The Wolf Den #324 - Regulators, Mount Up
Bitcoin Thoughts And Analysis
Yesterday saw an epic dump on significant volume, right as El Salvador officially made Bitcoin legal tender. If this was a "buy the rumor, sell the news" situation, then it was one of epic proportions. Clearly, some party or group decided that this was an opportune moment to aggressively sell Bitcoin, which is clearly confirmed by the volume profile, with huge spikes on low time frame candles (down to the minute). This would not happen if a number of parties were selling or panicking.
Interestingly, price traded sideways for hours after this happened, with almost no volatility. Very, very strange.
I do not pander in conspiracy theory, but can only say that the timing is suspect, especially in light of recent push back from the World Bank and IMF. I stated this on twitter, about an hour before Bukele (the President of El Salvador) effectively accused the IMF of dumping Bitcoin in a tweet.
If it was not them, then a whale simply took the opportunity to unload a lot of Bitcoin and cause the classic liquidation cascade that we see every time a sell off is triggered. Sam Trabucco from Alameda Research (SBF's fund) went into great detail on this, once again. Thread below:
According to Sam, this event is ALWAYS an opportunity to purchase coins for the long term.
Regardless of the reason, the market clearly just changed and we need to take a few days to absorb the new information. It appears that a macro lower high is likely, which would mean that it would seek a higher low to form a symmetrical triangle or more consolidation. We will see.
DAILY CHART
We saw a major drop yesterday, which interestingly stopped right around the 50 MA (blue line) on the daily. The daily candle closed back above the 200 MA, where it is currently sitting at the moment. A golden cross of these 2 MAs still looks likely, but tends to be a lagging indicator, meaning that it is a result of the previous rise and not predicting future price appreciation. That said, it's always worth watching when price is interacting directly with both lines.
I have been talking ad nauseam about a drop to the 40-43K area, although I did not expect it to happen in a matter of hours! As you can see, price landed EXACTLY at the top of the old range, with it actually hitting 42K on Kraken and some other exchanges. This was a perfect retest of the range highs as support, truly incredible from a chart perspective. If you had bids waiting there, you likely filled and are in profit. Too early to celebrate, as the drop may not be over, but still shows why having patience is key.
4-HOUR CHART
Zooming into the same chart above, you can see the clean retest of the range highs as support (red zone). You can also see that the current 4-hour candle is finding support in the blue demand zone that has been on my chart. That area is tapped completely now, as price pierced through and removed the bids.
The current 4-hour candle has decent buying volume and looks quite bullish - but it has not closed so it is too early to tell. We want to see price flipping the upper blue zone back to support, as that area is now clearly resistance.
RSI already hit oversold on the move down. You know what that means. It means that I will be watching for bullish divergence to form. This would require a lower low on price (for a close, not a wick) and a higher low on RSI. This is my favorite bottom signal. It is already there on the hourly chart. We do not need to see it, but if we do, I will buy even more.
Altcoin Charts
Major drop across the board, so time to watch and wait until the charts reset and we get some clarity. You may have filled some low ball bids, which is great. Otherwise, we need time now to see how the market settles.
ETH/USD
Deep correction yesterday, of course. As you can see, price tested the blue range highs as support - almost to the dollar. Bitcoin did the exact same thing.
I filled bids at $3,330, much higher than the bottom of this move, but the area that I had drawn before. Those are currently in profit. Price can go lower, so far too early to celebrate
This chart illustrates why you should have low ball bids in place. The range highs were an obvious place to put sell orders in case of a flash crash, and those who did it were handsomely rewarded.
Crypto Is Officially Legal In Texas
I was unaware that crypto was ever illegal in Texas! We reported a few months ago that these measures had passed, and they were put into action this week. This offers quite a bit of clarity for investors and companies operating in the state of Texas, which is becoming a haven for miners and other crypto companies.
“This is positive for crypto generally,” said Lee Bratcher. “This means parties to transactions have clarity regarding their legal rights and obligations, judges have a roadmap to adjudicate disputes, and lenders know they have an enforceable lien on the crypto pledged as collateral for collateralized loans.”
We need more states to pass similar laws.
El Salvador Is Buying Bitcoin In Bulk
“Buying the dip 😉 150 new coins added. #BitcoinDay #BTC🇸🇻”
El Salvador currently holds 550 Bitcoin and could be holding more by the time you read this newsletter. Not only is the country bulk buying Bitcoin (about $10 million at a time), but they are also going to be stacking more sats as some citizens inevitably convert their Bitcoin to USD, utilizing the government fund. In the passage of El Salvador's Congressional Bitcoin Bill, it was mandated that they hold $150 million USD to facilitate the adoption and ease of use of Bitcoin by offering a free way out of Bitcoin to USD. Ideally, the citizens will hold their Bitcoin if they can, but if they wish to convert their Bitcoin to USD, the government will just stack more Bitcoin. So, on top of the coins the country is currently buying, they also have the option to hold the Bitcoin accumulated from their citizens - a win-win.
CBDC Gaining Steam In China
China is far ahead of the curve on implementing a central bank digital currency, the e-CNY. A number of companies are now reportedly developing products based on the CBDC and integrating it into their platforms.
Central banks will all eventually move to digital currencies - it is inevitable. The world would prefer that the first to do it successfully not be China.
In a digital future, every citizen of every country will learn to transact using a wallet. CBDCs will likely be a historic violation of privacy, pushing more people towards Bitcoin.
Feature On Making Money With Charles Payne
I was on Making Money With Charles Payne again yesterday on Fox Business. We talked Cardano, regulation, Kim Kardashian, Bitcoin's role and more.
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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.