The Wolf Den #129 - Sentiment Is Everything
Bitcoin Thoughts And Analysis
There's still very little to look at as Bitcoin trades sideways in search of a definitive direction. Altcoins also seem to be stuck in the mud, so there are no fresh setups that are really drawing my attention today. Everything else I have shared this week is still valid. There's nothing wrong with taking a break from the charts and trading when the market is "boring."
This is the only thing that I am presently watching on the 4-hour Bitcoin chart - a clear hidden bullish divergence with RSI, which usually signals continuation to the upside. That said, hidden divs have been weak signals, so it's hard to get too excited here. I have no interest in actively trading Bitcoin for the moment.
Lindy Effect 101
By Sahil Bloom.
With Bitcoin's return to the spotlight, debates on its long-term viability are raging. Its proponents contend the Lindy Effect says the technology is here to stay. But what is the "Lindy Effect" and how does it work? Here's Lindy Effect 101!
First, a few definitions. The Lindy Effect is a theory that the future life expectancy of specific non-perishable items, like a technology or idea, is proportional to their age. Put simply, the longer it has already lasted, the higher the likelihood it will continue to last.
The term "Lindy effect" is a reference to Lindy's, a New York deli frequented by comedians in the 1960s. While author Albert Goldman used the term "Lindy's Law" in a 1964 article, it was mathematician Benoit Mandlebrot who moved the dialogue towards the current definition.
In his book, entitled The Fractal Geometry of Nature, Mandlebrot commented that the more stage appearances a Lindy's comedian made, the more future appearances he could be predicted to make. The longer he lasted, the longer he would continue to last.
Nicholas Nassim Taleb built upon Mandelbrot's work, formally coining the term "Lindy Effect" in his book, Antifragile. He noted the Lindy Effect with books - the longer a book has been in print, the longer it is likely to survive. With no natural upper bound, power laws come into play. "If a book has been in print for 40 years, I can expect it to be in print for another 40...if it survives another decade, then it will be expected to be in print another 50 years. Every year that passes without extinction doubles the additional life expectancy."
So who cares? What are some useful applications of the Lindy Effect in helping you understand the world? Given its recent rise and accelerating mainstream adoption, let's look at Bitcoin and how the Lindy Effect may apply.
First off, it is a technology - a durable, non-perishable item. This checks the first box. The Bitcoin Genesis Block was created in January 2009 and it has continued to survive in the nearly 12 years since that date. It has withstood technological and societal attacks.
From technology-based attacks to societal attacks, it has shown its robustness. The Lindy effect says the fact that Bitcoin has survived this long makes it likely to survive much longer.
So as you sit down for Thanksgiving dinner, prepared for the inevitable questions about Bitcoin and its long-term viability, remember the Lindy Effect! That was Lindy Effect 101. I hope you found it useful.
The Dangers Of Emotional Trading
This is a great twitter thread on the dangers of making financial decisions when you are in a suboptimal emotional state or have too much happening in your life. You can erase years of gains with a single bad decision - two in this case, because he revenge traded the same asset. I commend Steve for putting this out there publicly, because I know almost everyone has experienced a similar situation. This is a cautionary tale - give it a read.
Find A Purchasing Partner
Just like a workout partner, a purchasing partner is there to encourage you to buy the prices that aren't always sexy and help you stick to your trading plan when you don't feel like it. Finding someone of equal or better skill Yes, and a similar mindset is ideal for a purchasing partner. They can keep you accountable for buying the dip and prevent you from fomoing into trades. The next time you are on the edge of buying a beaten-down coin or stock and you need someone to give you encouragement, looking to a friend in the same boat as you can make the difference between long-term profit and loss. Investing and trading is like a game, so do it with a teammate.
SEC Allowing Crypto Regulators to Grow
The SEC’s fintech team dubbed FinHub was granted permission to become its own office, gaining more relevance and responsibility with its new structure. FinHub has been responsible for educating the SEC on cryptocurrency and blockchain and now will report directly to SEC Chairman Jay Clayton rather than the lower-level divisional office it has been reporting to thus far. On record, Clayton said, “our action to establish FinHub as a standalone office furthers our commitment to facilitate the introduction of new technologies for the benefit of investors and the efficiency and resiliency of our markets." We see this as a move in the right direction for crypto regulation, as it lets the experts make decisions others have either failed to make or made poorly.
Supply Chain is Slowing the Vaccine
Pfizer, one of the largest pharmaceutical companies in the world, is presently manufacturing the COVID Vaccine but announced a major setback in its expected distribution. Its initial goal of producing 100 million vaccines this year was just cut to 50 million. They said that their billion-dose production target for 2021 remains, but they have no incentive to announce a delay in future production when their stock price is high. Some of the factors resulting in this delay were poor quality production, difficulty sourcing ingredients, and rushed scaling. Pfizer’s production issues serve as a case study to predicte the challenges other companies in the production race will face - like Johnson and Johnson, Moderna, and Novavax. Pfizer’s cutback is proof that one variable or all variables need to align for successful vaccine output.
Brooks Says Good News Coming For Bitcoin
Should we choose to believe him?
“Melissa, you know rumors abound within Bitcoin more than almost any other place, but I would tell you is we’re very focused on getting this right. We’re very focused on not killing this, and it’s equally important that we develop the networks behind Bitcoin and other cryptos…”
Lee then asked if there could be some new crypto regulations before the end of Trump’s first term in office.
Brooks answered:
“I think you’re going to see a lot of good news for crypto by the end of the Trump term. Some is going to have to do with banks connecting to blockchains, some of it is going be more clarity around the nature of these assets. So, believe me, there’s going to be very positive messages coming up.
“At the same time, it’s a dangerous world out there. We have to be honest about that, but nobody is going to ban Bitcoin. Nobody is going to ban some of these transmission technologies. I think it’s going to be a lot less bad than people worry about.”
US Job Recovery Slowing
"U.S. job growth slowed sharply in November, suggesting the labor-market recovery is losing steam amid a surge in coronavirus cases and new business restrictions.
Employers added 245,000 jobs last month, less than half the 610,000 jobs added in October, the Labor Department reported Friday. The unemployment rate edged down slightly to 6.7% in November from 6.9% a month earlier."
November marked the seventh consecutive month of job gains at a steadily cooling pace. The labor market has now regained slightly more than half of the 22 million jobs lost at the onset of the pandemic.
Over 10 million people still do not have employment and the recovery is slowing.
My Recommended Platforms And Tools
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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.