The Wolf Den #163 - Valkyrie ETF Filed, Trust Launched
Bitcoin Thoughts And Analysis
Bitcoin is still very much choppy and sideways in my opinion, but it's starting to move a bit today. There's not much to see on large timeframes, so I will focus once again on the 4-hour chart.
4-HOUR CHART
This idea did not fully play out, but we almost always expect our ideas to be front run. That's why we do not place orders right on a line, but rather above in case price does not quite get there. This got within about $1000 of the intended entry on that long wick. Close enough, but still does not mean it won't come to fruition eventually. What I like on this chart still is that price consolidated hard for days around the EQ of the channel and has not made a nice move above. Trading in the top half is good! If we draw a new support line (not shown) between the 2 large wicks down, we would now have a clear descending wedge instead of channel, still bullish.
After the recent drop, Bitcoin made a nice move up and consolidated in a bull flag, which has now broken to the upside. Based on the length of the flagpole we can extrapolate a target from the point of breakout. That's perfectly aligned with the red resistance, so I if we get there, I would expect a lot of friction.
You can also see on this chart that Bitcoin has flipped the red 200 MA back to support and the blue 50 MA as well. That will likely be retested as support imminently.
In theory, the current Bitcoin move should at least target the EQ of the blue channel, which is the dashed center line. That's what "should" happen after a support test of the range lows, which were swept just as predicted. Once it hits the EQ, we need to see if it can flip that to support, which would then target the range highs around $42,000.
Bitcoin - The Four Year Cycle
Written by Rekt Capital:
I first started sharing my thoughts on the Bitcoin Four Year Cycle in early March 2020:
The most important technical step Bitcoin needed to make by the end of 2020 was to eclipse its previous high of $13,900.
And Bitcoin did just that and more.
Bitcoin decisively eclipsed $20,000 and finished 2020 on a high note by reaching $29,500.
The previous Bitcoin Four Year Cycle is over.
A new Bitcoin Four Year Cycle begins.
The New Bitcoin Four Year Cycle
There is no denying that the Bitcoin Halving serves as a major catalyst to Bitcoin Bull Markets.
And this time was no different.
In fact, the Bitcoin Halvings tend to play an important role in forming the Four Year Cycles.
That is, the Halving events take place in Candle 4 of the old Four Year Cycle; months before the exponential Candle 1 of the new Four Year Cycle takes place.
Bitcoin Halvings precede the exponential Candle 1 of a new Bitcoin Four Year Cycle.
What this suggests is that Bitcoin will experience yet another exponential Candle 1 in 2021.
Is A Retrace Possible In Q1, 2021?
Historically however, Candle 1 tends to first pullback into the same level that rejected Bitcoin for the majority of the previous Four Year Cycle to claim it as support (green horizontal). This tends to occur in the early stages of the new Candle 1.
In the first Four Year Cycle, this level was $733.
That is, $733 rejected Bitcoin in Candles 1, 2, and 3 until Candle 4 eclipsed it, and then the new Candle 1 claimed it as support.
And even in 2011 and 2012 when no Four Year Cycle existed, the price level of $13.14 would reject price for two years until Candle 1 claimed it as support before embarking on an exponential uptrend.
In short: previous Four Year Cycle resistances tend to be claimed as support later on.
So if history were to repeat itself, this would suggest Bitcoin could retrace towards the $13900 area in this current Candle 1 (i.e. which would mean a -60% retracement from $35000, which does seem unlikely at this point).
The problem with this assumption is how exponential the latest Candle 4 actually was.
Before, the Candle 4 would be able to eclipse only the green horizontal and fail to eclipse the black horizontal (i.e. old All Time High).
Of course, Bitcoin was able to invalidate this key historical tendency in this recent Candle 4.
So where does that leave a potential retrace opportunity for Bitcoin?
The only Four Year Cycle level remaining - $20,000 (red horizontal). This would require a -42% retracement from the recently reached ~$35,000.
In Bitcoin's previous Bull Markets, Bitcoin would typically retrace 21–43%.
How Much Could Bitcoin Rally In 2021?
In my previous October 2020 analysis on Bitcoin's Four Year Cycle, I measured full Candle Bodies to extrapolate a new Candle 1.
In doing so, I excluded volatile upside as well as downside wicks so as to arrive at a more conservative estimate. At the time, I also assumed $13,900 could be the base for a new Candle 1.
In this article, I'll include these upside and downside wicks in the analysis, so as to account for any extreme volatility that Bitcoin may experience throughout its new Candle 1.
I'll also assume $20,000 could be the base for a new Candle 1 (even though a retrace to this level is not a guarantee).
Using recurring price tendencies from previous Four Year Cycles as a guide, I'll extrapolate this entire new Four Year Cycle:
Accounting for historical upside and downside volatility and a potentially diminishing rate of return in Candle 1 rallies, Bitcoin could rally to as far as $150,000-$170,000 in Candle 1.
This would likely be followed by a Bear Market Candle 2, which historically tends to experience an average correction of -84,5%.
The Candle 3 that would follow thereafter would be the bottoming out candle, which would form at the bottom of Candle 2, while offering scope for some downside wicking, just like in previous Candle 3s.
And lastly, Candle 4 would form just above the top of the previous Candle 3, developing in an effort to eclipse a multi-year horizontal resistance (green), ultimately managing a twelve-month close above it and perhaps even eclipsing the old All Time High (red horizontal resistance) before yet another new Candle 1 forms.
Overall, this extrapolation should serve as a visual guide on what to expect from Bitcoin's price action for the upcoming years in this new Four Year Cycle.
Altcoin charts
It was a great couple of days for altcoins, seeing large moves and a major recovery of the losses from last week. That said, Bitcoin is making a move an altcoins are clearly reacting negatively at the moment. ETH is at resistance and Bitcoin Dominance saw a sizable bounce. For that reason, I am not looking at many trades today, but will share some ideas.
EGLD/USDT
EGLD has broken out once again, almost 5x from our entry on this round of trading Elrond. Incredible. It is in price discovery, so hard to discern targets or entries, unless we get a retrace. A first test of the previous all time high that was just broke as support would be a logical entry, so watch for that if we do get a retrace. We may not.
ENJ/BTC
I am not saying that this will happen, but I would be willing to put some "stink bids" down in the pink box in case we get a significant retrace. That is a very key resistance that was never tested as support, so if you are looking for an Enjin entry, that's the place to try to catch a wick or a drop. Otherwise, the entry is higher, with a solid flip of that supply zone to support.
ETH/BTC
Ethereum broke a key resistance on the BTC pair on every meaningful time frame from the weekly down. It is currently retesting that line as support, at .04057175. It will be very interesting to see if it holds and will largely depend on what Bitcoin does. From a technical perspective, this is an attractive potential entry with good risk/reward - the first retest of a key level as support. That said, zooming in on the daily and even 4 hour, that candle is currently very ugly, so it does carry some risk. Might be worth waiting until a close to see where it lands.
ETH/USD
The dollar pair is still struggling to make a clean break of the previous all time high. As I said last week, Bitcoin hit its all time high and then retraced for about 2 weeks, gaining strength to break the line. Ethereum has now been trying for about 6 days, so perhaps it will make the move. Regardless, I expect it to happen eventually and for ETH to head to new highs.
I drew this idea last week. I have no idea if it will happen, but whenever it does break, this is the trade I would personally think it safest - a retest of the red line as support, if it happens.
YFDAI/USDT
This is not available on TradingView, so I cannot embed the chart. Here is the link: http://www.chartex.pro/snapshots/38dce075-3511-4dcc-85de-21fa9218c495.png
I have, unbelievably, been in this since $40, although I have traded in and out a number of times. My entry is on the far left and was a tip from a friend. Crazy, lucky. I have talked about the coin quite a few times, I am very bullish on the team's transparency, the anti rug pull elements etc. But the chart also looks great. $3359 is now support, but I am watching from a break of the all time high and a move into price discovery. This is one of my largest positions.
Legacy Markets
SPWR (SUNPOWER CORP.)
This is up about 70% since I posted it less than 2 weeks ago and 65% from the proposed entry on the retest of resistance as support. I hope you are enjoying the gains! I will look for some more stock setups this week.
Fundstrat Predicts 10.5K Ethereum
Alex Krüger shared a small screenshot from Fundstrat explaining the bull case for Ethereum. A couple of weeks ago, I covered why I was bullish on Ethereum but wanted to share a new perspective arriving at the same conclusion. If you are a crypto investor, there is no reason not to hold some Ethereum long-term. The idea that the market is either Bitcoin or Ethereum is wasteful tribalism. This is both a Bitcoin and Ethereum market, and Alex makes this exact point in the thread.
Ethereum Is Leaving Exchanges
There is a massive exodus of Ethereum held on exchanges being removed to new platforms and projects. This is almost always seen as a bullish indicator, considering the coins become harder to sell when they leave exchanges. This last week, there was over $1.6 billion in Ethereum removed, creating a 15-month low for Ethereum held on exchanges. There are only four main places the Ethereum would go: into DeFi to increase total value locked (TVL), the Ethereum staking contract, the Grayscale trust, or investors. From four paths, TVL hasn’t seen an increase in coins, but the staking contract has seen a massive influx this week accounting for about a third of fleeing Ethereum. The third possibility, Grayscale’s trust, also isn't the answer because they have not been recently buying additional Ethereum. The removed Ethereum must be flowing into the pockets of large investors, most likely being placed in cold storage. This lack of supply is surely a strong factor in the recent price run-up.
This Billionaire Thinks Bitcoin Is Nothing
Time and time again, we’ve seen billionaire hedge fund manager take shots at cryptocurrency. This time, it's Paul Singer and he believes, “people try to be rational and think that they’re rational, but quite frequently they’re not. And there is hardly a better example today than cryptocurrencies.” Furthermore, he added, “to tell me that something that’s constructed as a computer program, where you engage in some process of sitting there in front of your computer and after a period of time and the expenditure of a bunch of electricity a message appears on your screen that you have created something, that’s ridiculous. It’s nothing. Gold is not nothing, gold is something, you’ll hurt your teeth if you bite a gold coin.” This is more of a telltale sign that Singer does not understand cryptocurrency rather than him intelligently believing Bitcoin is just “nothing.” Keep in mind, these comments are being made while BlackRock is publicly showing interest in investing in Bitcoin. They are probably buying the Bitcoin Singer is choosing not to touch.
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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.