The Wolf Den #180 - MicroStrategy Is Buying... Again
Bitcoin Thoughts And Analysis
There's little reason to beat the dead horse and spend a ton of time charting Bitcoin. It remains bullish.
As discussed, the rising wedge was a weak "bearish" pattern and Bitcoin broke above on a sizable candle. Price has since come back to retest the recent highs as support and continues to rise.
The hidden bull div played out and price reversed to the upside. We are once again entering price discovery for new highs. My target of the daily bull flag around 63K has not changed.
Altcoin Charts
Alts look generally risky at the moment on BTC pairs, so I am not looking at too many setups. If Bitcoin continues to rage, BTC pairs will suffer, USD pairs will rise but less than BTC, making BTC the better trade.
LTC/BTC
Litecoin is one of the few coins that looks solid against BTC at the moment. It has been trending up and just broke out of it's recent consolidation, as shown by the break through the purple line. That said, it is presently at resistance, so I would ideally like to see it close above 4500 before considering an entry. That or buy it lower on a retest of the support below or the purple line. If it can muster the strength to break above the current resistance, it should theoretically continue up. This is the smaller trade.
Ultimately I would like to see a break of the red line above, which would confirm a macro double bottom. This would theoretically send price flying to much higher targets. It all depends on your system and time frame as a trader as to how you approach this.
LTC/USD
I wanted to add the LTC/USD pair for context, as a remind of how bullish this asset looks. As you can see, price confirmed a double bottom breakout already on this pair, with a target around $275. Ultimately I expect LTC to hit the previous all time high. If that flips, it's clear skies ahead. I am NOT saying this is a buy here, but it certainly looks like adding on dips would be a good idea.
Legacy Markets
DXY (DOLLAR INDEX)
The dollar gapped up nicely in a small bullish move after having a lot of downward momentum. In a coinciding move, stocks opened down, with a gap of their own. Bitcoin did not react, a further signal that it continues to become less correlated and more idiosyncratic. Beautiful.
While many likely view today's dollar action as bullish, to me it just looks like it's going up to retest former support as resistance. We saw this on the much larger monthly channel and at every key horizontal level. Nothing goes straight down. Anything can happen, but my idea is drawn above. If this happens, it would likely be a nice dip buying opportunity for stocks on that bearish retest. At the very least, we would anticipate the new gap being filled at some point.
Buy The Dip
Buy the dip is an age-old mantra used by traders and investors to describe the activity of adding to their portfolios when the price of an asset drops. It has historically been proven to be one of the best ways to compound wealth.
To illustrate the power of buying the dip, I created the above chart of the Dow Jones Industrial Average since 1896. There have been a number of crashes, bear markets and recessions over the past 125 years. I have marked each of the most notable events on the chart.
As is painfully clear, every single dip, including The Great Depression, was an opportunity for cash flush investors to buy stocks at extreme discounts with a long time horizon. With the stock market presently near all time highs, there has literally never been a bad time in the history of the stock market to invest in equities.
When viewed through this lens, you can see how essential it is to zoom out and consider a multi decade time horizon for investments. As Warren Buffett once famously said "the stock market is a device for transferring money from the impatient to the patient." Short term decisions are what lose investors money. Buffett also said, "If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes."
Markets trend up over time. Depressions, recessions and bear markets have always been temporary and are the best buying opportunities.
Now apply this logic to Bitcoin. Imagine if the Bitcoin chart ultimately reflects similar growth to the stock market over a long time horizon. Logically, there's no reason for this not to occur. Considering this, it is likely that we are very, very early.
Peter Brandt touched on the idea of patience in markets and buying dips in our interview below - around 41:30. ""Buy stocks and hope they go down. Buy good companies and hope you can buy em cheaper.. Buy them and hope that they go down 50%, because you can dollar cost average your whole life and you'll do very well doing that."
MicroStrategy Is Buying More Bitcoin
Michael Saylor at MicroStrategy is fulfilling his commitment to buying more Bitcoin beyond the multibillion-dollar stack his company already holds, with the added risk of taking on debt. But not all of his purchases have been the same, and the strategy in which he is conducting his purchase can be seen as a roadmap for how other companies could approach the matter. Back in December was the first time MicroStrategy offered senior convertible notes to raise money for purchasing Bitcoin and now they are offering a second and similar round. According to some analysts, investing in MicroStrategy is an “almost free call option on Bitcoin.” This is due to the fact that the bonds can either be paid out in equity at a set price or cashed out at expiration. Major investors that believe in continued upward movement of Bitcoin can gain indirect exposure with a strong upside potential in their investment in MicroStrategy. Read the thread above for a more nuanced look at how the bonds work.
As an update to the tweet thread, MicroStrategy has upped their ask from 600M to 900M and has announced 0% interest. Here is the official offering.
Gartner Survey Reveals Mixed Reviews Around Corporations Buying Bitcoin
A recent survey from Gartner targeting CFOs from major corporations about their views on Bitcoin found mixed results when interpreted by industry experts. Cointelegraph released a positive interpretation of the survey pointing out that “More than 70% of financial executives surveyed are closely watching what everyone else is doing with Bitcoin before they decide on investing their companies’ cash reserves in it.” Gartner’s conclusion focused on other statistics indicating that “Just 5% of finance executives polled said they planned to hold Bitcoin as a corporate asset in 2021.” Regardless of the sentiment, the the number one risk identified by those surveyed was, “volatility of Bitcoin.”
The important thing is to watch what companies do, rather than what they say. That is where the ultimate truth will lie.
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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. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.