The Wolf Den #154 - Be Humble
Bitcoin Thoughts And Analysis
Every time we see a significant impulsive move on Bitcoin or another asset, we expect to see a reactive bounce of around 50%. It happens almost every time, and is a classic setup for a short or long, depending on the direction of the impulsive move. Like anything in TA, it does not work every time, but it's always worth watching on a major drop (or rise).
Yesterday's large up candle stopped at exactly the 50% level, as shared in this tweet below.
Overnight (for me), price pushed past the 50% level, almost to the "golden pocket" between the 61.8% and 65% retracement levels. It did not quite reach that area. If you are unfamiliar with the "golden pocket," here is more info.
For now, the move up still looks like it could simply be an impulsive bounce after the strong push on significant volume to the downside. That does not mean it will drop again, it just means that early calls for a reversal are just that - early. These bounces happen because there are heavy standing orders in certain areas, or because traders jump in early trying to time the bottom. If it drops again, you can clearly see that the sellers were clearing out orders for another push - hence why we see consolidation after major moves.
The good news is that most bearish consolidation (bear flag or pennant) does not extend past the 50% retracement - some argue that they are invalid once that level is breached. If we did have a flag, the measured move of a breakdown would be defined and would be significant - effectively another drop of the same size as we just witnessed. For now, it appears to me that Bitcoin is still looking to make a decision and if it drops, it would not have as aggressive of a target.
As you know, I drew the above idea yesterday and it still seems possible. As a trader, I would love to see one more dip to make a lower low on price and a higher low on RSI. This has been the signal on the past two bottoms, which I have drawn out previously.
Yesterday we had a clear bull div on the hourly, which signaled the bottom.
I drew this idea on the livestream yesterday, to get ahead of the crowd that would inevitably be screaming head and shoulders. Sure enough, it is everywhere on twitter now.
You cannot trade a head and shoulders before it happens - it's just an idea and can be completely ignored until the neckline breaks on significant volume. If we drop that low, I would actually be quite amused and unsurprised if it did what I drew above - fake out below the neck, forming the bullish divergence and shooting up.
We will see if it becomes and issue, but for now it's not worth worrying about
The bottom line for now is that I am planning to watch and wait. If we start to see higher lows (it could be making one now) and THEN higher highs, I would be more convinced that this drop is finished and we are heading to new highs. Otherwise, I will be watching for a bull div on a drop.
Altcoin Charts
Like with Bitcoin, we have seen a little bounce on altcoins. I am still skeptical, as it could be reactive to the drop. That said, ALT/BTC pairs have held up relatively well. $EGLD is up 10% from the entry I posted, and INJ (shown below) looks solid. I still really like SUSHI as well, nothing has remotely changed there. No new setups today outside of a recap of INJ - waiting to see what BTC does, which is the smarted move for any trader today.
INJ/BTC
Just a quick update from yesterday, as this broke out and retested both areas as support. I am still liking this setup... a lot.
DXY (Dollar Index)
As you know, action on the dollar tends to drive price action on almost every other major asset, including Bitcoin and metals. The dollar bounced yesterday, coinciding with the Bitcoin dump, so it's worth zooming in a bit on the DXY chart.
I have been bearish on the dollar for a long time, as you know. When everyone was screaming breakout in September, I drew the above idea and it played out perfectly. Now we are seeing a retest, once again, if this resistance. Watching if the dollar can break this line could be key in figuring out what is next for Bitcoin. On a larger time frame, I think the dollar is clearly broken down and headed lower.
Mark Cuban Compares Crypto to Dotcom Bubble
It is hard to take Mark Cuban seriously here when he is referring to cryptocurrencies as “the cryptos,” but I will just assume he was tight on space for the Tweet. Mark Cuban has a decent point here - many cryptos will fail. Like dot-coms in the late 90s, there are just too many coins trying to do the same thing. What Mark is likely trying to say is that crypto is undergoing another cycle. The dot-com bubble never had cycles; it just had a massive run up from 1995 to a peak in 2000. That being said, the majority of cryptocurrencies are young, meaning Bitcoin and a few other coins are the only “cryptos” that have experienced cycles, unlike the majority of coins that were created from 2017 to the present. Clearly, Mark felt the need to clear the air on his stance. Crypto really is knocking on the door of every investor and entrepreneur.
Bakkt Rumors Are True, It’s Going Public
Bakkt, the digital asset marketplace, is considered one of the giants in the crypto space. It is now confirmed that Bakkt is undergoing a merger with VPC Impact Acquisition Holdings and will be called “Bakkt Holdings” when listed on the NYSE. The merger is expected to be valued at $2.1 million and to have a closed deal second quarter. Investors and capital on the legacy side are growing, while there remains a shortage of places to put money if they are looking for price exposure to the crypto markets.
JP Morgan Does Not Understand Bitcoin Supply and Demand
According to a JP Morgan analyst, the approval of a Bitcoin ETF would cause a dip in the short-term price of Bitcoin. This seems ridiculous considering the fact that an approved ETF would open the gates for major financial institutions to enter that currently are sidelined by company regulations that bar them from purchasing GBTC. According to Bloomberg, “the ETF would erode the Grayscale Trust’s effective monopoly, sparking outflows and a slide in its premium to net asset value.” If money leaves GBTC it seems likely the GBTC sell orders would match the buy orders flowing into the ETF, which wouldn't bring the price down of Bitcoin, only GBTC. An ETF approval brings money to the space and a correction on release day would just be profit-taking from the run-up due to the announcement. In the long run, I can only see the upside of an ETF when it is approved and deployed.
Livestream Today At 2 PM EST!
I will be going live again at 2PM EST to discuss current Bitcoin price action, what other coins I am looking at, Bitcoin Dominance and more. I am having a great time hanging out with you guys, so why not do it again?
The Wolf Of All Streets Podcast Ft. Robert Materazzi
Robert Materazzi is a US Marine who eagerly attacks big problems, as evidenced by his time at PWC and at Lukka. Robert discovered crypto and believed in the sector's potential, but determined there to be a missing link in crypto markets with regard to fair market price evaluations. While it may sound simple to determine the price of a crypto asset, it is quite the opposite - and over 160 crypto firms have leveraged Lukka’s products to accurately price the assets that they own for guaranteed accuracy. When bilions are at stake, every penny and dollar matters.
Robert and I further discuss, working with the S&P, providing the most precise indices, how a fair market value is determined, avoiding artificial volume, catering to 160 crypto funds, the accessibility and liquidity of tokenized assets, staying compliant with regulators, crypto tax audits, Lukka Prime, Series C investments, Bitcoin as a gateway drug and more.
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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.