The Wolf Den #293 - Is The Bull Market Back?
Bitcoin Thoughts And Analysis
Beautiful price action and short squeeze yesterday, liquidating about 1B in leverage. This is still a fraction of the 10B liquidated from 60-50K, showing there's a lot less friction going up now then there was down.
Still, this was a technical move created by traders, right into a lot of resistance. So now we need to see bull step in and start heavily buying spot Bitcoin.
RSI is overbought on every time frame below daily, with some hitting nearly 90. A cool off here and consolidation would not be a surprise at all.
MONTHLY CHART
We still have 5 days left in the month, so too early to call it on the monthly candles. That said, I pointed out last month that price found support on the EQ of the massive ascending channel. Most of this month has traded below, making it look possible that it would lose support. For now, price is back above the EQ, which shows exactly why you cannot judge a candle until it closes. It will be interesting to see what happens in 5 days.
Notably, we have not had a monthly close below 35K on this correction. The last 3 candles all have wicks down, showing a ton of demand in the low 30Ks. Last month's high wave spinning top showed some indecision. If this month closes as a bullish hammer above support, we should expect this correction to be ending.
WEEKLY CHART
This really looks like it is bottoming, which I have been saying for quite a while. Last week's candle was not only a hammer, with a wick down below the 50 MA (which it held as support), but also bullishly engulfed the previous candle. That's a sign of a bullish reversal. While many were saying that the 50 MA was lost, I calmly pointed out that the candle was not closed and that it was still support. Always wait until the candle closes!
Last week had more volume than the previous 2 weeks. Hopefully we are ramping up.
DAILY CHART
Price is currently testing the top resistance of the blue descending channel. I have been sharing this pattern for weeks. This should break to the upside, but no surprises that price stopped right at resistance. We all know that we still need to get above 42K for any of this to indicate a true bull market return.
Really nice uptick in volume today on this short squeeze. Almost 1B was liquidated on this move, so now that the shorts are squeezed, bulls will have to step in organically to continue pushing price.
4-HOUR CHART
As discussed, price had a small deviation below the range but flipped the lows back to support quickly, causing a move that targeted the EQ of the channel and beyond. The ascending triangle locally played out nicely, as well as the inverse head and shoulders idea, which was spotty.
As you can see, the blue supply zone that has been epic resistance was once again where the move up stalled. Now we have consolidation below resistance with RSI quite overbought. If this retraces some before another move up, I would be watching and bidding the 36K area, the EQ of this channel.
Altcoin Charts
I am hesitant to share altcoin charts after such a significant move by Bitcoin. The USDT charts largely look good, because Bitcoin went up. The Alt/BTC charts took a beating, and the point for most is to stack sats. Trading the USDT pairs when BTC is going up is futile, if you can just make more by sitting in Bitcoin.
That said, to be clear, the USDT pairs look good.
Bitcoin is overbought, so perhaps we get some consolidation here and altcoin action, but Bitcoin Dominance is rising for the moment.
LTC/USD
I am sharing this because it's a very clear bullish setup and breakout. Very simple. Ideally, we want to confirm the close above resistance and then look for a retest of the blue line, which often does not happen. You have to be willing to miss the trade if you want that "ideal" entry. Either way, you can see the fibonacci levels from the recent top to the lows and use them as targets - there's a lot of room for upside here.
Crypto Tax Loophole
I have written about was sales a number of times, but figured this was a good time to remind you of the tax benefits... for now.
In legacy markets, when an investor sells a stock, they need to wait 30 days to buy the asset back in order to avoid triggering a wash sale. If a wash sale triggers, the investor cannot write off the loss. Since crypto regulation is lacking, there are no wash sale rules, meaning investors can sell their crypto then instantly buyback and the loss is still recorded.
I am not a tax expert, but I will advise that if you do this, you need to keep perfect records of your transactions if you plan to report the loss to the IRS - they will not do this for you.
What is great about these losses is that they can be accrued and carried over the years to offset future gains. Keep in mind that if you opt into this strategy, you forfeit long-term capital gains advantages. Before you decide on this, you need to understand what type of investor you are so that your tax strategy best matches what you do on a day-to-day basis.
FTX Is Cutting Back On Leverage - Binance Too
I have always said that 99% of retail traders should stay away from leverage, a tool that even I rarely use. FTX has now decided to cut back on the high leverage it offers its users by setting the cap at 20x, which is still high. In the linked twitter thread, SBF made it clear that he felt it was his duty to remove high leverage to “encourage responsible trading.” Sam made a good point that this is the direction the industry is headed anyways and for them to set a trend of responsibility is worth the cut in revenue from removing the service, which is small. Lyn Alden, a popular macro investor chimed in with a really good analogy, “it's like a bar implementing a 10-drink maximum per customer after some bad weekends. Lower than before but still like... a lot of alcohol.”
It has since been reported that Binance has made the same move.
Amazon Insider Claims Bitcoin Payments This Year
Possible, but I don't give much credence to stories like this one. Insider journalism and “leaks” are just too unreliable and their hit rates are too low to bother getting excited over. Don't buy Bitcoin to front-run leaked information. Rather, buy Bitcoin because you believe these events are inevitable regardless of what the clickbait headlines compel you to believe.
All of that said, I believe that Amazon entering the space is inevitable. On the off chance that this is true, it would be a massive bull market catalyst.
Ethereum Staking Continues To Climb
A few staggering milestones have been reached on the Ethereum network. First, there are now 200,000 validators. To become a validator, the requirement is a deposit of 32 Ethereum to the staking contract. This is a serious figure, considering 32 Ethereum is currently worth over $73,600. It would be one thing if being a validator was free or cheap, but there is a lot to be said about eager validators at expensive prices. With over 200,000 validators, the current total of staked Ethereum is 6.6m tokens, worth roughly $15.2b. I wouldn't be surprised to see 10% of the total supply staked before the launch of 2.0. Right now, the figure is approaching 6%. Although it may be cheaper now to buy the 32 Ethereum and stake the coins, markets have a tendency to gain popularity with rising prices. This could lead to an explosion in staking interest at even more ridiculous prices.
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