The Wolf Den #228 - What A Week
Bitcoin Thoughts And Analysis
WEEKLY CHART
The weekly chart looks mediocre at best. That said, we have had a lot of "bearish" weekly candles that have been meaningless in the bull run. I have pointed out the previous 3, all of which were followed by a complete reversal to the upside. We have rarely had more than 2 red weeks in a row, which just happened. Further, after only a few hours, the current weekly candle has already retraced the majority of the past move down. But that's meaningless 1 days into the weekly candle.
The weekly is saying "watch and wait" to me. It is a bit of a rounding top at the moment, but nothing confirmed. I want to see green this week.
DAILY CHART
Bitcoin retraced just over 27% before seeing a significant bounce around the weekly close. While the price action had continued to grind down, we saw wicks down on almost every daily candle, indicating sustained buying demand. I continued to fill bids, with about 75% of my total buy orders filled up on the way down, starting at $51,700 going to around $47,250. I laid this plan out multiple times, and view these as investments for my longer term stack. I have almost no interest in trading Bitcoin right now, just simply adding when I can on dips.
As you can see, for now, the large red zone that we were all watching was front run.
The last two drops looks strikingly similar. I would love to see that similarity continue! We have to watch the 50 MA above, but we still have a few thousand dollars to get there.
The difference this time is that BTC did briefly break market structure and make a lower low (black line), but that becomes irrelevant if candles start closing back above. Also, the last retracement did not lose the 50 MA. I would really like to be back above that if I was an MA trader.
The current candle has plenty of time left to change. At the moment, it is bullishly engulfing the previous 3 candles, and the body of the 4th. That would be a pretty meaningful reversal signal.
I was REALLY hoping to see the daily RSI hit oversold, but it was not to be. It was below 30 until 30 minutes before the daily close, when bulls pushed price. It's "close enough" and fractionally missed, but still would have loved to see it happen.
6-HOUR CHART
As I stated continually, we had a confirmed bull div on the 6 hour and below. I also said this meant we were "bottoming" and now at "the" bottom. We often see a bit more downside, forming more divs and a larger spring from oversold.
That happened. Now we have potential hidden bearish divergence, although this would require a really definitive elbow down on RSI and is a weak signal. It would basically just indicate that the bull div, which really has played out, is no longer valid.
Watch and wait.
Altcoin Charts
Altcoins are still looking confusing to me, so I am not really on the hunt for trades at the moment. If Bitcoin rips up or drops fast, it would be bad for altcoins. So I think we need to wait on Bitcoin to see what happens. I don't like to post a lot of alt setups when Bitcoin is in decision mode.
ETH/BTC
Look at the weekly ETH candle against BTC. While Bitcoin was dropping 27%, ETH was absolutely ripping up. I have been calling for bullish Ethereum endlessly, and nothing is changing my mind now. I still believe that Ethereum is the better bet as a trader for the foreseeable future.
Confirmed inverse head and shoulders, confirmed breakout and retest of descending resistance. Keep an eye on Ethereum.
Legacy Markets
COIN (COINBASE)
We barely have enough price action on Coinbase to really look at the chart, but I posted this before the weekend on Twitter. As you can see, price is in a descending channel and has just flipped the EQ to support. I am looking for something like I drew above - the first part just happened.
Coinbase stock will likely follow Bitcoin to some degree, and may have more upside with time if Bitcoin rises. I also believe that Coinbase will be one of the most important companies in the world in the coming years, regardless of my thoughts about the actual platform. I have been buying - most recently on the open on Friday around $282.50.
My Favorite Financial Quotes
I constantly look to the wisdom of experts who came before me to learn lessons. Here are just a few of my favorite quotes about money and trading.
“Trade money for time, not time for money. You’re going to run out of time first.” Naval Ravikant
“The rich invest in time, the poor invest in money.” Warren Buffett
“The money you have gives you freedom; the money you pursue enslaves you.” Jean-Jacques Rousseau
“My favorite things in life don’t cost any money. It’s really clear that the most precious resource we all have is time.” Steve Jobs
“The men on the trading floor may not have been to school, but they have Ph.D.’s in man’s ignorance.” Michael Lewis
“The expectation that you bring with you in trading is often the greatest obstacle you will encounter.” Yvan Byeajee
“The market can stay irrational longer than you can stay solvent.” John Maynard Keynes
JP Morgan Opening Bitcoin Fund
"JPMorgan CEO Jamie Dimon called bitcoin a dangerous fraud in 2017, threatening then to “fire in a second” any trader who touched the stuff. “If you’re stupid enough to buy it, you’ll pay the price for it one day,” he said at the time. "
The audacity! We all know that Jamie Dimon has been a vocal critic of crypto, but that has not stopped them from creating their own internal crypto currency or from now opening the doors to their investors. Whether they like it or not, their clients want access and they have to give it to them.
Just a reminder - these banks are not your friend. It's great to see them help the number go up, but we don't want their hands anywhere near our beloved assets.
Crypto Fear & Greed Index Update
At the time of writing this letter, the Crypto Fear & Greed Index is sitting at a score of 31 (fear), a low that hasn’t been hit since Covid’s deep crash. A few more points down on the scale will tip the sentiment into “extreme fear” which last occurred at the height of the March Covid crash. It is amazing that a move from $64,000 to sub $50,000 is enough to rattle the market into fear, but for OG’s, moves like these aren't worth batting an eye over, they are either a chance to buy more or patiently wait for a comeback in a couple of weeks.
The index gathers its analysis from several factors listed below:
Volatility (25%)
Market Momentum/Volume (25%)
Social Media (15%)
Surveys (15%) currently paused
Dominance (10%)
Trends (10%)
With the increase in volatility + negative FUD + a sharp drop in Bitcoin dominance, it really is no surprise the index has dropped into “fear.” Keep in mind how the figure is calculated, it tends to reflect the masses, not those that understand the bigger picture.
Vitalik Discusses What Comes After The Merge
Everyone is talking about “The Merge,” Ethereum’s upcoming transition from proof-of-work to proof-of-stake. Less discussed is the roadmap post-merge, something Vitalik recently publicly spoke about. Most of his presentation was extremely technical, but a few important roadmap updates stood out that I have quoted below.
“After the merge, the execution layer is no longer an independent chain, it lives inside the POS consensus layer.”
“The roadmap will then move on to a post-merge cleanup fork that cleans up old data, reorganizes the new format, and adds withdrawals.”
“After the cleanup comes sharding, increased security, address extension, statelessness, account abstraction, and more.”
“We decided to spread out every dangerous update to ensure the utmost safety.”
“I do expect the pace of change can decrease on Ethereum.”
A few main points stood out from Vitalik’s talk. First is that Ethereum’s upgrade isn't an event, rather it is a continuous process beyond just the major shift to 2.0. The second is that right now leading up to 2.0 will likely be the most pivotal and reactive time period in Ethereum’s histor. Investors look for continuity and stability, and with that, investors should be excited about Vitalik’s statement on Ethereum’s pace of change “decreasing,” which will likely begin well beyond this bull cycle. Achieving POS will bring long-term reliability, something investors can get behind. I believe there will come a time for Ethereum (and other coins) to attract a complete adoption cycle from mainstream investors post bull cycle, something akin to a “post-2000 dot-com boom.” The fundamentals are continuing to improve and won’t stop soon. Check out the video linked for Vitalik’s entire vision, post “Merge.”
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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.