The Wolf Den #260 - Retiring On Bonds (You Can't Anymore)
Bitcoin Price Analysis IntoTheBlock
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB). ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data.
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.
Bitcoin Price Analysis
Using data on addresses’ profitability we can also determine points of support and resistance for Bitcoin’s trajectory.
Addresses’ profitability directly impacts buy and sell orders set by investors. Using on-chain data, IntoTheBlock’s In/Out of the Money Around Price (IOMAP) groups clusters of addresses depending on whether they are profitable (in the money) or losing money (out of the money), at least on paper.
The largest clusters of addresses represent at which price the most volume of Bitcoin had previously been bought, and directly influences near-term support and resistance levels.
As of June 9 using IntoTheBlock’s Bitcoin financial analytics
The IOMAP reveals that 600 thousand addresses had previously bought approximately 251K Bitcoin at a price of around $34,800. Due to the large buying activity around this area, there is expected to be strong support from new buyers and current holders. Were this level to fail, then a drop to $32,000 is likely.
On the other hand, Bitcoin is facing strong resistance ahead around $35,7000. The high amount of volume that was previously bought there (200k BTC) is expected to create selling pressure as many holders tend to look to sell positions at a break-even level. Moreover, if buyers are able to get Bitcoin beyond this range, a move towards $37,000 seems probable, where there's the highest level of resistance.
Due to the high concentration of volume currently near price, it is likely that price may continue range-bound, but with the recent announcement from the government of El Salvador, there’s a possibility that an upwards breakout for Bitcoin will lead the rest of the crypto markets along. This may be the catalyst we were looking for.
2 positive on-chain facts for Bitcoin
Despite the deep sell-off, not all indicators are pointing to negative patterns. The first one is that selling off from large players has slowed down, with long term holders not moving their positions. Also buying activity has accelerated. It also points to the likelihood of smaller players potentially selling their positions due to the recent FUD.
As of June 9 using IntoTheBlock’s Bitcoin UTXO analytics
IntoTheBlock’s UTXO Age indicator shows that activity in Bitcoin UTXOs between 3-to-6 months increased drastically while the activity between 1-to-3 month holders had the sharpest decrease. This is an indication that midterm holders have been the most active demographic in the market.
Moreover, exchange netflows—which shows the difference between tokens entering exchanges minus those leaving exchanges - spotted the third largest outflow of Bitcoin in over 12 months.
As of June 9 using IntoTheBlock’s Bitcoin exchanges flows analytics
With over 30k Bitcoin transferred out from centralized exchanges, data points to the likelihood of investors moving their funds to store in safer cold wallets. This is a valuable approximation of users going long and opting to hold their own funds.
Bitcoin Thoughts And Analysis
WEEKLY CHART
We only half way through the week, so take this with a grain of salt. We had inverted hammer (or similar) candles the past two weeks, generally seen as bullish when they occur at the bottom. Now we have a potential hammer candle with a long wick down and small body, but way too early to tell. That "would" be a bullish signal, once again. More importantly, price bounced right off of the 61.8% Fibonacci level on yesterday's dip. The 61.8% - 65% area is called the "golden pocket" and is where Bitcoin (and other assets) love to reverse. You can also see the 50 MA pushing up below price and just below 30K. Support has been tested a lot, so it's shaky, but there is still a lot of support below and the reaction thus far has been positive. The weekly is also still holding the 50% level of the move up from March 2020.
DAILY CHART
We once again have potential bullish divergence with RSI on the daily, which would confirm at the close tonight if RSI continues to have a clear elbow up. We would once again need to dodge hidden bearish divergence, so we need to see a significant move up on volume for this to be convincing. Either way, it's always a good sign.
Worth noting, the bullish MACD cross of both the lines and the histogram have happened, and MACD looks likely to continue up after the move today - but that is yet to be confirmed. If we do see a drop, we would likely see bullish divergence with MACD as well, which works in the same way as RSI divergence.
4-HOUR CHART
MACD has clear bullish divergence already on the 4 hour chart. Also a bullish cross of the blue over grey MAs and the histogram in the middle moving above 0. MACD looks bullish across the board.
To put things in perspective, it's clear that BTC is still just ranging, waiting for direction. Price did not sweep the range lows (yet, easily could), but it did sweep the lows at the blue line, finding some liquidity below. So that's encouraging as well. Still, volume is low, 50 MA and EQ of the range are both resistance.
For now, we have a small reactionary bounce and nothing more until we start to clear higher levels of resistance. Little matters until 42K, honestly. The trend is down until that happens, in my opinion.
Legacy Markets
AMZN (AMAZON)
Dollar cost averaging into Amazon for years has been a core part of my investing strategy, so I rarely check the chart. If you have been here a while, we had quite a few amazing trades on this stock in the past, so I decided to take a look again and it's in a very interesting spot.
This is the weekly chart and you can see that it has been ranging now since last July - almost a year. That said, the 50 MA is pushing up hard and has historically been VERY strong support. Also, after having a slight bearish SFP at the range highs, price has seemingly found support at the range EQ (the equilibrium, which is the 50% level of the range). That is a nice confluence of multiple supports on the weekly chart, so this could be a good spot for an entry, depending on your timeline and risk tolerance.
The real trades now on Amazon are either a break above or below the range. A break above would be price discovery for new highs. But if you have been looking for a shorter term entry, this is a really good spot with solid risk reward. You could trade it and take a small loss if it breaks both supports with a weekly close. Personally, I do not trade this - I invest.
El Salvador Officially Makes Bitcoin Legal Tender
It happened. El Salvador quickly passed the law making Bitcoin legal tender, as discussed previously in the newsletter. This is the first of likely many similar laws we will see in Central and South America, with Panama, Paraguay and Brazil already showing interest. Arguably the biggest news in the history of Bitcoin.
Biden’s Antitrust Advisor Owns Bitcoin
Tim Wu, a top antitrust White House advisor, does not influence policy around crypto. However, his ownership of Bitcoin is significant, makes sense, and can influence the people that matter. An antitrust advisor’s role is to make sure the government protects consumers from predatory business practices and ensures fair competition. It isn't hard to imagine why an expert in this field would view Bitcoin favorably. Wu is estimated to hold between 29 and 146 Bitcoins, totaling between $1m-$5m. Wu is almost certainly sharing his opinions on Bitcoin with his co-workers in government.
Warren Buffet Indirectly Invests In "Rat Poison²"
Berkshire Hathaway has historically embraced investments in financial firms, including traditional banks and insurance companies. This means that crypto has become nearly impossible to avoid. Just recently, Buffet invested $500m in a digital bank called Nubank, which is based in Brazil. Prior to Buffet’s investment, Nubank acquired a company called Easynvest, which allows its investors to buy and trade Bitcoin. Oh the irony.
Warren Buffet is now indirectly profiting (or losing money) from Bitcoin, an asset he has called a “gambling device” and far worse in the past. Perhaps seeing profit from Bitcoin services will eventually change his opinion, as we know that earnings rule all for Buffett. Regardless, Bitcoin does not need his support to succeed.
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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.