The Wolf Den #202 - A Beginner's Journey
Bitcoin Thoughts And Analysis
Bitcoin price has changed little since I last wrote. It went up, it went down, it came back to the same place. Don't get chopped up in ugly sideways price action. I did buy yesterday's dip for the long term, but I am not actively trading this.
DAILY CHART
$58,972. Clearly that is the key resistance here on the daily chart, with 3 of the last 5 daily candles topping off there and today's candle also finding resistance in that area thus far. I want to see that flipped to support.
4-HOUR CHART
This went down to test the top of the range, as discussed. That was a nice long entry for at least a scalp, and is the reason that I bought a bit of Bitcoin yesterday. It seems to be sideways, ranging roughly between the black lines. So above the top line would be a nice place to feel more confident in longs.
Bottom line, Bitcoin is choppy.
Altcoin Charts
POLK/USDT
Contract Address: 0xd478161c952357f05f0292b56012cd8457f1cfbf
POLK is trading on Uniswap, so be careful as always. There are no stop losses, so generally a good idea to take smaller positions in case it drops hard.
It was also listed on KuCoin the other day, hence the drop - those listings tend to be a buy the rumor sell the news situation. Hopefully that drop is finished, with price breaking through descending resistance and coming close to a retest on the way down. This breakout theoretically should target the highs.
UNI/USDT
Like our SUSHI trade, this has been an absolute beast. Hard not to be bullish on DEX coins, when we know how popular Uniswap remains. You can see how well the inverse head and shoulders played out at the bottom.
Now we have another potential setup. UNI appears to have flipped resistance to support at $28.75 and looks like it is consolidating to test the recent highs. A pop up to there would be roughly a nice 20% move. If it can flip the all time high to support, sky is the limit.
If it does break support, the nearest demand zone is drawn below. For now, this is a small trade targeting the recent highs.
Bitcoin’s Unsung Narrative - Decreasing Supply
Everybody has a different narrative for Bitcoin’s recent rise. “The institutions are here" and “the hedge against money printing” are popular ones. A lesser-discussed story is the amount of Bitcoin leaving exchanges at unprecedented levels. As noted above, during 2017’s parabolic run, Bitcoin was “steadily increasing on exchanges along with price.” In this cycle, the price is rising, and Bitcoin held on exchanges is decreasing, something never seen before. Depending on how serious this drought becomes, this could be a huge factor in how high Bitcoin runs when retail FOMO hits. Investors in the know have been aware of this phenomenon now for about a year, but it feels like the effects really haven’t kicked in yet.
Hanlon's Razor
By Sahil Bloom:
Hanlon's Razor is a simple mental model for cutting through negative noise and unlocking growth in your career, startup, business, or relationships.
A short thread on what it is and how it can change your life...
A philosophical "razor" is a principle or rule of thumb used to simplify a decision.
The "razor" quite literally cuts through the unnecessary detail, noise, and information that slows our decision-making processes.
Razors can promote quick, rational, high-quality decisions.
Occam's Razor is the most well-known of the philosophical razors.
It says that when you are weighing alternative hypotheses, the one with the fewest necessary assumptions should be chosen.
In short: simple is beautiful.
Hanlon's Razor is simple.
"Never attribute to malice that which can be adequately explained by stupidity."
In assessing someone's actions, we should not assume negative intent if there is a viable alternative explanation, such as different beliefs, incompetence, or ignorance.
By broadening the original definition - from "malice" to "negative intent" and from "stupidity" to "viable alternative explanation" - we make the mental model more useful.
It becomes helpful for driving rational, quick decision-making and judgment in a range of scenarios.
Hanlon's Razor is named after Robert Hanlon, a little-known figure who submitted it to a joke book about Murphy's Law published in 1980.
While named after Hanlon, its spirit has been around for centuries, with Napoleon, among others, believed to have made similar statements.
Hanlon's Razor can be a very powerful heuristic (i.e. mental shortcut) to add to your mental model toolkit. Let's look at a few examples of where it might be useful...
In Politics.
We often assume the worst about politicians (and their supporters) who are on the other side of issues we care about.
Confirmation bias (the tendency to exclusively see evidence that is confirmatory of our standing beliefs) feeds into this feedback loop.
By leveraging Hanlon's Razor, we might be able to break this cycle.
Do not assume negative intent if there is a viable alternative explanation. In politics, there are many viable alternatives beyond negative intent.
Realizing this may open us up to more productive discourse.
In Relationships.
Hanlon's Razor cuts through a perception that others are "out to get you" in life.
With your partner, family, or friends - or with new strangers - never assume negative intent if a viable alternative exists.
You'll find happier, more fulfilling relationships.
Hanlon's Razor has one important caveat.
While it says that we must not ASSUME negative intent when there is a viable alternative explanation, this does not imply that actions NEVER HAVE negative intent.
There are bad actors out there who genuinely do have negative intent.
Hanlon's Razor simply suggests that these people are few and far between. It is the glass half full. It says that humans are inherently well intentioned, so to make decisions and judgments accordingly.
It is a powerful heuristic for viewing the world in a more positive light.
Hammer Candlesticks
I used to include very basic lessons on trading and realize that I have stopped doing so. Here is a quick primer on hammer candlesticks, one of my favorite reversal signals.
Basics
Hammers have a small real body and a long lower shadow.
Hammers occur after a price decline.
The hammer candlestick shows sellers came into the market during the period but by the close the selling had been absorbed and buyers had pushed the price back to near the open.
The close can be above or below the open, although the close should be near the open in order for the real body to remain small.
The lower shadow should be at least two times the height of the real body.
Hammer candlesticks indicate a potential price reversal to the upside. The price must start moving up following the hammer; this is called confirmation. One candle alone is not a signal - you need follow through on the next candle
It is ONLY a bullish signal when it occurs at the BOTTOM. Context and placement matter. This can be a bearish candle when it is at the top.
Here is a nice example on the daily BTC chart from a few weeks ago.
Coinbase Pro Listing Offers ADA Arbitrage Opportunity
Cardano made its debut on Coinbase Pro with a bang, soaring to a new all-time high of $1.88
The Coinbase listing pump was once the holy grail for traders, causing immediate massive FOMO buying. Yesterday, Cardano (ADA) was listed on Coinbase Pro and alongside an immediate price pump, Coinbase Pro’s ADA price was significantly imbalanced compared to other exchanges. Savvy traders that prepared for the listing capitalized on the price discrepancies, buying Cardano on Binance and selling on Coinbase Pro for a profit. In 2017/2018, this was one of my favorite trading activities with LTC, which would repeatedly have a 5%+ spread between the two exchanges.
Right at the time of listing, there was a 39% premium on Coinbase Pro’s ADA/USDT vs. Binance’s pair. The gap quickly diminished but lasted a enough time for traders to arbitrage the opportunity. To capitalize on these opportunities, which are usually short lived, you have to have both BTC or USDT and the tokens you are trading sitting on both exchanges to transact simultaneously. If you wait to send the coins, the opportunity will likely be gone.
VanEck’s Bitcoin ETF Is Under SEC Review
Now that the SEC has acknowledged VanEck’s Bitcoin ETF, it has 45 days to decide on the approval. With Canada having approved three Bitcoin ETFs and a new SEC chairman, now is the time for Bitcoin to receive ETF approval in the U.S. The last time an ETF was denied, the SEC cited “extreme volatility” and “market manipulation” as their reasons for the denial. Gary Gensler understands Bitcoin at a high level, meaning there will be an ETF approved soon, whether it is VanEck’s within 45 days or another one down the road. Once one is approved, many will likely be approved similar to what is happening in Canada, and this will kick off another huge leg of the bull run as sidelined institutions can safely jump in.
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. 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.