The Wolf Den #259 - The Dominos Are Falling In Central And South America
Bitcoin Thoughts And Analysis
DAILY CHART
Bitcoin broke support of the symmetrical triangle, although as I discussed, this pattern was looking weak and irrelevant after the fake out above and the approach to the apex. Usually a strong pattern breaks out long before the pattern reaches completion.
Either way, this is a break of support, which should technically target at least the lows of the triangle. If you view this is a bear pennant (I do not, it's too big for my liking), then the measured target based on the flag pole would be around $8000, which seems absurd and utterly irrelevant. I am only mentioning that to somewhat dispel the bear pennant narrative.
Also, volume is still hot flaming garbage, which indicates that even this selling has extremely low conviction. I still view this price action as sideways chop that should not be traded. Very little information to be gleaned from the chart, in my opinion.
4-HOUR CHART
Price broke below the EQ (equilibrium, center dashed line) of the trading range. This "usually" leads to a trip to the range lows. Nothing in TA is remotely certain, so it does not have to happen, but that's what you would look for if you are trading the range. If this happens, I would be watching for price to sweep the recent lows around 30K, perhaps with a big wick down into the 28-29Ks and a big bounce back up to spark a recovery.
Sometimes you have to go down to go back up, and right now it seems like buyers are interested in lower prices.
I have no idea what is going to happen and neither does anyone else. This is low volume, low conviction price action. A rudderless ship. I am sharing charts because it's the best tool we have, but right now I have very low conviction in a move in either direction.
This market should not be traded at the moment, in my opinion. But that does not mean you should stop investing.
The FBI Broke Bitcoin?
No, this is FUD. Bitcoin was not broken. If you have been paying attention to the news, you are probably familiar with what is going on with the Colonial Pipeline attack. An anonymous hacker group by the name of DarkSide effectively shut down the Georgia-based pipeline necessary for supplying fuel to the East coast. The notorious group has reportedly collected over 90 million in Bitcoin ransom payments over the past 9 months. Their latest victim, Colonial Pipeline, sent the group 4.3 million in ransom, of which 2.3 million was just recovered.
In an obvious win over a very sinister group, critics were quick to point out that the Bitcoin system must be broken if the FBI can just seize any assets they want. The FBI didn't break the blockchain nor did they uncover a secret method to steal private keys. There was really only one of two ways they recovered the coins: information from inside the criminal organization or obtaining a warrant on a wallet or exchange. We now know they did the latter. A judge granted access for the FBI to get into a server in California. It’s idiotic that a cyber hacker group didn't use a cold wallet, but perhaps they were just planning to sell. Nonetheless, there are some important takeaways below.
This story serves as evidence for the mantra - not your keys, not your coin. Of course we want stolen Bitcoin returned to its rightful owner, but this is proof that if you don’t own the keys, someone else controls your coins. It also proves that the government can and will take your Bitcoin if they want to. Furthermore, this story goes to show that maybe Bitcoin isn't an ideal asset for terrorists. Perhaps they could have stored it in cold storage, but eventually they have to sell and they open themselves up to capture - a small win for governments and Bitcoin.
I can almost guaranteed they would NOT have been able to recover cash as quickly.
SEC Considers Crackdown On Meme Stocks
Of course. After seeing GameStop and AMC pulls massive an irrational gains, the SEC is considering regulation on brokerages like Robinhood where the bulk of the trading of these "meme stocks" is happening.
By imposing the regulation, known as "Regulation Best Interest" (Reg BI), Robinhood would have to "step in" and warn investors about the risk of trading some of these stocks, said one person with knowledge of Gensler’s thinking. The SEC has begun to scrutinize the wild trading in shares of the meme names which only last year were trading as penny stocks.
One thing is certain - Wall Street and regulators hate when they lose control of markets, and are unlikely to allow retail to drive sentiment on meme stocks for much longer. This would be a small regulatory burden for these companies, but could be a harbinger of larger regulation to come.
Bitcoin Rapidly Being Locked In DeFi
1.3% of the current Bitcoin supply and 1.1% of the final supply has been locked into DeFi, primarily with Wrapped BTC, or WBTC. This number has increased by over 100,000 coins this year, showing a burgeoning trend of Bitcoin believers moving coins onto Ethereum to take advantage of the yield opportunities in DeFi.
"The tokenization process works by locking up an amount of bitcoin and issuing an equivalent number of tokens on Ethereum. The bitcoin-backed tokens are pegged to bitcoin’s price but can also be used on DeFi platforms and in other protocols. To reverse the process, the tokens are destroyed and the bitcoin released.
The majority of the tokens have been turned into wrapped bitcoin (WBTC). WBTC accounts for 80% of the tokens wrapped onto Ethereum, and these tokens alone represent 1% of Bitcoin’s circulating supply."
MicroStrategy Raising Debt To Buy Bitcoin - Again
Talk about conviction. Gigachad Michael Saylor is once again pushing a senior note to buy more Bitcoin, this time in the amount of $400M. MicroStrategy has been relentless in their pursuit to buy as much Bitcoin as humanly possible, even if it means taking on debt to do it.
Crazy to watch - Saylor is truly a unicorn. Also, we now know that they are about to buy 400M worth of Bitcoin, giving us the opportunity to front run that trade.
22,550 Bitcoin Removed From Exchanges Yesterday
According to Glassnode, 22,550 Bitcoin were removed from exchanges on Monday, the largest net-outflow in a single day for the entire year. This means that supply is being removed from the active market and likely is headed to cold storage. This is normally a bullish indicator, but price has dropped since. It will be interesting to see if price reacts.
The Wolf Of All Streets Podcast Ft. Tim Draper
When it comes to picking winners, Tim Draper is one of the best, looking for investments that revolutionize the world. An early investor in Hotmail, Skype, Tesla, SpaceX, Twitter, and Coinbase, Draper has now fully shifted his focus, time, and money, towards cryptocurrencies. This new passion is driven by his belief that Bitcoin and the underlying blockchain technology will drastically reshape finance as we know it. Explaining that legacy systems will be redefined in ways we are just beginning to understand, it’s safe to say Draper is a bull in the crypto space.
In this episode, Tim Draper explores:
Elon wreaking havoc on the markets
Buying Silk Road Bitcoins
Timing tech bubbles
Picking winning investments
Redesigning legacy systems
The entrepreneurs’ mission
Tokenizing everything
Hedging against inflation
Banks using more energy than Bitcoin
Bitcoin’s walled gardens
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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.