The Wolf Den #296 - Becoming A Full-Time Trader
Bitcoin Thoughts And Analysis
MONTHLY CHART
As you can see, the last 3 monthly candles (this one is not yet closed) have long wicks to the downside, indicating tremendous demand below 35K. Bears have failed to push further than the initial May drop for the past 10 weeks or so. Bulls are still very interested in this range.
More importantly, we have this macro ascending channel from 2013. On the recent bull run, price flipped the EQ (the dashed center line) from resistance to support, which is currently being retested as support once again. If this candle can close in 3 days above the dashed line, it makes a strong case that price will target the top of the ascending channel, giving 6 figure Bitcoin targets. A clean break below could target the bottom, but that looks less convincing at the moment.
DAILY CHART
We now have a bit more of a convincing break above the blue channel, on strong volume. We had a retest as support yesterday, but now volume is decreasing as price rises, which gives a bit of pause. Ultimately we need to break above the 42K area to have a convincing bullish case. I am cautiously optimistic, but believe maybe price drops a bit first, retesting the top of that channel and maybe even dropping a wick back in.
After a historic tightening of the Bollinger Bands, we have seen a clear break to the upside with renewed volatility. That's good. We saw something similar in December. Using that as an example (this is just an idea, unlikely to repeat exactly), we can see that price got out above the upper bands for a few candles before consolidating back inside for another push up. This would lend some credence to the idea that Bitcoin will consolidate here below 40K for a bit before renewing strength for another run to the upside.
4-HOUR CHART
We can see that price is once again struggling around 40K, in the blue supply zone that has rejected price time and time again. This looks quite a bit like the action in mid June, except that this time it took far more effort to get here. RSI hit it's highest level of the year, making bearish divergence nearly inevitable. We have confirmed bearish divergence on every time frame from the 12 hour down, but price has not dropped too far. If price does drop, it is very likely we will see hidden bullish divergence cancel the bear div and give us a signal that continuation up is likely.
I am still watching the 35-37K area if price drops to add more to my position, which I once again started buying around 31K.
Bottom line: price is still below a ton of resistance and would need a real push on significant volume to make the bull case. It's encouraging, but not there yet.
Altcoin Charts
I normally share altcoin charts and setup ideas in this section, but only when the altcoin market looks bullish. At the moment, Bitcoin looks poised to make a significant move, which would likely be bad for altcoins, no matter which direction it goes. USDT pairs will do well, but not as well as Bitcoin, if the move is up. If BTC drops, alt coins will likely suffer. If the goal is to stack sats, neither of these situations is deal.
As I often say, the biggest part of risk management is knowing when to sit on your hands and not trade at all. Alts could do well, I have no idea, but the situation at the moment is suboptimal. That can change fast, so I will revisit tomorrow. There are a few that I am watching which I will consider for tomorrow, namely RUNE and UTK.
Also, I never share signals, I share setups. So when I post charts, they are ideas of what could happen and where I would look at taking a trade. They should be used within your own system.
Legacy Markets
DXY (DOLLAR INDEX)
The dollar index largely drives the price action in other markets, with a general inverse correlation. When the dollar drops, metals, stocks and even Bitcoin tend to perform well.
I have been an outspoken dollar bear for a very long time, and even the recent rally appeared to me likely to come to a quick end. I shared this idea in the newsletter and on twitter a few days ago.
As you can see below, this is playing out beautifully. The ascending wedge has broken down with strength, and is rapidly approaching the short term target. With trillions being printed and no end in sight, the dollar should continue down over a long time frame.
Chart Requests
Every Wednesday I take chart requests from my paid subscribers and look at them live on YouTube. Here are your chart requests from yesterday - enjoy!
The Pareto Principle
The Pareto principle (also known as the 80-20 rule, the law of the vital few and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.
The original observation was in connection with income and wealth. Pareto noticed that 80% of Italy’s wealth was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.
As a trader, it is likely that 20% of your trades will result in 80% of your profits - so focus on riding winners and cutting losers. Learn to implement a proper position sizing methodology to your trading, ensuring that you can withstand a string of consecutive losses without going bust.
Traders tend to fail to cut losers and then impatiently take profits too soon. It doesn’t matter if you have multiple losing trades over the past several months as long as your overall risk on each trade is less than 2%. The Pareto Principle will even out your results in due time, assuming you have developed a known expectancy on your system and employ risk management (stop loss and position sizing).
Ride the winners and cut the losers and never be discouraged that more often than not, your trades will be losers or will be a wash (smaller winner or small loser). It’s the small minority of trades that will make you a consistent winner at the end of the year and over the course of a lifetime. Trend trading is boring and will probably give you a home run every one in ten trades with a couple of doubles and triples in between. Be patient, you will be rewarded.
The Wolf Of Wall Street Wants Crypto Regulation
Jordan Belfort recently did an interview with CoinDesk and had the following to say: “The sooner that massive regulation comes into the market, the better it is for Bitcoin, stablecoins, and everything else. Any market that was nascent got much bigger after regulation. Regulation will make crypto far more buyable for institutions.” He also went on to say, “Tether is a scam” and that there are “so many scams in the space, but once regulation comes, the legitimate one's will soar.” For the most part, I think Belfort is right here. Perhaps he framed it harshly, but regulation is needed, and will sort the legitimate projects from those that should be culled.
In terms of Tether, Belfort has argued that it is a scam since 2017. Yes, Tether’s history is questionable, but their reports are now public, and their balance sheet looks much cleaner than those of many companies traded on the NYSE. I recommend you listen to the full interview for a clearer view of Belfort’s thoughts. He mentions Bitcoin and Ethereum numerous times, always in a positive light. Those two also happen to be my largest holdings.
Inflation Is Poised To Rise
At the most recent Federal Reserve meeting, Jerome Powell confirmed what Bitcoiners already know. This is what he had to say: "inflation is running well above our 2% objective, and has been for a few months, and is expected to run certainly above our objective for a few months before we believe it’ll move back down toward our objective. The question of whether we’ve met that objective, formally, is really one for the committee to make.”
One of the most popular narratives for owning Bitcoin is that it is a hedge against inflation. Right now, it is hard to see how the FED will stop inflation in the long run, which is why Bitcoin feels so necessary. With the Delta variant on the horizon, a rising possibility of lockdowns, and tech stocks looking ripe, it is hard to imagine that Bitcoin does not perform well as a hedge against the nonsense.
Blockfolio Is No Longer Blockfolio
FTX has officially announced a rebranding of the Blockfolio App, which it acquired back in 2020. Blockfolio will now be known as the FTX mobile app or FTX app. The change is only branding, as there is zero impact on user experience. When asked to comment on the news, Sam Bankman-Fried said the following, “the rebrand of FTX: Blockfolio to FTX puts the final cap on our acquisition of Blockfolio, doubling down on our commitment to being the number one crypto trading platform for both retail and institutional users.”
Robinhood IPO Today
All eyes on Wall Street are on the much anticipated and debated Robinhood IPO. The company raised roughly $2B, selling shares in the IPO at $38, the low end of the anticipated $38-$42 range. They earmarked a large percentage of these shares for users - a risky move, considering those are likely to be dumped.
It will be interested to see if Robinhood becomes a meme stock, much like the assets driving usage of the platform.
Bitcoin Leaving Exchanges In Record Numbers
Roughly $2.8B in Bitcoin was moved off of exchanges... yesterday! This is the largest number since November 2020, in the early innings of the previous bull run.
This is a hard metric to trade on, because it is difficult to discern who controls the wallets and where the coins are going. Of course, the coins can also come back any time.
That said, massive amounts of supply leaving the active market is always a positive, so it will be interesting to see if this helps increase supply shock and drive price up.
The Wolf Of All Streets Podcast Ft. Landon Cassill
Before Landon Cassill could legally drive on the road, he was winning races as a teen driver and being scouted by high profile sponsors and racing teams. What few know is that he was also an early crypto adopter and miner. He managed to merge his two loves - Landon pulled off a crypto sponsorship with one of our team’s favorite companies, Voyager. This epic deal has spawned a whole new fan base for crypto, furthering the marriage of crypto and sports. Perhaps most interesting is that the foundations of Nascar are built around freedom of choice, a pinnacle of the crypto community.
Landon And I discuss:
The reality of a crypto fan base
The Bitcoin journey
Mining Bitcoin
Landon’s investment strategy
The Bitcoin network effect
Sponsor: Harmony +49
Crypto becoming mainstream
What a crypto sponsorship looks like
Paid in crypto
Athletes going broke
Nascar, freedom, and crypto
How does someone become a driver
Stuck inside a race car
Crypto and the NFL
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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.