The Wolf Den #137 - We Made It!
Welcome To Unexplored Territory From IntoTheBlock
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.
Welcome To Unexplored Territory
Yes, it finally happened. Bitcoin just blasted well above $20,000 for the first time, marking a historic milestone for the leading crypto-asset. As Bitcoin is having no clear resistance above it, we have now entered into unexplored territory.
Not only has Bitcoin reached a new ATH but now 100% of the addresses currently holding BTC are experiencing profits. Using ITB’s Historical In/Out of the Money indicator, we can observe a large shift in the number of addresses profiting when compared to the yearly low in March. The Historical In/Out of the Money provides the distribution of in-the-money (profiting) and out-of-the-money (losing money) positions over time, and allows us to determine the number of investors that would have made a profit if they had sold their position at the price at that moment in time.
If we compare the Historical In/Out of the Money today versus March, we observe that new addresses have been buying and existing ones accumulating at lower prices. In the graph below we can see how the number of Bitcoin addresses “in the money” increased by a whopping 25.84 million in 9 months.
IntoTheBlock’s BTC financial indicators
And what’s different than the previous bull run of 2017? Amongst the increasing perception of BTC is a store of value and strong network fundamentals is the growing appeal and demand of institutional investors.
The Bitcoin rally in 2020 has been fueled by institutional players stepping in, along with the narrative of digital gold. This has been evidenced by support from large traditional finance players such as Microstrategy, Blackrock, JPMorgan and Fidelity, fintech companies such as Square and PayPal, and renowned macro investors such as Paul Tudor Jones and Stanley Druckenmiller. More recently, even S&P Dow Jones Indices announced they will be launching cryptocurrency indices in 2021, which are expected to keep fueling market participation from financial institutions.
At the same time, Bitcoin continues to outperform traditional markets. As it reaches a new all-time high of over $20,000 today, and with a 169% YTD return, BTC has dwarfed the performance of traditional instruments in 2020. Hence, it is no surprise that Wall Street is now taking Bitcoin more seriously than in 2017.
Now the question is, where to next? The In/Out of the Money Around Price (IOMAP) indicator reveals that BTC is sitting over strong support. Over 767 thousand addresses had previously purchased a total of 410 thousand BTC between $19,166.04 and $17,746.97. If Bitcoin were to break that level, it would find an even bigger level of support at $19,080, with 807 thousand addresses that previously acquired 483 BTC. It is all clear skies from here.
IntoTheBlock’s BTC financial indicators
Bitcoin Thoughts And Analysis
Bitcoin charts just became a lot less meaningful! As you know, I have been unapologetically bullish for most of this year, especially over the past months as Bitcoin has broken level after level in an orderly manner. Breaking 20K felt somewhat inevitable if you were to step back and consider the macro environment, news and chart.
There it is. The monthly candle is currently pushing through the last resistance on the chart. Just like last month, as I have pointed out a few times, we had resistance for the beginning of the candle before the break through. Beautiful.
I may frame this 4-hour chart that I have been sharing for days, because it has really played out as I hoped.
Altcoin Charts
I would sit on the sidelines for the moment and watch Bitcoin - eyes on the prize. There's no great reason to be actively trading today. Just some quick updates...
COMP/USDT
I am long this pair on Phemex. I entered a bit late after the recent newsletter, so I am only even at this point, even with the nice price action today. I could have found a much better entry, honestly. I even considered adding to the small position at support but did not, because I was watching Bitcoin.
Either way, we had the breakout of the channel and then retest multiple times of the 21 and 50 EMAs, as well as the horizontal support. We have had a nice move away this morning, so this look good to continue up. The risk reward is also good, with a stop below the recent lows. We now know we need that horizontal support to hold. This looks like it wants to finally head up.
EGLD/BTC
This is following the plan exactly. As I always mention, lines should be viewed as zones, and orders should be placed above the line to avoid being front run. This is risky because it was a big drop, but this is now sitting above a key support and should theoretically head back up sooner than later. I added to my position.
LINK/USD
As I mentioned was likely, this broke the pennant support but quickly reversed and headed up. Now we have a clean breakout on significant volume. I hope you caught it!
SUSHI/USDT
Patience has paid off on this pair, which is finally making a push through supply and resistance. It did not follow the exact path that I drew, but the idea is there and was echoed by Altcoin Psycho. Anything above the blue level now "should" be strong support. Nobody knows what will actually happen, we can only look at the chart. But I may add more to my position from far lower in the coming days if this remains strong.
Trump May Pardon Ross Ulbricht
Rumors are circulating of more than just a pardon for Ross Ulbricht, the founder of Silk Road. Julian Assange the founder of Wikileaks is also having his name tossed around in clemency rumors. Pardoning Ross would be very symbolic for the space because hatred for Bitcoin was tied to the persecution of Ross. This wouldn't bring mass adoption or price increases, but it would be a huge step in the right direction for basic acceptance of both libertarian ideas and the people’s freedom of choice over money. I spoke with Ross's mother Lynn on the podcast many months ago. It's a great listen.
Another Day, Another Rug Pull
This is your daily reminder that investing in this space comes with risks. Anyone that owned the coin DistX experienced over a 99% drop in 36 hours. This is a warning to anyone holding altcoins that don't have strong communities and/or bring anything substantial to the table. The promising coin that you heard will 1,000x that nobody else is talking about is likely set atop a rug waiting to be pulled. Be careful out there.
CBOE Is Adding Crypto Indices
It was recently announced that the S&P would add crypto indices next year. Now the CBOE is sharing similar news. The existence of crypto indexes on reputable legacy exchanges will bring credibility and access for big money. I interviewed Robert Matarazzi yesterday, the CEO of Lukka which is the data and software company behind the S&P index. I can say that he believes that this is a huge step towards mass adoption.
It would be absolutely huge if major legacy exchanges eventually directly offered crypto purchases - this would open retail floodgates that have never been opened before.
Trade Gods Is Live!
This is a must listen for any of you who are interested in trading! I know I shared it yesterday, but I want to make sure that you soak in all of the wisdom imparted by legendary trader Peter Brandt. Go watch it!
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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.