The Wolf Den #270 - What A Bounce
Bitcoin Hodlers Bought the Dip - 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.
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Bitcoin Hodlers Bought the Dip
Let’s call it for what it is - the last few weeks in crypto have been a bit more than a correction. The recent crypto crash has had ripple effects across the entire ecosystem. Bitcoin is heading for its worst quarter since the start of 2018, but what we are experiencing at the moment is short term panic sellers, while the majority of the long-time holders are not selling, and are even buying the dip.
The buying the dip narrative was supported by analyzing the addresses profitability. The Historical In/Out of the Money (HIOM) is useful when comparing the percentage of addresses making money at two different points in time where prices are at a similar range. The difference in the addresses profiting provides an idea of whether momentum is on buyers’ or sellers’ side.
By looking at addresses’ profitability we can confirm that Bitcoin holders took advantage of the opportunity to buy below $30,000.
As of June 23, 2021 using IntoTheBlock’s Bitcoin Financial Indicators
When comparing this to the last time Bitcoin had 71.5% of holders in the money, we observe that Bitcoin’s price was at $34,758.88. Despite the drop in price, the percentage of Bitcoin holders profiting from their position climbed back to this level, pointing to many addresses bringing their average cost down.
Once again, speculators dumped while whales and HODLers held and added to their positions.
Bitcoin Thoughts And Analysis
DAILY CHART
What a bounce. While I was hoping that support would hold and we would make a higher low, it was not to be... but what we got was even better. Each time we have seen price visit the 30K area, I have discussed the possibility of a flush below the range low, amounting to a move into the 28000-29000K area. This is exactly what finally happened. The result was major volume, a bullish hammer candle, price STILL HOLDING the ascending blue support on the close and forming a perfect descending channel, which should break to the upside eventually. This is NOT A BEAR FLAG, which would have to be ascending.
This move was the mother of all bullish SFPs. We saw price break below all of the recent swing lows in the range and close back above all of them. What does this mean?
An SFP is a "swing failure pattern." When whales need buying liquidity, they have to engineer it by pushing price into an area where there's likely a ton of sell orders. Just when people are most depressed and desperate, they push price below a key area which triggers stop losses on longs (sell orders) and fresh breakdown shorts (sell orders). They use this liquidity to fill their buys and price bounces - hard.
We still need to be above the range and 42K to even get excited, but this was a hell of a move.
This move confirmed multiple bullish divergences on the daily chart, as I discussed for days was possible. This is more confluence for a potential bottom. We should see RSI slowly make its way back to overbought.
4-HOUR CHART
You can see more clearly here what I was talking about in the last section. Price broke below the range and the blue swing low on the 4-hour and close the candle back above both. Incredible in one candle. Price also broke the descending blue line we discussed and is retesting it as support. This "should" target the range EQ around 36K.
We are NOT OUT OF THE WOODS YET. This could have been a test dump to clear a runway before a bigger move down. All we can do is analyze the chart, and for now there are a lot of bottom signals, at least in the short term.
We had oversold bullish divergence with RSI on the 4-hour at the bottom. My favorite signal!
Altcoin Charts
I am hopeful that we will see some real altcoin setups and opportunities in the near future, assuming Bitcoin has found a bottom and begins to look a bit stronger. Yesterday was obviously the best time to catch falling knives, but that would have required real conviction and a lot of guts. I was riding roller coasters at an amusement park and not even checking alts, so I definitely didn't buy anything!
ETH/USD
Like Bitcoin, ETH swept the range lows yesterdays with a beautiful hammer candle and a close just back above support on significant volume. This "should" mean that price revisits at least the EQ of the range at $2,340. You can also see it is flipping a very local resistance around $1996 to support at the moment. Further, there was clear bullish divergence a few times with RSI coming out of oversold. There's a lot to like with ETH here if the market is stabilizing.
Legacy Markets
AAPL (APPLE)
This has been a beautiful setup since the bounce off of the ascending support that I shared. Now Apple is breaking descending resistance on strong volume and looks likely to revisit the all time high around $145. I am assuming that many of you are already in this trade (I am not, but I hold Apple as an investor), but just alerting that we have another potential entry here on the breakout or on a retest of that descending line as support, if price drops a bit in the coming days.
TSLA (TESLA)
Tesla is taking a shot at the daily 50 MA for the first time since early May, a line that many stock traders and algorithms use for trading. Also, you can see that price is testing a key local resistance around $635. Ultimately a break of the descending blue line is the real trigger for a return to the all time highs, but holding the 200 MA and now breaking above the 50 MA (it still has to close above) are encouraging signs for Tesla. This is looking good here if "stock only go up."
Founder Of Cardano Believes Ethereum Overtakes Bitcoin
Charles Hoskinson, the founder of Cardano and co-founder of Ethereum has made some bold statements. In a recent 5-hour podcast, Hoskinson confidently argued that Ethereum will overtake Bitcoin. Perhaps this was a clever marketing strategy, considering Ethereum’s success will spill into Cardano’s success as the two protocols are looking to tackle similar problems and control similar market share, but his statements can’t be ignored.
“In a battle, my money is on Ethereum. As against Bitcoin, Ethereum is always bound to come out better 9 out of 10 times. Bitcoin is its own worst enemy. It has the network effects, it has the brand name, it has the regulatory approval. But, there’s no way to change the system, even by correcting obvious downsides in that system.”
Hoskinson also pointed out that one of the main reasons that Ethereum is better is that its faults are fixable - arguably not the case with Bitcoin. I have no particular opinion on any of this, I just wanted to share his comments from the interview.
North American Miners Are In Good Shape
Two days ago, I wrote a segment about the bright side of China’s Bitcoin mining crackdown. One of my points was that North American miners are benefitting from China’s diminishing dominance. It looks like my suspicions are correct, because Blockworks is reporting that, “Riot Blockchain (RIOT) is mining bitcoin at a cost equivalent to approximately $15,000 per bitcoin or a 62% discount to market pricing. One of its competitors, Marathon Digital (MARA), is mining at a cost of approximately $12,000 per bitcoin, or a 70% discount. North American miners are well-positioned to benefit both from the lower global hash rate and the potential for increased availability of mining equipment. And in the case of Riot, the firm’s recent acquisition of Whinstone should provide the miner with significant hosting capacity ready to bring on Chinese miners looking to move their operations to North America.” Compass Point, a major investment firm covering the industry, gave both Riot and Marathon a buy rating. Interestingly, the last major Bitcoin correction in 2018 did not favor miners, but this correction hasn’t been bad news for them at all. The health of miners is a significant indicator of the overall health of the network and asset, so it’s good to see miners outside of China faring well.
Chinese Miners Are Moving Or Coping
The shutdown on miners in China is very real, with some looking for alternatives and others simply struggling to deal with the new reality. We have already seen reports of multiple metric tons of equipment being shipped to the US, and another huge operation moving to Kazakhstan. The migration out of China is a huge opportunity for the mining industry and will be interesting to watch.
FTX Sponsoring Major League Baseball
Wow. FTX has the naming rights to the Miami Heat arena, sponsored the biggest esports team and now MAJOR LEAGUE BASEBALL. They are bringing crypto to the forefront in a major way. Love to see it!
Cathie Wood Bought The Dip
Famed investor Cathie Wood added more crypto exposure on the dip, in the form of shares of GBTC and COIN. Absolutely love to see this as well! She has a long record of success investing early in tech, so it is nice to see this level of conviction. "Smart money" is viewing the correction as an opportunity.
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