The Wolf Den #287 - Catching Falling Knives
Bitcoin Thoughts And Analysis
I have been sitting on the sidelines since May, only continuing my normal dollar cost averaging on Bitcoin and Ethereum. As you know, I had standing order down to 30K that filled on the first major drop.
Today I decided to start dipping my toes again and bought 1 BTC at around $31,300. The vibe in the community is extremely bearish, with Bitcoin at support. I am starting to feel like the bottom is likely in, although I cannot tell the future and am prepared to keep buying if it drops further. This would NOT surprise me. But I am buying for the long term, and think 31K Bitcoin is VERY cheap with a multiple year time horizon.
The reactions to my tweet about buying were hateful, angry and full of salt. Usually a decent sign that I am right.
DAILY CHART
Bollinger Bands are the tightest that they have been in ages, which usually is a precursor to a major move and a return of volatility. It does not necessarily tell us which direction that move will head. That said, price is sitting on the lower bound of the bands, which is technically support. We have a potential hammer candle here on the daily, although it is too early to call it. We also have potential tweezer bottoms, with both wicks nearly the same on the past two daily candles. Those are all potential reversal signals, which would not be a surprised considering Bitcoin has been ranging for nearly 9 weeks and is near the lows. Getting bearish here is being bearish right at support. That can play out in your favor, but the support has held many times.
6-HOUR CHART
We have confirmed bullish divergence with RSI on the 6 hour, with another potential div likely to follow.
4-HOUR CHART
I mentioned yesterday that I was watching for a drop down to complete the red channel and hit the blue support. That happened, and now we have a confirmed channel with 2 alternating touches down and up. This touch was in perfect confluence with support at the blue line. We also have a potential bullish engulfing candle, which I will be watching for the next hour for confirmation.
This can absolutely still go down, but for me the local signs look decent for at least a bounce. We have seen price float up almost every weekend, with weekly closes above 34K. Will be interesting if we can see that for a 9th time in a row on Sunday night.
As you know, the real story is that we want to see 30K hold, but the short term bullish case starts above the EQ at 36K, and really kicks in above 42K or so.
Altcoin Charts
ETH/USD
Ethereum is working on a potential bullish divergence with RSI coming out of oversold on the 4-hour chart. We need the candle to close like it is now with a clear elbow up on RSI.
Almost all altcoin charts look rough against Bitcoin, so why am I sharing this? Because for Ethereum to rise against USD, it will likely mean that Bitcoin will rise. As a trader, Ethereum looks good here, but is giving me information that perhaps Bitcoin looks better.
If you are trading against USD, this has a lot of potential. Against Bitcoin, this may be an inferior play.
Legacy Markets
AMZN (AMAZON)
Quick update. I have shared a number of successful Amazon trades, so wanted to highlight the fact that it may be coming back down for the retest that I recently discussed. I drew the blue arrow a while back, and price is falling. This would be a retest of the previous all time high and range high for over a year as support. The first retest of a key resistance as support is usually the best possible entry.
Jack Dorsey Can’t Stay Away From Bitcoin
At the Bitcoin conference, Jack Dorsey explicitly said that he would work full time on Bitcoin if Twitter and Square didn't require the bulk of his effort. Bitcoin is where his heart is. This has become more evident now that Dorsey has made a major announcement of a new business entirely focused on Bitcoin. As for now, there isn't any specific information on the direction, but we do know that its goal is “making it easy to create non-custodial, permissionless, and decentralized financial services for Bitcoin.” Furthermore, the entire process will be open source, an important pillar to the crypto community that is extremely non-controversial and well supported. I’m really excited to see where this goes and imagine it will be a healthy addition to the Bitcoin world.
Paraguay’s “Bitcoin” Bill Isn’t Exactly About Bitcoin
The world crypto community has been patiently waiting to see the details of the crypto legislation proposed in Paraguay. The day has finally come. Some have considered the news a letdown, but at the end of the day, it was an attempt at clarity for the crypto space. When El Salvador first announced Bitcoin as legal tender, Paraguay jumped on the news cycle and said they too had legislation coming next month with regard to Bitcoin. It was never explicitly said what the legislation would entail, but it was certainly reasonable to think that Paraguay was gearing up to make a similar move to El Salvador. Unfortunately, that didn't turn out to be the case.
Carlitos Rejala, the legislator from Paraguay who began hinting at the announcement even added laser eyes to his profile picture. Surprisingly, the bill entirely failed to mention Bitcoin. Instead, the bill refers to “digital assets” and “cryptocurrencies” and has a total of 22 articles with very specific guidelines on how to mine, trade, invest and interact with the crypto space. Along with the bill, there are also penalties listed if an entity were to break any of the new laws. El Salvador’s bill was extremely concise and positive. This legislation feels like a strict rule book of do’s and don’ts for the citizens of Paraguay. Although it misses the mark, hopefully, the feedback it receives serves as an example for other countries to learn from.
Congressman Tom Emmer Is Proposing A Pro-Crypto Bill
Congressmen and congresswomen have continued to write letters to the SEC and propose bills to the U.S. House that are crypto-related with minimal success. The last major regulatory push from Tom Emmer was the Security Clarity Act, which aimed to reduce the label of “security” thrown at cryptocurrencies by providing a more modern framework for categorizing tokens. It really is amazing to think that our modern financial system still follows security laws from 1933 for digital assets, a near-century old model that does not work.
One of the main reasons the Security Clarity Act failed back when Tom Emmer (R) proposed it was because it needed approval from a Democrat-controlled house and lacked bipartisan backing. This time, the bill has two democratic co-sponsors making it a truly bipartisan bill. Furthermore, the bill made a few “cosmetic” changes to use vocabulary from the original Securities Act of 1933. If passed, the act should bring a lot of clarity to concerned projects who fear their coin falls somewhere close to the label of “security.” Also, worth noting is that the bill has backing from a lot of legitimate stakeholders in the crypto community, so it's something we can all root for.
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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.