The Wolf Den #156 - Random Reinforcement
Bitcoin Thoughts And Analysis
It's been interesting to watch the community react to the recent drop. We have talked over and over again about the idea of a 30% retrace, something that happened many times in the 2017 bull run before huge gains to the upside. Even knowing that this has been a possibility for months, many started screaming "bear market" and calling for targets tens of thousands of dollars below price.
Once again, this appears to be a healthy and necessary retrace to gain strength for further price appreciation. Remember, institutions are buying and then moving their coins off of exchanges. Outflows remain high and supply remains limited as a result. eToro almost RAN OUT OF BITCOIN to sell this week. When institutions buy as a reserve asset or hedge, they do not sell. Further, they would be unlikely to sell at all in the first year to avoid short term capital gains. Demand remains much higher than supply. The higher we go, the more that will be the case. This is simple economics.
MONTHLY CHART
A thing of beauty. Bitcoin appears to be flipping the EQ (equilibrium, center dashed line) of this massive ascending channel to support. From a TA perspective, if the monthly candle closes above that dashed line, price should target the top of the channel - that puts 6 figure targets in the crosshairs. As absurd as that sounds, that is like than 3 from here. We have already done more than that in the past couple of months. Price is relative, which is why we use log charts - the percentage gain is much more important than the fixed amount in dollars.
4-HOUR CHART
I shared this idea on twitter after the newsletter as it began to develop. Bitcoin was in a clear ascending triangle and pushing hard towards resistance. It broke to the upside. You can see the target in pink, based on the depth of the triangle. The top resistance has not been retested as support. It may not happen, but if it does that is a classic long setup worth considering and is shown by the red path.
The green area on the left shows a large cluster of resistance. Since there was a major sell off, there are likely still quite a few people who had sell orders in this area or slightly higher that were never filled. So this is the last cluster of supply for now on the chart. It could be difficult to push through here, but with the power of Bitcoin right now I would not count on it holding for long if it really starts to rise. If you are not already in, the ideal short term trades are a drop to that blue support or a break of the all time high and/or retest of that as support. Candles closing above the all time high would be a strong signal of likely further price appreciation.
Altcoin Charts
I have kept the altcoin charts to minimum, only sharing those that I believe have the best chance to succeed. And succeed they have! EGLD, DOT and INJ are the three that I have shared this week (WAVES has not triggered, not trade yet), all of which are doing exceptionally well. After about 2 months, the SUSHI trade that I have posted over and over again is within reach of it the target (even though I believe it could go higher). Let's take a look.
DOT/BTC
This played out exactly as I was watching for, following the blue path by breaking the descending resistance and retesting it as support. Many of you contacted me and told me you took that trade, so congrats!
At this point, if I was looking for an entry on DOT I would either wait for a retrace (less likely) or look for a break of that top resistance and a retest as support. I have drawn a new red path to show this idea. Reminder, these ideas are not drawn with a specific timing in mind, just to show the idea of the resistance break and retest as support. For now, the first trade hit, so you look for confirmation (break of the top line) for another executable position.
EGLD/USDT
I have shared this chart over and over again and it is up roughly 4x for many of you. Of course we did a 20x on ERD before the rebrand. This appears to be breaking out of local resistance for another move up. The immediate target is the recent high at $42, but a break above that will send this into further price discovery for a new all time high. I am comfortable in this trade as long as price is above $29.8. If a candle close below there, I would consider exiting for the time being with a part of the position. That is the support to watch.
SUSHI/USDT
What a trade this has been. 3x in a matter of months. I have continued to update to help keep your hands strong on this one! I know that many of you have ridden this with me and I am starting to scale out. You know that I never hold right to the target, but usually sell a bit in case sellers front run that line. I have added a few more lines to the chart, where you can look for an entry on a retrace. The upper target is really it before price discovery, which is definitely possible. DeFi continues to explode, and this is one of the blue chip coins to hold through that growth. I will keep a position in this now indefinitely in case we see much higher targets. That is how I operate - 10-25% of any position that makes a huge profit gets moved to my investment portfolio.
Chart Requests
Here are all of your requests from yesterday! $AAVE $ALGO $CEL $CHZ $CRM $HBAR $LINK $OCEAN $PHA $TLRY $UTK $VET $ZEC $ZIL $ZRX
If Your Trade Doesn’t Wreck You, The IRS Will For Sure
...so stay safe and always keep track of your tax liability. As the battle of the bitcoin and altcoin maximalists continues, the marketcaps are shifting and trying to find their perfect balance. Many bitcoiners seek for the perfect opportunity to increase their bitcoin holdings. With bitcoin rising above $40,000 and bitcoin dominance trying to overcome its final resistance, many traders as well as investors are waiting for the perfect storm. Most people may already know what we’re referring to, #ALTSEASON.
As the past has shown us there could be one or two huge altcoin cycles in front of us.
Is it the right time to shift your balances from bitcoin to altcoins and grasp the opportunity? Nobody knows that, but I do know the shift to altcoins might lead to enormous risks from the tax perspective. Exchanging bitcoin for an altcoin makes you realize profit/loss and you need to pay tax on that. If your altcoins suffer a loss, you will have much less substance or need to sell at an unfavorable price in case you need cash. And the IRS will be demanding cash from you for the previously realized bitcoin gains. This happened to many traders in the aftermath of the 2017 and in some cases, their tax liability was larger than their whole crypto portfolio.
The most important things are to track your potential tax liability and your portfolio development. With tightening regulatory frameworks around the world and the RIPPLE lawsuit in the US, the risks are real, and you need to track all your crypto transactions to prevent potential damage in the future.
How do you react to this situation correctly? My answer to this is to check your tax liability upfront, before the IRS or another tax regulation authority does it for you. In order to keep track of all your transactions and avoid getting rekt by the IRS, be smart and use crypto tax software that lets you make the right decisions and provides maximum compliance. With Blockpit’s Cryptotax Tool, you can check your taxable profits and how much you will have to pay in taxes if you cash out now. This gives you the opportunity to get the most of the bull market and avoid the tax traps.
Elitium Q & A - Everything You Need To Know
I recently tweeted and wrote a blog about my investment in Elitium, as it is now my largest altcoin holding. I received a lot of questions about it so I wanted to cover my thoughts here in the newsletter to be as transparent as possible. I’ve invested in running an Elitium masternode, which will generate up to 28% EUM rewards over the next twelve months. A masternode, if you aren't familiar with it, is the fancy consensus method for proof of stake blockchains, similar to how mining is the consensus method for proof of work. This isn’t a coin I am in for quick profits; this is now a major holding of mine, alongside Bitcoin and Ethereum. Since November 1st, 2020 to today, Elitium has printed over a 5x, but that still doesn’t change my strategy. The level of utility this team is creating, coupled with the investors they have on board, means they’re just at the beginning. I did a full interview with the company a couple of weeks ago which I will link above, but here are the most important questions I asked the company.
Q: What makes Elitium unique?
A: Elitium brings together a variety of blockchain investments in one simple-to-use platform, eliminating the complexity and security implications of holding a blockchain-based portfolio. Elitium makes it easy for every accredited investor to access the world of blockchain-based products and grow their wealth in a straightforward, streamlined, and secure way. This strategy has created a stable foundation for our token, which ultimately allowed it to weather the pandemic and perform very well in March last year. And with the market taking off, EUM is once again showing its strength with very impressive performance since early December.
Q: What are the main selling points that led me to invest a significant amount of money in a low market cap coin that isn't ideal for trading?
A: There’s very little selling pressure on the coin given Elitium never ran an ICO. Plus, the masternode investment offers 28% annual rewards (with staking topping those up with up to 6.5% annual rewards). And with partners of the caliber of GDA Capital and Shahal Khan on board, Elitium has very well resourced investors who’ve proven their worth in the crypto world.
Q: Why is Elitium outperforming so many other altcoins?
A: The driving force behind Elitium’s price rise is a combination of a few factors. The most important is that Elitium never did an ICO, the result of this is there are less weak hands in the Elitium market. Rather it is high net worth individuals and capital partners who tend to buy the dip instead of panic selling. This has created a very strong price floor and foundation for the asset resulting in Elitium outperforming all top 50 altcoins in BTC comparatively.
Blockworks - My New Source For News And Insight
My friends at Blockworks launched their new website on Tuesday. I asked their Co-founder, Jason Yanowitz, to give us the inside story on the site.
When Mike and I launched Blockworks, we had one goal: To advance the conversation about Bitcoin and crypto in a responsible way.
At the time, every piece of info focused on the retail audience. We decided to help the institutional crowd understand this wild industry.
We launched as an events business. What started as small after work events grew into conference in locations like Chicago, New York, and London.
The Digital Asset Summit became the go-to conference for investors looking to learn about Bitcoin and crypto.
In August 2018, we launched our first podcast with Anthony Pompliano (The Pomp Podcast). We now work with twenty shows, including my personal favorite: The Wolf of All Streets :)
At the beginning of Covid-19, we sat down with our audience. We met with over 100 investors. These included: financial advisors, family offices, high network individuals, hedge funds, traders, venture firms, and more.
We learned 1 thing: There still wasn't a great source of information for traditional investors looking at digital assets.
We’ve spent the past several months designing and building the website, hiring reporters from Bloomberg, CoinDesk, American Banker, Cheddar, and Real Vision, and creating the perfect source of information for investors.
Our goal remains the same as it was on day one: To provide investors and finance professionals with the news, analysis, and insights they need to make informed decisions about the digital asset space.
You can view the new site at Blockworks.co and follow us on Twitter @Blockworks_
Don’t be a stranger. Send us a message and let us know your feedback!
Jack Dorsey Praises Bitcoin And Defends Trump Ban
Jack Dorsey, the CEO of Twitter wrote an insightful thread about the recent Trump ban and the ramifications of the decision. The overarching theme of the post wasn't about any one individual or action taken, but rather a thought experiment about the power structure within modern-day systems. The recent ban has raised serious questions in regard to centralized power, freedom of speech, and a divided nation. Within the depths of the thread, Jack said this, “The reason I have so much passion for #Bitcoin is largely because of the model it demonstrates: a foundational internet technology that is not controlled or influenced by any single individual or entity. This is what the internet wants to be, and over time, more of it will be.” What he means is that Bitcoin is monetary freedom and the principles it is built on should be carried into areas like information, data, and socialization. Bitcoin has given us more than a store of value; it has given us a democratic road map for society.
Brian Brooks Is Stepping Down From OCC
This is the second major departure of a regulator in weeks, with the power of replacement resting on Biden. Brooks was only the interim OCC chair, so everyone knew he would depart, but seeing the leader step down from his position is still disappointing. Brooks came from a strong cryptocurrency background as the former chief legal officer for Coinbase and through his short time as comptroller, provided banks with long-overdue clarity regarding the custody of crypto assets and the issuance of stable coins. Brooks's replacement will likely keep his policies in place, but it remains to be seen if they will proceed with the same level of urgency as their predecessor.
eToro Is Running Out Of Bitcoin
The Bitcoin supply crisis isn't a new story, it's just now becoming more serious. eToro sent out a letter to its 17 million registered users warning of “limited buy orders this coming weekend.” To combat the surge of new customers, eToro had to raise the minimum deposit by 400% to catch up on onboarding new users. This is the type of action that creates the frenzy we saw in late 2017. A former eToro employee weighed in on the situation, warning traders and investors to not move their funds during the potential weekend crisis when network activity could become extremely congested and liquidity could evaporate. He further speculated that this issue will likely soon plague other exchanges. This is a volatile time for traders, but an exciting time for investors. The supply crisis is something I will continue to monitor in the bull run to help predict a cycle top.
Livestream With Income Sharks At 8 PM EST
I will be livestreaming with crypto twitter legend Income Sharks tonight at 8 PM EST, talking altcoin trade ideas, charts and markets. Don't miss it!
Phemex X League of Traders New Year's Competition
My friends at Phemex are about to launch an individual competition for traders with a prize pool of up to 5 BTC in collaboration with League of Traders. To join ,simply download and sign up on League of Traders, create an API key on Phemex and connect your account to League of Traders (Guide). The app will allow you to monitor the leaderboard in real time for this and future competitions, access exclusive bonuses up to $600, copy trade, and more. Full details and requirements are available here. Sign up for Phemex first HERE.
The Wolf Of All Streets Podcast Ft. Edan Yago
Edan Yago grew up in the middle of South Africa’s Apartheid movement, and at one point had to smuggle gold as a child. Upon discovering Bitcoin, Edan was primed for the moment from every aspect of his past and immediately knew his life would change forever. Stepping into the crypto space, Edan set out to design a new way of doing DeFi building a sidechain off of Bitcoin instead of Ethereum, called Sovryn. Edan is most excited for the monetary evolution DeFi will bring to the 99% of the world that does not have full access to the world’s financial gardens.
Yago and I further discuss sewing gold into coat pockets to smuggle, growing up in South Africa’s apartheid, a family of political activists, the only important choice is buying Bitcoin, bringing Bitcoin’s liquidity to DeFi, designing Sovryn, defeating crypto tribalism, fighting the non-coiners, loaning against DeFi, pseudo-Bitcoin, hyper dumps, hyper pumps, 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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The platform I am using for my taxes. My trades were automatically imported after setup and displayed nicely. The tax report was quick and easy to create in the app. I can also track the performance of my assets in the app. With Blockpit, I no longer have to worry about realizing profits or losses in time. 10% discount using the link above!
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.