The Wolf Den #298 - El Salvador
Bitcoin Thoughts And Analysis
MONTHLY CHART
The importance of the rally to end the month cannot be understated. I have shared this chart countless times, and we have a clear flip of the EQ of this 8 year old ascending channel to support, which we were watching for. Further, the monthly candle closed as a bullish hammer, with a wick down below support and a nice large bullish body, closing near the monthly high. We also have tweezer bottoms on the last 2 monthly candles, a bullish reversal signal.
I know this sounds crazy, but with time, this support flip of the channel EQ should target 6 figures - the top of the range.
WEEKLY CHART
Beautiful weekly candle last week, tapping the key 42K resistance before ultimately being rejected. The week before had a clear reversal candle at the 50 MA support, so this move was somewhat predictable.
Now we really need a close above 42K, as I have said countless times.
DAILY CHART
The TD Sequential indicator printed a sell 9 (the green 9) a few days ago, followed by two candles that closed a bit higher before starting the bearish count. This is a reversal signal that a lot of traders use for confluence, especially if it happens at a key level of resistance like 42K. Price can reverse back up at any time in the count, we do not need to see another 9. This is more hindsight, showing you guys there was a sign that the local top was likely in for the moment.
I shared this idea a few times last week. As you can see, price was trading above the top of the Bollinger Band like in December, which usually leads to a reversion to the mean. Now price is retracing a bit back into the bands, which is completely normal after such an aggressive move. I am looking for some consolidation between here and 36K or so (not saying we get that deep) before more movement to the upside. After the bands were this tight and we had a clear break up, we should see continuation.
The daily barely closed a candle above 42K, but quickly dropped back below. Very strong resistance in that area. As you can see, price is coming back to test the top of the descending blue channel, as discussed. For traders that use EMAs rather than MAs, the 200 is acting as support there, and price is notably trading above all key EMAs. To me, this still looks like a predictable rejection on the first attempt at 42K, and consolidation below that resistance for an eventual push up.
4-HOUR CHART
We once again have very clear bearish divergences on multiple time frames, and once again they are likely to be followed by hidden bullish divergences to cancel them out. We have seen a nice RSI reset now, which means there is room to rise if price decides to push again. I will be watching for confirmed hidden bullish divergence again to signal a likely attempt to push up.
For now, I still have bids set from 35-37K or so, in case we go back to test the range EQ.
Altcoin Charts
As Bitcoin retraces, altcoins are seeing a moment to prosper on their BTC pairs. It's hard to predict whether it will last, but they look decent for the moment. ETH, as usual, led the way.
ADA/BTC
ADA appears to have found support at the range lows, which means that the EQ of the range should hit as a target, if not the range highs down the road. This looks a lot like ETH did a few weeks ago, when we called the bottom of the range there. The first trade is simply a move to the dashed EQ, but if the market is turning bullish, this could have far more upside.
ETH/BTC
ETH/BTC looks great. I shared this on twitter over the weekend, as the breakout was happening. As you know, I identified this opportunity when ETH tested the range lows and hit the EQ. Now it looks to be reversing up once again. The first target is the EQ, not far above. The real trade here if you missed the breakout is a flip of the dashed EQ to support, which would target the range highs.
ETH/USD
ETH/USD is trading strongly above the EQ of the range, meaning that it should eventually target the range highs around $3000. If Bitcoin retraces further, then I would watch for the ETH/USD pair to drop to the blue line or back to the EQ, which could be a great entry if the market remains bullish and we do see $3000.
RUNE/BTC
I shared a video including a RUNE setup on YouTube last week, which looks to be starting to show promise. As you can see, we have a clear break of the descending blue line, which is a signal that the downtrend is broken. More importantly, we now have a clear flip of the horizontal resistance at 15199 to support. The previous 2 daily candles tested this support and now we have movement away from that line on increasing volume.
Areas of interest are marked, but this looks decent if you are looking to trade altcoins.
Infrastructure Bill A Threat To Crypto Industry
On first glance, the US infrastructure bill seemed somewhat innocuous with regard to crypto. It stated a few extra reporting requirements and was pegged to raise 28B to pay for various other programs.
Upon digging in, a number of people in the crypto space have identified major flaws in open ended language that could be very dangerous to players in our industry. Most notably, the bill effectively labels everyone in the space like they would an exchange or broker, requiring specific KYC and AML of users, most often in areas where gathering that information would be fundamentally impossible. It is set up with vague language that would potentially require miners and others to report on the specific activities of each affiliate or user, an impossible task where people are anonymous.
It will be interesting to see how this plays out, but it's a real issue worth watching.
EIP-1559 Is Happening This Week!
After all of the talk around Ethereum’s most controversial and important update so far, we have finally made it. While it is exciting that the time has arrived, the event itself should behave as a non-event for price, similar to the halving. For both Ethereum’s EIP-1559 and Bitcoin's halving, the long-term implications are far-reaching but there is nothing specific to watch or impact price.
EIP-1559 is a restructuring of the way that transactions are processed on the Ethereum blockchain. We all know that proof of stake eliminates mining, and EIP-1559 is a middle ground on that transition. With the update, miners will receive fewer rewards and some Ethereum will now be “burned,” meaning it disappears from the supply. The advantage of EIP-1559 is that traders, developers, and users of the network will now have more clarity around the fees when participating. Ultimately, there should be more use on the network, more encouragement for big players to interact with Ethereum, and us HODLers will enjoy a nearly deflationary asset.
Saudi Aramco Planning To Mine Bitcoin
Saudi Aramco, a Saudi Arabian oil company ranked as the 3rd largest company by market cap in the world, is considering mining Bitcoin. The news comes from a Brazilian Bitcoin miner who is reportedly in talks with Aramco. Aramco would be an ideal miner due to leftover flare gas from their operations that naturally goes to waste. The leftover gas would power the miners, resulting in a profit from the by-product of their production, adding new revenue to the company and strength to the network. Another reason why this could work is that Aramco has already explored and invested in blockchain technology - they even use it in their own operations. Below is a quote from the miner in talks with the company.
“We are negotiating with Aramco. All black liquid [oil] that comes out of the desert belongs to this company. All the flared gas they’re not using, and that’s public information, I can tell you, it’s enough to ‘power up’ half of the Bitcoin network today, from this company alone.”
Bitcoin’s design incentivizes its own decentralization through the cost savings of randomly available cheap power - of which the Earth has plenty. Aramco’s involvement in mining would be an epic addition to the network.
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