The Wolf Den #188 - Mr. Wonderful Is One Of Us
Bitcoin Thoughts And Analysis
I have been aggressively buying the Bitcoin dips, quite publicly to make sure that I was transparent and showing my purchases. I last bought around $43,700, bringing my cost basis for purchases on this dip to around $46,000. As you know, I have been taking altcoin profits for weeks, so I have plenty of cash on the side that was waiting for an opportunity. Most of that is out of the market for good, but I took 25% of it to buy back in. I have deployed about half of that, might not buy more - we will see.
Through the weekend I pointed out multiple times that we had bullish divergences building on low time frames and confirming over and over again. Those eventually played out.
MONTHLY CHART
There's nothing bearish on the monthly chart, which just closed another candle yesterday. No concerns for me here, all systems are go. There will be corrections and pullbacks. When you zoom out, the last week looks like nothing even happened.
WEEKLY CHART
There is no denying that fact that last week's candle was ugly. It bearishly engulfed the previous weekly candle after topping at $58,000.
Not such a big deal.
A candle is only bearish if the next candle confirms it, so we have another 6.5 days to see what happens here. Price did not break any key levels of support and we have seen plenty of weekly candles like that that amounted to nothing more than good dip buying opportunities.
The talk of the town has been the confirmed bearish divergence with RSI on the weekly chart. As you know, I generally do NOT concern myself with higher time frame divergences, as they are unpredictable and can take months to play out, if at all. The SPY and Dow Jones had monthly and weekly bearish divergences pushing up for years. That said, we did have the bear div on the weekly, which sent RSI out of overbought and could be viewed as a nice reset. If this week's candle closes at current prices or above, we will have hidden bullish divergence, canceling the bear div. So we can keep our eyes on that. Even if price drops quite a bit further, that hidden bull div would likely eventually confirm.
DAILY CHART
There were a number of long wicks down on the previous candles, indicating buying demand. That said, that also means those orders are cleared and out of the way if Bitcoin continues to correct. My bias remains up, that this is a healthy correction. But it still bears watching. Yesterday's candle was a hammer, although the wick is not that long and the body is blue (red). Thus far, today's candle is following bullishly and engulfing the previous few bearish candles. A close here or above would be a nice signal that a reversal is likely underway.
6-HOUR CHART
The line chart shows a nice bullish divergence and the break out of this descending wedge. That is usually a reversal signal, but could just be relief with a target in the low 50Ks. We also need to watch for potential hidden bearish divergence on this time frame and below. We need to see some follow through and not see RSOI elbowing down, so to speak.
4-HOUR CHART
Revisiting this chart from last week, we can see that price did somewhat mimic the move from January so far. Price corrected almost as much. That said, if you continue the fractal, you will see that price continued to range and correct for almost 2 weeks, so that could be in our future. I personally think we will head up faster and that the lows could be in, but I have no better idea than anyone else what will happen!
Here are the divergences on the 4-hour chart, for reference. The newest confirmed divergence is a bull div.
Altcoin Charts
Altcoins seem to be finding some relief after Bitcoin bounced and is showing some signs of reversal. That said, alts remain risky in my mind. If Bitcoins rips up, alts will likely suffer on their BTC pairs (they will probably rise but not as much as Bitcoin on their USDT pairs). If Bitcoin corrects further, they will also likely suffer on both pairs. The best time to trade alts, in theory, is if Bitcoin goes up and then moves sideways in consolidation. So this could be a brief window for the moment.
BNB/USDT
This is an update from last week, because BNB is currently breaking out on the 4-Hour chart. If you like to buy breakouts before confirmation, you could purchase now (or a few dollars ago, honestly). If you like to wait for a retest as support, then you would wait for this candle to close above the purple line and set bids for that line to be retested. If you trade horizontals, this is currently right at resistance, so you would wait for a break above and/or retest as support. Up to you, but BNB looks ready to reverse back to the recent highs once again, assuming Bitcoin behaves.
COMP/BTC
COMP broke the descending resistance (purple), retested as support and has moved away. That said, the move through resistance was very weak and price is only currently back to the point where that happened. I personally would want to see price above .009226, ideally with a retest of that level as support. Fibonaccis levels can be used as targets - I have pulled them from the most recent major top to bottom.
If Bitcoin settles down and altcoins see relief, this should perform well.
POLK/USD
POLK is a brand news coin, Polkamarkets, that just started trading last week before the market correction. It looks like it is potentially reversing and heading back up now that Bitcoin has settled down a bit. This can be traded on Uniswap/Matcha etc. Here is the correct contract address:
0xd478161c952357f05f0292b56012cd8457f1cfbf
I charted it above on dextools.io, which for some reason will not embed in the newsletter.
As you can see, price broke the larger descending resistance, consolidated again and is not heading up. 2.5257103 seems to be the key local area.
Trading these coins is risky. They are low market cap, low volume and these exchanges have no stop losses. Therefore, you need to take VERY small positions. Be careful if you choose to trade coins like this. They do offer tremendous upside, when they go well. They are also difficult to chart, because they have not been around very long and tend to move more on FOMO than technicals.
Ethereum Continues To Hit Milestones
In the month of February, the ETH 2.0 deposit contract surpassed 3.3 million tokens staked and over 100,000 validators are now a part of the Ethereum ecosystem. The staked Ethereum will continue to grow as 2.0 is rolled out and currently, just below 3% of the total supply is locked.
If you own Ethereum and have felt fear creep in over the past couple of weeks, you are not alone. The fundamentals that prompted me to buy into the token have not changed - they are still fully intact. The recent rise of Cardano’s price is behind a lot of the recent division and controversy, raising fair questions about the possibility of an “Ethereum killer.”
When enough fear and panic have manifested in the market is when everything will begin to return to normal and reward those who have sat patiently. The last time I was frustrated with Ethereum for underperforming, it shot up to $1,100 from around $700. Investors today are experiencing a similar frustration; the markets are a constant game trying to flush you out.
On Etherscan:
https://etherscan.io/address/0x00000000219ab540356cbb839cbe05303d7705fa
Flash Crashes and Discounts Can Land In Your Favor
Just last week, Ethereum saw a flash crash to $700 on Kraken allowing users to fill stink bids at around half of the normal market price. Another exchange over the weekend, PDAX, accidentally sold Bitcoin at $6,000, down 88% from the market value of $48,000 at the time. It is likely that the increased volatility throughout the bull run will lead to more opportunities as mentioned above so be on alert. Don’t panic or celebrate if you happen to catch a discounted order, but don't immediately capitulate to demands to return your crypto. Historically, exchanges have fallen on both sides of the ethical spectrum, either offering reimbursement for liquidated traders or demanding crypto to be returned. Do your own research if you are caught in one of these situations before making a hasty decision. Familiarize yourself with how your preferred exchange has handled technical failures (if they have ever had any), as this will likely reveal where they will stand on future mishaps.
Miners Are No Longer Selling
After 2 months of selling, miners have finally begun to accumulate more tokens in their wallets than the amount they are selling. This is a positive reinforcement that supply is again less than demand, hopefully, enough to begin turning around the market this week. It is this exact behavior that can eventually lead to a supply crisis on exchanges, as seen a couple of months back.
As the price continues to rise and miners cycle back and forth between selling and accumulating on their own timetables, the market will continue experiencing more severe Bitcoin supply shortages, until one day there really is no Bitcoin to buy. And it will be during that short time frame when retail refuses to sell that the market will likely hit its absolute peak.
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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.