The Wolf Den #153 - We Made It
Bitcoin Thoughts And Analysis
Bitcoin is in the midst of a healthy correction. It topped at almost $42,000 and has since bounced from a low of roughly $30,200. This amounts to a roughly 28% drop from the highs in a few days. Scary for most, but TOTALLY normal in a Bitcoin bull market. In fact, it's been something we have been watching for since price was in the teens. I'm not worried at the moment. If you are an investor with a very long time horizon, these are likely "buy the dip and forget about it moments" as long as you understand it can go lower first.
DAILY CHART
As I have mentioned a few times, charts have become more difficult on the parabolic move up. That said, we can draw a clear but aggressively sloping support on the daily, which is currently being tested as support. If you are a trade who uses these lines, a break below would be a sign to exit lines or consider shorts (most likely on a retest as resistance).
Here are the Fibonacci retracement levels for the 2 major moves this year. The first are the blue lines, starting on March 12th at $3,858. You can see that we have now retraced past the key 23.6% level. The red lines represent the parabolic advance from $9,813. This drop almost retraced to the 38.2% level - a very healthy correction. If this continues down, you can use the Fibs from both of these moves as likely targets.
12-HOUR CHART
The last 12 hour candle had the highest volume in almost a year. The last time volume was higher was when "crypto died" in March.
This is worth paying attention to because the price dropping is confirmed with volume. As I always discussed, you want to see volume align with price action to confirm a move. Dropping on increasing volume means a true downtrend. It's real selling.
4-HOUR CHART
The 4-hour is where the action is. There are a few things to unpack here. First, I have mentioned the 50 MA countless times over the past few months, as it has held as support consistently and been a great long entry over and over. It works until it doesn't - which was this time. It finally broke down and is now resistance.
Looking back at this time frame, you can see a few clear selling and shorting opportunities. This is educational, I personally have no interest in shorting Bitcoin and absolutely did not consider these trades. But we had a range breakdown at the top with a retest as resistance, and a break of the 50 MA and PERFECT retest as resistance. Both of those, shown by red Xs, are textbook shorts with great risk reward.
You can also see the significant selling volume after buying climaxed. This is a real downtrend thus far.
So that's the bad news.
The good news is that price has bounced in a logical area for now and that could be a bottom. I am not sure, because RSI is still hovering JUST over oversold. As you know, overbought RSI ALWAYS travels to oversold and back. I have said this so many times in the past month that I am turning blue. Well, here we are. If you know my, you know I am really watching for a candle close in oversold RSI, then ideally a bullish divergence to signal a bottom. That would require a bit more downside. Here is a general idea of what that would look like.
I am watching to see RSI go oversold, then make a higher low while price makes a lower low. Look at the blue checks - that's what happened on the last two bottoms and almost every single oversold 4 hour bottom in Bitcoin history. If you have been with me, you have seen me draw the same idea IN ADVANCE on both of those bottoms with the blue checks. I am not saying it will happen - I am saying that's the signal that would be convincing for me if it does.
Let's take a look at the Fibonacci levels from the most recent move, which I have started at $27,678. Price just retraced about 80% of that move. Definitely "enough" if you are zoomed into the 4-hour and using this particular move.
Altcoin Charts
EGLD/USDT
This already gave the first entry I was watching before I could send the newsletter - $29.8. This may not be the bottom, but it is the first major support level below the current price and a reasonable area to start a position. This will all depend on Bitcoin, as this is the USDT pair.
The recent drop MAY be forming a nice bull flag, but the candle is not closed so we cannot confirm. That said, it would be quite perfect if that was the bottom for the day. If that is the case, the best entry on this pair would be a break of the bull flag to the upside.
This coin has held up strong on the BTC pair as well.
INJ/BTC
The most recent setup on this coin never triggered, as the blue line was not broken. That's great, because the same idea can be applied at a far better and lower entry. As you can see, this coin is attempting once again to break through the blue resistance. I would personally like to see it close above, since we already have a wick through. This would also be a close above horizontal purple support, which could be a good entry on a retest. Either way, this is strong resistance with the blue line and the purple, so a break and close above both would be a really nice sign that this intends to continue up.
Livestream Today At 2PM EST!
There seems to be quite a bit of panic in the market at the moment, so I am going to livestream today and look at charts, answer questions and offer my general thoughts on where we are currently at. Join me!
2PM EST today - just click on the video embedded above.
Popular Retail Indicator Shows How Early We Are
This retail indicator measures “New Weekly Twitter Followers For Crypto Exchanges” for the following platforms: Binance, Kraken, Coinbase, Bitfinex, and Bitstamp. 2017 recorded an all-time high for this metric at 253,000 new weekly followers. Even with the recent uptick in price across the board, the metric hasn’t come far off the bottom. Currently, new weekly Twitter followers is sitting at 69,000, only 27% of what it was during the last high.
As covered last week, searches for Ethereum have hit an all-time high, while searches for Bitcoin are half of what they once were. New followers described above are lacking. These numbers indicate that price is being largely driven by bigger players and that the retail market has not truly started buying. Another metric is the “New Weekly Twitter Followers With Coin Names” which has only achieved about 33% of what it once was, giving further proof that retail has yet to return in full force. Ideally, institutions will look to accumulate as much Bitcoin as possible before their competitors and before retail do, because once retail arrives, peak euphoria will be near.
Total Value Locked (TVL) In DeFi Hits All-Time High
TVL has been on a tear since July of 2020. It is important to note that calculated TVL is determined by the number of assets locked and the price of those assets. It is bullish to see this number increase but the other side of the story is that the total Bitcoin and Ethereum locked is decreasing - price is just increasing faster than the net total of exiting coins. The largest takeaway here is the role of Ethereum in DeFi. According to reputable data center defipulse.com, the top 59 DeFi projects are built on one chain - Ethereum. Bitcoin currently holds rank 25 due to progress on the Lightning Network. Despite criticisms for Ethereum, when it comes to DeFi there aren't even competitors - it's entirely a one coin show.
Financial Giants Are Looking For Alternative Bitcoin Exposure
A recent filing with the SEC revealed that Morgan Stanley owns 792,627 shares of MicroStrategy, or 10.9%, of the company. Morgan Stanley certainly knows that its investment in MicroStrategy will directly correlate to the price of Bitcoin. Since many institutions are sidelined by a lack of an ETF, their only option might be buying large-cap traditional companies that fit their investing guidelines. Even more interesting is the fact that Morgan Stanley isn't the only major player committing this Bitcoin exposure sidestep - BlackRock, Vanguard Group, and First Trust Advisors are also top holders of MicroStrategy. This is one of the clearest and quietest indicators that major financial institutions want a piece of the crypto action.
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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.