The Wolf Den #306 - Good Trades Vs. Bad Trades
The Bitcoin Whales Are Back - IntoTheBlock
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB). ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data.
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.
Bitcoin whales are back
Climbing from $29,000 to over $46,000 over the past 16 days, on-chain analysis indicates that Bitcoin has been experiencing significant buying activity and accumulation by large holders.
Although Bitcoin tumbled to $29,200 on July 20th, it has quickly recovered and recently closed above the 200 Moving Average once again, which will likely attract a lot of attention over the next few days. At the same time, on-chain data echoes the spot buying among institutional or large participants over the past few weeks. By analyzing the transaction size in Bitcoin, the number of on-chain transactions greater than $100,000 has been dominating over the past 2 weeks.
As the market continues to rally and price action confirms the uptrend, we can analyze who has been behind the recent breakout of the major crypto asset. We have talked about this before, but these “Large Transactions” are usually highly correlated with the price action of Bitcoin.
Large Transactions Volume provides an idea of the total amount transacted by whales and institutional players in a given day. Spikes in Large Transactions Volume point to high activity among institutional players either buying or selling.
As of Aug 12, 2021 using IntoTheBlock Financial Indicators
The chart above demonstrates how the volume of these transactions started to increase exponentially since October of 2020, back when the market rally started. Just in 2021, the total volume of these transactions accounted for $17.72 trillion, or 97.9% of the Bitcoin on-chain volume.
As of Aug 12, 2021 using IntoTheBlock Financial Indicators
Although we saw a remarkable decline in the number of these transactions since May, since the July dip, we have spotted an increase of 63% in the number of these transactions, while the volume rose by 178%. This points out the likeliness of these investors accumulating at the low prices instead of selling.
All signs point to whales accumulating in advance of another bull run.
Bitcoin Thoughts And Analysis
WEEKLY CHART
Bitcoin has been running hard to the upside over the past few weeks, with three consecutive bullish weekly candles. This would be a reasonable time to cool off and pullback, right after breaking through the key 42K level. I have been discussing and looking for a likely pullback in this area, and view a retest of 40-42K as very bullish assuming it is successful. You WANT to see key resistance retested as support to confirm the new trend, so there's nothing to fear in a bit of healthy retracement.
Ultimately, the bear trend is technically broken with the higher high and break from accumulation and the nearly 3 months range. Dips should be for buying, so the next major dip we get (maybe this will be it) seems like reasonable place to long your longs.
DAILY CHART
The 200 MA has been the talk of the town, as three daily candles managed to close above. Now price is trading below, but the day is not over. We will have to see how the candle closes to make a judgement. That said, it's just another line on the chart and tends to be a lagging indicator.
I have been looking for a retrace, so I am watching the 42K area, 40K as psychological support and then the purple demand zone that I drew for a wick down before a close higher. That would be a god tier entry if the bull run is back.
Notably, selling volume right now is quite low, no major spikes to speak of.
We have been seeing overbought bearish divergence on multiple time frames building, including the daily. I have posted this a few times as part of my thesis for a bit of retracement. If price bottoms here, we would actually have a small hidden bullish divergence, but I am not really looking for that at the moment. Things looks like they could cool off a bit.
Altcoin Charts
As tends to be the case, we had a few days of great altcoin action and some solid trades over the past two weeks. As I have warned, Bitcoin looked ready for a bit of healthy retracement, which usually means a temporary drop for alts. I think that we are in a bull market, so dips are generally for buying on investments, but as a trader I think we saw a few local tops, like ADA which I discussed after it hit its target. At this moment I am watching a few coins, but all look risky if Bitcoin drops any further.
EGLD/USDT
I am posting this because there are some clear areas where a trader may be interested in buying the dip on this pullback. Generally, EGLD has broken through descending blue resistance, signaling and end of the previous down trend. Key areas are marked, but based on the chart, this should eventually make a trip back to the top after the breakout. That said, dips look like they are for buying, assuming we believe that the bull market continues and Bitcoin will continue to rise.
I have circled my areas of interest where I will personally consider adding to my position from much lower. The ascending blue support ultimately is key, so I would exit if price closes candles below.
Legacy Markets
AMZN (AMAZON)
I have been dollar cost averaging into Amazon for years and view it as a retirement investment, but there are those that are looking to trade it.
If you are the latter, price is testing the daily 200 MA as support. Even if it drops below, it has never stayed that way for long - this has been one of the strongest supports on the chart historically. Also, we have a massive gap above to $3580 that is likely to get filled.
In my opinion, you buy dips on Amazon for the long term, and this is an opportunity for investors as well.
Chart Requests
Every Wednesday I take chart requests from paid subscribers and look at them live on YouTube. Here's the replay of the stream!
Trading Tip - Not "Till Death Do Us Part"
Never be married to a trade.
It sounds simple, but as a trader I am sure that you have experienced an emotional attachment to your current positions on countless occasions. It is human nature to always want to be right - that is why traders will reevaluate a trade and change the parameters once it is open, moving their stop loss down or taking profit too early.
There is no room for caring about being right in trading. In fact, it’s better to accept that you are wrong as quickly as possible, to prevent further losses and clear your mind for the next trade. That’s the secret sauce to longevity as a trader.
Many in this community are loyal community members of projects, which is amazing as an investor, but a curse as a trader as well. You cannot trade an asset that you are emotionally attached to.
Ask yourself the following questions.
If you are bearish on the asset you are trading, what would have to occur for you to cover your short and open a long? If you are long now, what conditions would invalidate your idea and cause you to change bias and flip short?
If you are presently sitting on the sidelines, what would it take for you to put your capital to work and open a new position?
It is essential that you always know the answers to these questions because it allows you to objectively see the other side of the trade.
DeFi Hacker Begins Returning Stolen Funds
If you've been following the crypto news, you have probably heard about the massive DeFi hack this week, totaling $600m in lost funds. Dialogue has begun to surface between the supposed hacker, community, and Poly Network, revealing more about the intentions of the exploit. According to the hacker, they could have “stolen more,” but decided to “save the project” and “consider returning the tokens.” Since the hacker’s address is known, some of the funds are now blacklisted, and exchanges are on high alert. Experts have weighed in saying that laundering the money would be extremely difficult. This may be the reason that the hacker is in the process of returning the funds. At the time of writing this, $260m has been returned to the Poly Network and the hacker is supposedly in talks with the development team to continue handing over the rest of the funds. The behavior is very strange, but what can you expect from someone who just became $600m richer one day.
Massive Car Insurance Company Adds Bitcoin To Balance Sheet
Metromile announced a purchase of $1m worth of Bitcoin in their Q2 financial reports. Not only have they invested in the asset, but Metromile intends to incorporate Bitcoin payments into their ecosystem. Metromile plans to “allow policyholders to pay for insurance and receive payment in bitcoin or dollars. They will accept premiums and pay claims in cryptocurrency.” This is a large company with a cash reserve of roughly 200M. Their purchase only represents .5% of their cash. Metromile plans to acquire $10m in Bitcoin, which would be 5% of their cash reserve. They definitely aren't stopping here.
Crypto Banks Are Coming
A recent blog post by Jeremy Allaire, the co-founder and CEO of Circle (USDC), revealed plans to pursue a commercial banking license in the US. This would be huge for the industry, considering USDC is the second-largest stable coin by market cap and has a well-established history. An overly compliant approach is a smart strategy to avoid the possibility of crackdowns, especially in light of the constant FUD surrounding tether (USDT). It is better to be ahead of looming regulation than to be caught in crackdowns. Below is an official post from Circle’s CEO.
“Circle intends to become a full-reserve national commercial bank, operating under the supervision and risk management requirements of the Federal Reserve, U.S. Treasury, OCC (Office of the Comptroller of the Currency), and the FDIC (Federal Deposit Insurance Corporation). We believe that full-reserve banking, built on digital currency technology, can lead to not just a radically more efficient, but also a safer, more resilient financial system…
In the coming years, we anticipate that USDC will grow into hundreds of billions of dollars in circulation, continue to support trillions of dollars in low-friction, high-trust economic activity and become widely used in financial services and internet commerce applications. Establishing national regulatory standards for dollar digital currencies is crucial to enabling the potential of digital currencies in the real economy, including standards for reserve management and composition.”
Messi Paid In Crypto
Messi's massive contract with PSG will include payment in fan tokens. The details are cloudy, but it's clear that a small part of his contract is the cryptocurrency, based on Chiliz and the Socios platform. $PSG trading volumes were over 1.2 billion in advance of Messi's contract. Somebody knew something!
HUMAN Protocol
HUMAN Protocol broke the CoinList record for number of participants in an ICO, which is not surprising when you learn about the project. The Protocol is designed to deliver quality, balanced data labels to ML companies at scale; labeling data is, for example, the process of selecting a car, or crosswalk, in a CAPTCHA. This data is essential for creating AI products - the problem is, it is often inaccessible, highly biased (learn more), or non-existent.
HUMAN Protocol is the infrastructure that allows two sides of a market to trade without trust. Requesters on one side purchase HMT to prefund a smart bounty, in which they define the data they want labeled, and Workers on the other end complete that work. The Protocol automates and distributes the details in between, allowing software to execute sanitation of the data, distribution of the work, verification of quality of work, and payment.
hCaptcha is simply the first application running on HUMAN Protocol. The Protocol supports other data labelling applications, such as Intel CVAT and INCEpTION, to deliver the quality data required to make AI products. These, however, only represent a small portion of the potential applications the Protocol could support.
HUMAN is designed to make machines more HUMAN; to give data scientists the means of creating a generation of AI products that can truly help to create a fairer, greater world for everyone. Beyond AI, the software infrastructure of HUMAN has many more potential use-cases - the Protocol is simply the software that supports decentralised markets - so why could that not be a doctor checking an X-Ray, or an accountant auditing company accounts?
The HUMAN collaborations:
HUMAN is building blockchain 3.0: a seamless, interoperable ecosystem, on which applications can run on multiple different chains. To that end, HUMAN is working with Solana, Polkadot, SKALE, Elrond, Algorand, and more to build out that ecosystem, with the idea being that HUMAN Protocol can intelligently distribute work to different chains depending on speed, cost, latency, availability, and other factors, to power the volume of work and microtransactions associated with the HUMAN work revolution.
Learn more:
An introduction to HUMAN job markets
Visit the website or blog for further information; to keep in touch with updates, follow HUMAN on Twitter, or join their Discord.
The Wolf Of All Streets Podcast Ft. Ran Neuner
As the host of the world’s first televised cryptocurrency show, featured on CNBC, Ran Neuner has become one of cryptocurrencies most recognized and influential voices. Providing educational content to millions of listeners around the world, Neuner advocates for safe investing and proper allocation in the crypto space to maximize returns in this fast moving industry. Neuner believes that the crypto market is reaching a massive tipping point, transitioning from the early adoption stage to the mainstream, and that this is a moment of tremendous opportunity.
Ran and I discuss:
Crypto never sleeps
The Ran Neuner CNBC story
Building a crypto community
The crypto bill
Are we moving towards mainstream adoption?
Bitcoin and Ethereum
Diving down the crypto rabbit hole
Making it big
The flippening
Crypto life balance
Can crypto change lives?
Building a crypto community
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My Recommended Platforms And Tools
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Concierge Phone Service for Americans that protects your from SIM Swaps and other phone related hacks. I cannot stress enough how amazing this service is.
Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
On-chain and fundamental analysis, research, predictions and indicators, all in one place. Highly recommend.
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.