The Wolf Den #114 - The Wolf Den Is Going Daily!
Bitcoin Thoughts And Analysis
Bitcoin is in an interesting spot. I view it as a battle between strong fundamentals and slightly weakening technicals, but not on the larger time frames that are most meaningful. The monthly and weekly charts could NOT LOOK MORE BULLISH for all of the reasons that I explained on Tuesday. I am seeing small signs that this move is exhausted and we all know that retraces are healthy and necessary in a bull run. Even in the fomo run of 2017, we saw multiple 30%+ retraces, shaking out late and highly leveraged longs and piling on shorts as rocket fuel for the next leg up.
I have no idea when, but odds are strongly in favor of us seeing a similar correction at some point in the not so distance future. My main concern is that I am seeing confirmed bearish divergences with RSI on lower time frames, with potential bearish divergences on higher time frames. Here is the daily:
As you can see, RSI is barely rising on the recent move and we need to push above the recent highs to invalidate a bear div if it happens. That would require tremendous buying and volume. Totally possible, but not as likely as some sort of eventual correction. That said, today's volume candle is already bigger than yesterdays and we are just over half way. That's a bullish signal. I would NOT SHORT THIS YET, if at all, personally. Just showing that we could finally see that healthy retrace.
Also worth noting that daily divs can take a long time to play out AND price can go a lot higher before confirming. This is not tradable information, just something to watch!
This is Bitcoin, it could just go to 30K in a day!
The 4 hour chart that I shared Tuesday with entry ideas is hitting one of them, but it's not a trade that I am taking at the moment. I would need to see a break of resistance and retest as support, but the divs above give me a bit of pause. That does not mean they should worry you! We now have a clear ascending blue support, so you could easily take a position on the break of this area and set stops below that line, ascending as price rises.
The rest of the charts are exactly the same as Tuesday - we are pushing through 16K, which is a risky but interesting area to buy if resistance is flipped to support. For now, I am continuing to dollar cost average and not taking any active trades. I could see it really going either way.
Altcoin Thoughts
BITCOIN DOMINANCE
Just as we saw Bitcoin Dominance take the stairs down, flipping support back to resistance over and over again (red circles), we are seeing the same levels flipped back to support on the way up. This gives us clues as to when altcoins are safe to trade or better avoided.
It appears Dominance is once again finding support - meaning alt trading carries extra risk.
Legacy Markets
From Altcoin Psycho:
MRNA (MODERNA)
What really made me interested in taking this trade was the sheer amount of volume coming in today on the option order flow.
As you can see from the above screenshot, someone made roughly a $2.3M bet that Modern would hit $95 before the end of the year. Pairing this with the resistance trend line break out it had today, I really like Moderna here and am setting a price target at $95.
With these vaccine stocks, when they run they run quick. The same goes when the sell offs happen. If your targets get hit, or there is a sudden news event causing a major 15-20%+ move in the stock, I would strongly recommend selling the stock or at least moving stops in heavy profits. I've noticed vaccine plays are very much a sell the news type situation.
Chart Requests
Since we are in the middle of a hurricane, this week I will not be able to update each chart. I discussed all of them and more in the video below, so please accept that as the fulfillment of chart requests for the week!
Trading Exercise - Can You Guess Up Or Down?
I have printed this before, but believe that it's worth sharing again for those who never read it!
This is an interesting exercise that I came up with for traders that I have taken to attempting on my own. I have roughly a 65% hit rate in the past month, which I find to be excellent.
In sports betting, you can beat the spread 60% of the time and be a legend. Most barely crack 51%. That’s binary - right or wrong. Trading is exponentially harder, so starting with “up or down” is a good exercise to show just how hard it is, before considering risk management.
Can you be right 50% of the time? If so, the next exercise is deciding where you would theoretically place your stop loss and take profit orders. When you consider risk management, you not only have to be right about direction, but have to avoid being stopped out before it goes your way and also have to be willing to exit in profit before a directional change against you.
The exercise is difficult, and will display just how important risk management really is - it’s everything!
A Thread On Sound Money
By Sahil Bloom:
Imagine it is the year 2200 and you land on a tiny planet inhabited by friendly aliens. Walking around, you admire their incredible alien technology. You wonder aloud, “What is the basis of this thriving planet?” So you enter the market...
The market is thriving. Buyers and sellers transacting with ease. But instead of the paper money you are used to seeing on Earth, you notice all transactions are being completed using small seashells. Curious, you tap an alien on the weird lump you think is its shoulder.
“Excuse me,” you say, “But why are you using those seashells as money?” After it processes your strange language, it looks puzzled. “The ‘seashells’ you belittle are very rare, impossible to produce, come in different sizes, and are durable.” “Ah, sound money!” you reply.
But suddenly, you hear a loud noise nearby and see another spaceship landing outside the market. The market gate swings open and who saunters in? None other than Mr. FEDerico, the man of endless means. He climbs the tower in the center of the market and clears his throat...
“I have come from Earth and will buy your technology! I have 100 million seashells as payment.” (Seashells, of course, are easy to find on Earth, despite their rarity here). The market turns into a frenzy - sellers going crazy over the profit potential. What happens next?
Mr. FEDerico zooms off with his technology, but not before he has inflated the seashell supply. With the massive influx, the value of seashells collapses. Savers are punished as sellers raise prices. The thriving society collapses. Without sound money, it could not function.
As you wander around the now barren planet, you marvel at how quickly it all broke down. You hop back into your space ship, ready for the long flight home. “Aliens are wild,” you laugh, “That could never happen on Earth.”
Ethereum’s Resilience is Unmatched
A quiet but massive wave of concern hit every Ethereum developer on Wednesday morning, impacting wallets, exchanges, dapps, and nodes. An old code bug surfaced, splitting the blockchain into two competing chains. This was the most serious issue for ETH since the DAO attack 4 years ago that caused Ethereum’s price to drop over 35%. During this week's catastrophe, Ethereum’s price continued to rise and the news failed to concern traders or investors. From our perspective, the story is likely over. One thing is for sure - Ethereum is continuing its transition to 2.0, which sis the most anticipated upgrade the crypto community has ever seen.
Bitcoin’s S2F Model And A Million Dollar Bet
The Stock to Flow Model is a popular bitcoin graph depicting the value of Bitcoin over time in relation to the production of supply and current stock available. Based on Bitcoin’s scheduled halving, PlanB, a well-known crypto analyst, designed this graph to measure its past cycles and predict where the price is heading. According to the visual, Bitcoin is headed for a valuation somewhere between $100,000 and $280,000 by the end of 2021. Before you get too excited, there is no guarantee in the chart, but it does hold a history of repeated accuracy throughout Bitcoin’s past 3 halvings. That does not mean it's anything more than coincidence.
Just recently, it was made public that not everyone agrees with the model when Eric Wall, the CIO of a hedge fund, offered a million-dollar bet that the model would break. He clarified that a “broken model” is Bitcoin not reaching 50% of the target range within 5 years. Some speculated the bet wasn’t a true disbelief in Bitcoin's expected value but actually a hedge against a huge Bitcoin position.
I am Going on Swan Lounge!
This Friday at 1 PM EST, I am going to be a live guest on the popular Bitcoin show, Swan Lounge. Swan Lounge is a weekly live show brought to you by Swan Bitcoin, a kicked back, relaxed, weekly chat featuring guests from across the industry. Link above.
The Wolf Of All Streets Podcast Ft. Charles Silver
According to Charles Silver, the CEO of Permission.io, every click on the internet is carefully tracked and packaged into a data gold mine that mega-companies use for their own gain. His company has found an ethical way to give its users the ability to profit off of their own digital footprint rather than having it sold to the highest bidder by multi-billion dollar companies.
Charles and I further discuss living in an Orwellian society, the history of big data, working under Reagan, the debt death spiral, web 3.0, Permission.io, click farms and click fraud, crony capitalism, property rights issues, privacy as a false concept, ASK token, the data economy, the confusion of fiat currency and more.
My Recommended Platforms And Tools
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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.
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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.