenmiller went on CNBC recently and publicly disclosed that he owns Bitcoin. Stanley joins the ranks of fellow billionaires like Michael Saylor, Paul Tudor Jones, Jack Dorsey, and Chamath Palihapitiya when it comes to sharing their bullish views on our beloved coin. In the interview, Stanley predicted Bitcoin would outperform gold, stated that Bitcoin grows in attractiveness every day, and that the dollar would likely weaken over the coming years. As individual investors like Stanley publicly come around to Bitcoin, hedge funds, and financial institutions will follow, bringing more money with them.
We are early and the big money is coming.
AMA WIth Steve Ehrlich, CEO Of Voyager
I had a call scheduled with Steve Ehrlich to ask some questions about Voyager, get some updates and see what they were up to. At the last minute I asked if he would be willing to take the call live and answer questions from the community, which he graciously agreed to do. I know a lot of you were present, but for those who missed it this is a great window into the mind of the CEO of a brokerage. You all know that this is the platform I use to invest, so it was amazing to hear about the plans they have for the future. This is a really great listen.
The Wolf Of All Streets Podcast Ft. Hotep Jesus
Bryan Sharpe, better known as Hotep Jesus, consistently challenges the status quo. At a young age his father began to introduce Hotep to ideas outside the mainstream narrative that put him on a course towards societal mastery rather than servitude. He took the "red pill" and today owns 3 businesses and never intends to work for anyone. He continues to grow his knowledge and spread awareness to those that metaphorically haven’t "woken up" yet.
Scott Melker and Hotep Jesus further discussed taking the red pill, demanding free coffee from Starbucks, left v. right politics, conspiracy theories, the birth of Hotep Jesus, the state and its central bank, capitalism mixed with anarchism, a world currency, traditional investors vs Bitcoin investors, a “Bitcoin board of attorneys,” deep fakes, ICO’s and more.
My Recommended Platforms And Tools
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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.