The Wolf Den #289 - The ₿ Word
Bitcoin Thoughts And Analysis
Bitcoin is seemingly breaking the range lows after almost 9 weeks of trading effectively sideways. There is some debate as to whether the range is broken and what would constitute this break, which we can discuss below. All time frames up to the 12 hour are now oversold on RSI, although they can dip much lower. The daily is not oversold, but it already was on the drop in May.
What is notable to me is the incredible lack of volume. Even breaking the lows, there's very little action and trading, so it's hard to really "confirm" the price action from that perspective.
The potential divergences we were watching yesterday did not manifest, unfortunately.
WEEKLY CHART
Moving Average traders have their eyes firmly on the 50 MA on the weekly chart. Price has not traded below on a candle close since May of 2020, when it spent about 9 weeks trading below that line after Black Thursday. There have been many instances before that where price closed slightly below and quickly recovered in the past, and we have 5 days left for this to potentially close above, with a wick below as we have seen so many times. Either way, this is a real test for those who watch this line.
As I discussed yesterday, attention should now be turned towards the golden pocket, the area between 61.8% and 65% of the move up from $3,800 to $65,000. That is 27K and slightly below. Bitcoin loves a good 61.8% retracement.
DAILY CHART
The range lows, which I will show more clearly on the 4-Hour chart, are at $30,066. Others have identified $28,600 as the lows, which is where price dropped to a few weeks ago. On Friday, I had Cheds and Birb on my livestream and this was debated. Birb is of the mind that anything above $28,600 is still technically ranging.
It would be really interesting to see the day close back in the range, which is obviously possible. That would throw everyone for a loop! For now, the next support is $28,600, with the areas mentioned above as the next areas to watch. Ultimately, if price really does continue to drop, all eyes will be on the 20K area, which was the 2017 highs that were never retested as support.
4-HOUR CHART
The red channel failed, breaking to the downside. Much like poker, each pattern has a statistical chance of playing out, but often the best hand loses. In this case, the confirmed channel did not play to the upside, as the odds were in favor of.
As you can see, the 4 hour has closed multiple candles below the red range that we have been watching since May. This is not ideal, and technically is an end to the ranging, which should indicate more downside. Nothing is guaranteed in trading and some would say that the $28,600 lows are more significant. But for me, the range is broken on the 4-hour and I'm watching for it to "hopefully" hold on the daily.
For traders, a retest of the range lows as resistance would be a textbook short opportunity. If price can flip that back to support, shorters would take a small loss. If the 30K area does hold as resistance, there's a lot of money to be made shorting it down.
Bottom line - we have a break of the range to the downside on low time frames, looking for confirmation on higher time frames. Volume does NOT confirm this move in my opinion, which means it could be a bear trap. We all know that one news story or tweet could send price back up into the range and higher.
Support areas are the recent 28.6K low, the 61.8% fib and golden pocket below, and the 20K previous all time high.
30K is now resistance until proven otherwise. All of the other resistance levels above (36K, 42K etc) are intact.
Altcoin Charts
ETH/BTC
I find it really interesting that ETH is bouncing from support right now with bullish divergence. If BTC dumps, I VERY seriously doubt this will hold, but for the moment ETH actually looks decent in the face of extreme fear in the crypto market. Notably, this blue range is after a major move up, unlike BTC which was ranging after a drop. This looks a lot like Amazon did for the past year, actually, before it finally broke the range highs.
Either way, caution. This is trading in the bottom half of the range in a market that looks ready to fall off a cliff temporarily. Still worthy of note.
ETH/USD
Bitcoin broke the range lows - Ethereum has not... yet. We also have oversold bullish divergence confirmed, although a Bitcoin drop will almost certainly invalidate this. Still, for the moment Ethereum is holding strong support.
Robinhood Braces For Pain
A recent amendment to Robinhood’s S-1 form filed to the SEC somes some interesting information on Robinhood’s future outlook. The report has reaffirmed Robinhood’s plans to proceed with its IPO, but also a potentially grim upcoming Q3. In the report, Robinhood indicated that:
“We have applied to list our Class A common stock on the Nasdaq under the symbol “HOOD” - page 17
“We expect our revenue for the three months ending September 30, 2021 to be lower, as compared to the three months ended June 30, 2021, as a result of decreased levels of trading activity relative to the record highs in trading activity, particularly in cryptocurrencies, during the three months ended June 30, 2021, and expected seasonality.” - page 137
Investors considering purchasing shares of Robinhood’s IPO should spend some time sifting through the S-1 form and pay close attention to page 137. Their summary gives a good idea of where their growth came from, how their profits could fall back to equilibrium, and how much of their success is tied to the crypto markets and “retail frenzies.”
Institutions Are Enjoying Grayscale’s Products
While the media seems to be concerned about Grayscale’s Bitcoin unlock and the subsequent sell pressure, there are a number of positive developments,
Here are 3 major updates.
First, Rothschild Investment has been one of the major institutional purchasers of GBTC and ETHE shares and has recently added more of each. They now hold $4.2M in GBTC and $6.3M in ETHE. Not only is the firm clearly bullish on the space and Grayscale’s products (which are now at a discount), they also seemingly believe in Ethereum, considering they have 50% more allocation to it than Bitcoin.
Second, Grayscale just announced the introduction of a DeFi index and fund, indicating a long term belief in the DeFi space. According to the official press release, the fund will offer “exposure to a selection of industry-leading DeFi protocols through a market-capitalization weighted portfolio.” As of now, it is only available to “eligible individual and institutional accredited investors,” but there are plans for wider releases in the future.
And if you aren't convinced that Grayscale will be a long-term player in the crypto market, the CEO has reaffirmed the company's commitment to transform their GBTC product into an ETF. This was officially made public yesterday along with a statement that a U.S.-based ETF is inevitable and close. Grayscale wants global crypto adoption. GBTC’s transformation to an ETF is clearly the first step, but we all know that Grayscale has plans for more products in the pipeline.
Yellen Is Yellin' About Stablecoins
No surprises here. We all know that regulation of the crypto industry and stablecoins in particular is inevitable. Stablecoins are a direct competitor to a multitude of payments systems, as well as to a future Central Bank Digital Currency, or digital dollar. We can only hope that the regulation will be measured and reasonable, rather than irrational and heavy handed.
New FUD - Bitcoin Dropping Because Of Covid
There is a new narrative in town, being spread across media outlets - Bitcoin is dropping because of Covid fears and the delta variant. The real story they are telling is that global markets are dropping and Bitcoin is going with it.
We have now returned to the "Bitcoin is correlated argument."
Even though it was clearly not correlated for months.
There are brief times when all markets are seemingly correlated, but it's disingenuous to ignore the run to $65,000 when Bitcoin was vastly out performing every other asset. IF markets falls, the "correlation" will likely, once again, be fleeting.
Just another FUD narrative to add to the dossier.
The Wolf Of All Streets Podcast Ft. Whit Gibbs
China is shutting down Bitcoin mining operations, offering miners around the world the golden opportunity to capitalize and earn more Bitcoin. Whit Gibbs, the CEO of Compass Mining is bullish on the asset becoming more decentralized than ever before while the inherent risks of China impacting the network diminish. Compass Mining’s revolutionary business model allows anyone around the world to instantly mine remotely in a simple and cost-effective way.
Whit Gibbs: https://twitter.com/BitcoinBroski
Compass Mining: https://compassmining.io
In this episode, Whit and I discuss:
Myths in mining
The scale of China’s shutdown
Where is China’s hash power going?
What is Compass Mining
Bitcoin prices and Mining
The Elon Musk mining debate
Decentralizing the mining network
Hash rate and price
Mining in the headlines
Going all-in on Bitcoin
When all the Bitcoin is mined
Ethereum 2.0
This is why we Bitcoin
Mining picking up in the states
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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.