The Wolf Den #193 - Invest Only What You Can Afford To Lose
Bitcoin Thoughts And Analysis
WEEKLY CHART
Bitcoin had a strong weekly close after last week's dip. The volume was low - no surprise during consolidation after a large move in either direction. But it's a nice candle, minimal lower wick and a small upper wick. We want to see real follow through this week.
DAILY CHART
The daily chart gives us some very clear areas worth watching for supply and demand. The overhead supply is drawn off of the last grey daily candle before the major drop - meaning that there are lots of sell orders left over there that were never filled, which should cause resistance. Demand is the last down candle before the bounce, an area where lots of people were looking to buy and likely missed their chance. There should still be buy orders sitting there, creating support. Ultimately, I view Bitcoin now as sideways until one of these areas is broken.
4-HOUR CHART
Zooming in, we can see that Bitcoin is actually in a smaller range. This is a beautiful range, as can be seen by the interaction of price with the EQ, the 50% line in the middle. It was strong resistance and support over the past days. It's bullish to be trading in the top half of the range, and appears that price is likely consolidating below the top resistance. We want to see a strong push through this level to signal a likely reversal is underway.
There was a confirmed bullish divergence with RSI on Saturday. I did not open a single chart this weekend, so I missed it, but it's still valid as no hidden bear or bear divs have followed.
Altcoin Charts
ETH/BTC
I have posted this chart quite a few times, but it's worth noting that Ethereum is finally showing some strength on the BTC pair, moving away from the descending resistance and horizontal support. It is currently working on flipping another local resistance to support as well.
Ethereum strength should be a very good sign for the altcoin market in general.
ETH/USD
ETH had a strong weekly candle close on the USD pair, bouncing perfectly off of the previous all time high. This is an expected and strong flip of resistance to support, so I am very optimistic still on ETH here. If you are risk averse, the safest entry now if you missed this dip is to wait for a break of the new all time high and price discovery. I believe we will see it, but nothing is certain.
TVK/BTC
I love this project - I even wrote a review of it on the blog, which you can read linked below. I also like the chart. It currently appeared to have bottomed and is presently rising in an ascending channel. It flipped the EQ (equilibrium, dashed center line) of the channel to support and is currently struggling with horizontal resistance at 1309. I want to see that flipped to support, so we need to see candles closing above that. Regardless, this is trending up after it's quick drop after being listed on Binance, and there's a lot of excitement around the project. I like when fundamentals line up with technicals. First target is simply the top of the channel. Above that it would be in price discovery.
Legacy Markets
DXY (DOLLAR INDEX)
The DXY has shown quite a bit of strength over the past few days, largely the reason that we have seen stocks and metals suffer. I have been a dollar bear for a year and my bias still remains down, but it's always important to note the other side when presented with new information.
DXY on low time frames has now made a confirmed higher high and higher low since bottoming and is in the process of another potential higher high. That said, the area that the DXY is entering is strong resistance, and unlikely to be easy to push through.
We know that the dollar moves inversely to most other assets, so we should continue to monitor this movement. A push through resistance and another higher low down the road would make this a more compelling case for a reversal. For now, it still looks more like relief.
And they're still printing more.
GBTC NAV Has Gone Negative
One of the downsides to investing in GBTC has been the premium investors pay in relation to the current value of Bitcoin. Recently, GBTC’s NAV (net asset value) dipped negative for the first time, dropping all the way to almost -12%. Because of investor movement in and out of the trust, the share price, in theory, can either offer a discount or a premium depending on activity.
Since its inception, GBTC has always traded at a premium, with its highest value over NAV reaching 132%. From 2019 until the present, the value has settled somewhere between 10% and 30%. Savvy investors know that a dip below 0% could likely result in a short-term free % return as the NAV naturally returns back up to its normal state.
On the downside, the dip below 0% is likely the result of investors slowly losing faith in the trust due to a growing rise in secondary and indirect exposure options for Bitcoin. Canada just had its ETF approved, more publicly listed companies are adding Bitcoin to the balance sheet, and mining stocks are continuing to gain traction. An ETF approval in the U.S. could dramatically lower GBTC’s NAV. If you plan on trading GBTC, you should probably consider the NAV before you buy or sell.
The Public Is Doubting Michael Saylor
MicroStrategy bought an additional 205 Bitcoins on Friday to increase their holdings to 91,064 Bitcoins. Like a seasoned investor, Saylor’s strategy is entirely unaltered by onlookers and the stock’s recent downward performance. After previously receiving praise for his bold and brazen investment, headlines are now describing Saylor “'irresponsible" and “a coke addict,” and stating there is “no more Bitcoin effect.”
Saylor’s strategy is polarizing and one-dimensional. Either Saylor has killed the company, or he will go down as one of the greatest investors of our time. I would be willing to bet that many authors will be eating their words by the end of the year - it often pays to be doubted.
The Original Satoshi Mailing List
If you are looking for a primary source to dive deeper into the origins of Bitcoin, take the time to read the original Bitcoin mailing list. The mailing list is a conversation dating back to late 2008 between Satoshi Nakamoto and early Bitcoin adopters. In the thread, the participants discuss the white paper and future implications of Bitcoin at a time when only a handful of people were involved. The discussion is long, but incredibly insightful, circling around some of the most hotly debated subjects Bitcoin faces today: scalability, double spends, 51% attacks, intrinsic value, inflation, and more. It is an incredible defense of Bitcoin’s most essential properties to a small audience of curious and skeptical minds.
ETH Supply Being Reduced
The proposal to burn Eth when it is used for gas fees has been approved.
“This is probably one of the biggest milestones we’ve seen recently,” he said. Until EIP 1559 goes into effect after being approved Friday, the supply of Ether was theoretically infinite, leading to criticism that its underlying monetary policy was weak and inflationary. “Now, they’re actually controlling inflation on Ethereum” and “in some cases you’re looking at negative inflation so it’s definitely important,” Turner said.
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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.