The Wolf Den #294 - The Truth Behind Diversification
Bitcoin Thoughts And Analysis
DAILY CHART
I have shared the daily chart with Bollinger Bands a few times, noting that they were squeezed the tightest that they have been in many months, meaning that a major volatile move was likely. The good news for us is that it seems to have happened to the upside. I also pointed out last week that they daily was holding support on the lower bands, and that price was likely to rise as a result.
The last two times that the bands were almost this tight were April of 2021 and December of 2020. December led to a massive move up, April a massive move down.
As you can see in December, once the price rises above the upper band, you tend to get aggressive continuation - the same to the downside in May. Multiple candles ride the upper or lower band. Looking at the bands here, I would expect price to continue up after breaking out.
Price appears to be making another run at the top resistance of the blue descending channel after being rejected yesterday. I am feeling good about the follow through today after seeing price rejected in general yesterday.
4-HOUR CHART
RSI was the most overbought it has been this year. The drop from 40K reset RSI back to around 60, with hidden bullish divergence, indicating likely continuation to the upside.
Price also bounced off of support, just above the channel EQ.
You want 36K, you get 36.4K. We often see whales front running obvious levels, assuring that retail misses the move and is forced to buy in higher.
We still need to break through that blue supply zone, hold 40K, pass through 42K-43K... and then we can feel more bullish. But this is a good start.
Amazon Denies Bitcoin Rumor - Obviously
Amazon has denied a London tabloid report that it would begin accepting Bitcoin and other cryptos.
It was only a matter of time before Amazon cleared the air regarding the rumors circulating about its supposed crypto plans. In an investor relations email, Amazon denied the rumor that “it would accept Bitcoin and other cryptocurrencies by the end of the year" and stated that they have no plans to launch a crypto by 2022. No surprises here. What was added to the end of the email was that Amazon will, “continue to explore cryptocurrency and blockchain solutions.”
What is known is the fact that Amazon does have a legitimate interest in the crypto space. Just last week, Amazon posted a job listing looking for someone to, “own the vision and strategy for Amazon’s Digital Currency and Blockchain strategy and product roadmap" as well as someone who has a "Deep understanding of the digital / cryptocurrency ecosystem and related technologies." Beyond just looking for talent and experience in the space, AWS (Amazon Web Services) are deeply integrated with Ethereum. As I said yesterday, don’t buy crypto because of these rumors, buy because you believe it is all inevitable in the first place.
Man Group Will be Left Behind
The CEO of this oddly named hedge fund will be eating his words in the future. The firm currently manages $127B and the CEO Luke Ellis had some hot takes about cryptocurrencies. “If you look at cryptocurrencies as a whole, it is a pure trading instrument. There is no inherent worth in it whatsoever. It is a tulip bulb. You can have an infinite number of different cryptocurrencies. Anyone can start another one any day.”
El Salvador has chosen to make Bitcoin legal tender. $65B are locked in DeFi. It's obviously absurd to consider crypto to be simply a trading instrument.
Probably where Ellis most misses the mark is the deeply entrenched network effect driving Bitcoin up over the long run. A staple of sound money is recognizability, an attribute that can't be minted overnight. In just over a decade, Bitcoin has grown from one user to around 125 million users. It won’t be long before this hedge fund misses out on one of the greatest monetary innovations of our time.
Grayscale Is Committed To ETF Success
In a mid-year investor letter, Grayscale gave an outline of its commitments moving forward this year. While sifting through the typical corporate nonsense, I read that, “these milestones underscore that we are 100% committed to converting Grayscale Bitcoin Trust (symbol: GBTC), Grayscale Ethereum Trust (symbol: ETHE), and our other investment products into ETFs.” In other words, we should expect to see more than just the obvious BTC ETF, but also an Ethereum ETF, and probably ETFs of other reputable coins and baskets. Everyone talks about a Bitcoin ETF, but that only scratches the surface. There will be so much more.
ETF Applications Are All The Rage
We are at the point now where investment firms are feeling FOMO if they don't have their name on a product pending an application approval from the SEC. Goldman Sachs is now claiming to have submitted a “DeFi ETF” to the SEC for approval, which in reality is a far stretch from real DeFi. Tracked in the ETF are public companies that are “exploring blockchain tech” such as PayPal, Facebook, Visa, Microsoft, and other centralized tech companies. “DeFi” as a description is becoming as trendy as “blockchain” was a couple of years back, so don’t be fooled. If you want DeFi, buy some crypto, not shares of a centralized company. The irony of a centralized mega bank creating a decentralized finance ETF should not go unnoticed.
The Wolf Of All Streets Podcast Ft. Anthony Scaramucci
Anthony Scaramucci and his company Skybridge Capital have been dominant names in the crypto media, as they have been leading the charge for institutional adoption of Bitcoin. They have their own ETF proposal and proprietary crypto funds, so it’s safe to say the “Mooch” has a bullish long-term outlook for the crypto market. It is Scaramucci’s belief that both Bitcoin and Ethereum have proven themselves as the gold standards of crypto, both earning his approval and allocation. You’ll have to listen all the way through for some epic Scaramucci predictions.
Anthony and I discussed:
We are so early
The story of adoption
Bitcoin does not break
Buffett and Munger
Bezos as the greatest capital allocator
When should an investor diversify?
Where does Bitcoin fit into a portfolio
Ethereum opinion
Bitcoin critics
Bitcoin’s trillion dollar market cap
Bitcoin at a billion users
Does Wall Street get it?
What is the end game?
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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.