The Wolf Den #37- BTC, Stocks, Terrible Takes, Altcoins And MORE
Bitcoin Thoughts And Analysis
Bitcoin has been a fun asset to trade since it bottomed a few weeks ago. As you know, I was long Bitcoin from $4,850 and $5,950. I used a manual trailing stop to lock in gains - I did not catch the top near $7,000, but stopped out for a great trade at $6,430.
I entered a new trade with a cost basis (multiple buys) of $5,930 which is described below. I remain cautiously optimistic.
MONTHLY CHART
I finally get to discuss the monthly chart on the last day of the month! Tonight's close will be meaningful, with price presently trading slightly below a key level that bulls would like to see hold as support - $6,540. For now, this monthly candle has a nearly $3,000 wick down, which shows a ton of demand and buying since the recent bottom. This candle is definitely more bullish than bearish, although a smaller real body would be ideal.
Interesting to note - the only candle with higher volume than this month's is the candle that saw Bitcoin hitting an all time high. No matter what happens, there is almost more interest in trading Bitcoin now than ever before. Unfortunately, this month most of the volume was sellers. But high volume is what we generally want to see!
WEEKLY CHART
Price is trading between 2 key weekly levels right now - in fact, yesterday's DAILY candle started on the first at $5,873 and touched $6,540 before retreating a bit. I am presently in a Bitcoin position from $5,930. I shared this at the time, as I always like to update everyone and be completely transparent.
You can see the $6,540 is also a key weekly level that we would like to see flipped to support. Lots of resistance here - I can definitely understand why traders would consider taking a short position in this area.
Additional fuel to the bearish fire is the weekly tweezer tops circled in the chart above. That is usually a sign of a reversal to the downside - bulls were only able to push to the same level of resistance two weeks in a row before seeing price drop. This week's candle has only been moving for 2 days, so there's a lot of time left to see what will happen. A down candle to close the week would be confirmation of a more bearish scenario as a result of these tweezer tops and last week's shooting star candle.
DAILY CHART
The daily chart is interesting and once again shows that price is trading at a key level which will largely determine short term direction. Price has formed a clear ascending channel. Some would call this a bear flag, but that is NOT technically valid. A flag usually does not retrace more than 50% of the flagpole - in this case, price retraced back up almost to the 78.6% Fibonacci level. An ascending channel in this scenario is not as bearish - reversals tend to follow channels back up.
That said, if you were looking for a short, a retrace this far would have been an ideal opportunity. A short around 7K was a very clear trade - the question is whether that trade has concluded now after the drop to the high 5,000s and the bounce from the bottom of the channel. At this point, the safest short (IMO) would be a clear break below the channel. I missed my exit at 7K, as I said before and ended up selling on the retrace.
4 HOUR CHART
The 4 Hour Chart shows a potential ascending triangle (we have seen them before since the bottom) with a top near the 7K highs. A break above that area and retest as support would be massively bullish.
It is VERY COMMON to see multiple potential patterns at tops and bottoms, like the ascending channel and ascending triangle. TA is not a perfect tool, so it's about bias and confluence of other ideas to identify which pattern you prefer. Most ascending triangles break up, make a higher high and then form an ascending channel, often a bear flag. Bottoms and tops can be very hard to ID.
On the flip side, fans of TD Sequential will see a green 9 presently developing, which is a signal to go short. These have been somewhat inconsistent as far as accuracy - not an indicator I use alone, but one that I check sometimes for confluence of a trade idea.
FEAR AND GREED INDEX
The crypto fear and greed index is currently showing "Extreme Fear." If you believe in counter-trading sentiment, then this is a clear signal to buy. The herd is usually wrong.
BLOOMBERG INDICATOR SAYS BUY
The Bitcoin (BTC) indicator that called the 2020 price rally signals another rally
Interesting and quick read. TLDR - Bloomberg's custom indicator flashed buy for the first time in months.
Phemex
As you likely know, it has been years since I have found a leverage exchange that I feel comfortable trading on. A lack of a trustworthy exchanges is the reason that I never short Bitcoin.
After being introduced to the team at Phemex by a number of traders that I trust, I decided to give it a test drive and have been extremely impressed with the platform and team. They have been available to answer all of my questions and to incorporate my feedback into the platform. To that end, if you use it and have any ideas, please share them with me and I can pass them along. I will be trading with leverage here for now on.
Here are a few important points:
Institutional Background of the team - led by over 8 former Morgan Stanley Executives
6 Crypto trading pair + GOLD/USD
Phemex’s design criteria (<1ms latency speed, >300k tps, >99.9999% availability)
Sub-Accounts (Different from BitMEX and Bybit, allow to hold long and short positions at the same time, or lend accounts to fund managers)
USD settled contracts, less risky and simple PnL (Different from BitMEX and Bybit)
Proprietary Cold Wallet System
3 Withdrawals per day (Different from BitMEX)
Traditional financial products soon, after licensing from MAS
Chainlink, Tezos and Litecoin trading now live. New pairs coming soon
Fund managing options (Up to 200 Sub-accounts, simplified withdrawals, full API integration)
I asked them to provide me a bonus for anyone who signs up using the link below. This is not for me, it's for you. Give it a test drive and let me know what you think!
SIGN UP HERE FOR UP TO A $72 DEPOSIT BONUS
The Wolf Of All Streets Podcast Ft. Gabriel Jiménez
This episode is likely the most important and unbelievable that I will ever record. I had the honor and fortune to interview Gabriel Jiménez, the mind behind the Venezuelan Petro. Gabriel has always been an active member of the opposition and spent his life protesting the Chavez and Maduro regimes - so how did he end up on stage with Maduro presenting the Petro as it's architect!? I have the entire story and more, including why Bitcoin is essential to every day life in Venezuela.
His story was made public last week after 2 years of research by the New York Times. He is still an "enemy of the state" in Venezuela, so he is just feeling remotely safe in the United States and can start sharing his story.
Mine is the only podcast that he has been on. Buckle up.
Altcoin Charts
ICX/BTC
ICX looks very bullish here. The weekly chart shows a clear break of resistance with multiple retests as support. Price looks ready to finally break away.
The daily chart looks potentially even more bullish. There's a clear descending wedge with price breaking out. I was a bit early on my entry yesterday, but am still slightly up on the trade. This looks really good.
MATIC/BTC
Watching MATIC closely again, as it continues to bounce off of the ascending support. I will likely enter once again if it breaks the descending blue line, which would be a sign that it will likely head up.
NAV/BTC
NAV looks like it is finally ready to head up again. I bought a small position on the break of the blue line. This has very low volume, so hard for me to trade. At this point, I would like to see a break of 1262 and a retest as support.
WRX/BTC
I am not in this trade, but am looking for an entry. Price clearly has broken the descending resistance and is currently holding support. A flip of 1582 would be the safest entry for me, so that's what I am looking for, although I have considered a buy on a support bounce here as well.
Legacy Markets
AAL (AMERICAN AIRLINES)
I have continued to short all irrational bounces on airlines and cruise companies. My entry on American airlines is shown. This is NOT BECAUSE OF THE CHART. It's a common sense decision based on the global economic situation. There's no reason for airlines to do well, and American has done a uniquely poor job of running their business, after using 96% of their available cash on stock buy backs. They will get a bailout - sure. But they also won't have customers. The stock rose on the rumor of the bailout and has fallen since the official announcement.
BUY THE RUMOR, SELL THE NEWS.
NCLH (NORWEGIAN CRUISE LINES)
Same idea as American Airlines. It's even worse for cruises, because they were at the epicenter of the COVID-19 breakout and are not American companies. They cannot really be bailed out. I didn't need a chart, I just saw enough of an irrational rise to decide to short.
SPY (SPDR S&P 500 ETF TRUST)
SPY is my preferred instrument for trading the market and is the asset I average into for retirement. Many are pointing to the nice long wick on the bottom of the current monthly candle as a sign of a likely reversal. It could be. That said, let's look at similar candles over the past few decades.
I have pointed to many of them with blue arrows from both the Dotcom Bubble and 2008 Great Recession. ALL OF THESE were relief bounces before lower lows - none signified a bottom.
If you do believe that the market has bottomed, then seeing the 50MA hold here is key - the blue line that is currently supporting price. We also have a massive bullish SFP from the previous 2018 low - a clear wick below and move back above for the close. That shows a lot of buying interest.
USOIL
Oil has taken a historic beating this month. Not only has oil seen a drop in price as a result of reduced demand due to the global slowdown, but Russia and Saudi Arabia decided to engage in a price war in the midst of this crisis. A barrel of oil is presently cheaper than a carton of cigarettes.
I cannot bring myself to buy this yet - airlines are not flying, cars are not driving and Russia and Saudi Arabia can push this for a long time, as the real loser is the United States.
That said, the monthly chart is interesting. Price is clearly in a descending channel (although it really needs another touch to the bottom, which should eventually (in YEARS) break to the top. There is also potential bullish divergence with RSI on the USOIL chart, with RSI almost oversold on the monthly - something you rarely see. I could definitely see buying from here down to the $18 region, depending on how long it takes to get there. That's only if you are in this for the long term. Eventually oil will be more expensive than it is now.
Worst Take Of The Year
I cannot get over this article in the Wall Street Journal from last Thursday - I have tweeted about it 3 times. On the heals of the largest and fastest drop in market history for a few sustained weeks, they chose to push their narrative that the bear market was over and a new bull market had begun, simply because of a 6% rally. Of course, price dropped before the market even opened the next day, putting the market back into "bear" territory before a single trade was made. By their rationale, each new up or down day would be a new bull or bear market. Ridiculous.
Every financial publication has a narrative they are pushing, but this one was somewhat unbelievable. Importantly, this goes to show that everyone has their own definition of what determines a trend, or what financial terms like bull and bear even mean. You have to develop your own system and drown out the noise, or you will end up trading on bad information that opposes your system.
Microsoft + Mining + Body Activity?
Microsoft is potentially entering the mining space, with a novel and somewhat scary new approach. Using a sensor, their system will monitor a users body activity to determine whether they have completed a task (like reading an ad) and will award cryptocurrency for doing so. I feel like we just took a jump to 3020.
This article really nails the essence - is this creepy or cool?
Sponsored By Voyager
Voyager is my favorite crypto broker. You can trade crypto fast and commission-free. Earn up to 6% interest on top coins with no lockups and no limits. You literally earn interest on your holdings while you trade at a rate higher than you can get in any legacy bank account or fund.
Download the Voyager app and use code “SCOTT25” to get $25 in free Bitcoin when you create your account.
This is where I personally invest in Bitcoin on a daily basis. They are a publicly traded company on the Canadian Stock exchange - I trust them implicitly to protect my funds.
10 Things Every Beginner Crypto Trader Must Know
We have all heard hundreds of stories about the life-changing money being made in the crypto space. Anonymous Twitter traders regale us with tales of turning $1,000 into millions in a matter of months, flipping altcoins and making 100x on investments daily.
Moon. Lambo. To the outside observer, this seems like an easy and sure way to get rich quick. They leave their jobs to become “professional crypto traders,” even before learning the basics of trading and managing risk. We all know how this story ends.
Being a trader in any market is hard — 95% of all traders fail, most within a few months. They generally go completely broke or perform far worse than simply investing a lump sum in a safe investment and leaving it to grow. Contrary to popular belief, the crypto market is the most difficult to trade for beginners for a number of reasons.
The casino never closes
The market is open 24/7, giving traders the feeling that they always have to be trading. This causes tremendous fatigue and FOMO (fear of missing out) for emotional traders. Nobody can effectively track a market that is perpetually available, and new traders find it difficult to step away. This often ruins both their personal lives and destroys their finances.
What fundamentals?
The crypto market lacks fundamentals, the cornerstone of trading legacy markets. When purchasing stock, a trader can review quarterly earnings, sales reports, the company’s road map and countless other barometers of success. More importantly, companies trading on the stock exchange are regulated and therefore transparent — you generally know what you are buying.
The strength of a team or project in crypto is nearly irrelevant for a trader’s purposes. Traders rely on technical analysis, which is hard to use properly for newcomers to the space.
I’m making money, so why is my Bitcoin balance down?
The interplay between Bitcoin and altcoins adds a complicated wrinkle. Alts are rarely safe to trade and finding opportunities requires tremendous patience and experience — both things that newer traders inherently lack. New traders often mistakenly gauge the success of their trades in the USD value of the coin, not realizing that leaving their capital parked in Bitcoin would have been a far more profitable (and far easier!) strategy. Trading legacy markets with fiat is straightforward — you either make or lose dollars.
How do I set up a stop loss and take profit order?
Legacy traders have the benefit of placing both stops losses and take profit orders, as well as trailing stops. Trades require less babysitting and management. In crypto, exchanges lack the full breadth of orders necessary to properly manage risk, especially in a market that never closes.
Experienced crypto traders can share countless stories about missing a huge pump while they were sleeping because they had their downside protected with a stop loss and were unable to set sell orders at their targets. Traders should never have to choose between taking profit and properly managing their risk.
I can turn $10 into $1,000 with leverage!
Leveraged trading is far too common among beginners. Leverage is a tool that should only be used by the most experienced traders, those who have proven to be profitable for years.
The barriers to entry are non-existent in crypto, on exchanges that are built to transfer the wealth of inexperienced retail traders into the pockets of the exchanges themselves. Beginners will likely lose everything they risk trading with leverage because the downside is massively compounded.
Getting rich quick is easy, right?
In legacy markets, nobody expects to get rich quick. Crypto appeals to people looking to quickly turn a small sum of money into their retirement, which is unrealistic. Twitter is selling Lambos while beginner traders end up selling their cars on the used lot to pay rent.
Those who got rich quick in crypto were most likely lucky, not good. Further, there is a difference between being wealthy on paper and in real life — most of the crypto traders who “got rich” failed to sell at the top and saw their paper wealth disappear as quickly as it was made.
Crypto is not a safe investment
An inexperienced person is far less likely to go broke buying a random stock than they are buying any available asset in crypto. The stakes are far higher! Crypto is not a safe investment and should only be a small part of someone’s overall portfolio.
I get all of my trade advice from a cartoon on the internet
While there are experienced and successful traders on social media, most beginners are learning from other beginners and don’t know it. Taking financial advice from strangers on the internet is the cornerstone of the crypto market.
There is no surer path to financial ruin than spending your hard-earned dollars on assets being shilled by avatars who are likely manipulating you for their own profit. Never base your decisions on the advice of those who don’t have to deal with the results.
Traders do not average down!
A common grave mistake many traders make is Averaging Down: buying more of the coin as the price drops with the logic that a good thing is now cheaper (an even better bargain). This logic applies to investing, not to trading.
A trader has an invalidation level for their idea — price dropping significantly should invalidate their trade and cause their stop loss to fire! Most beginners do not understand this and dig a deeper hole than necessary.
Risk management is everything
Risk Management is boring — and happens to be the most essential skill necessary to be profitable. Understanding how much to risk on a trade and how to properly balance a portfolio are exponentially more important than entries and exits. Learning this takes time — most new traders are broke before they understand risk.
Most people would be far better off slowly investing a small percentage of their entire portfolio in crypto — and in Bitcoin, in particular. Don’t be fooled by the avatars on twitter — trading crypto is hard.
Music Corner
Red Hot Trilli Peppers
This was one of the most popular projects that I ever released - it went wildly viral across college campuses in the United States. Since Ballin' Oates had been so successful a few months before, I was really able to give this a major push - which included a release party at South By Southwest in Austin. It was one of the most insane nights of my life - Snoop Dogg and Wiz Khalifa performed, as did YG and a number of other artists. Lady Gaga, Diddy, Talib Kweli and countless other celebrities were there for the show - it was incredibly surreal to have all of those people present for a release of one of my projects, in a room that only held 300 people!
The project features remixes of 6 RHCP songs - I sampled or replayed every single part of every song before adding a vocal on top. This really became my signature sound and carried my career for many years. I hope you like it!
Last Week's Rant
I had a lot of people comment favorably about the intro to the last newsletter, so I have decided to pull it from behind the paywall and share it with free members.
I started the last newsletter with a single word: jobs.
3.3 million Americans filed for unemployment this week. THIS WEEK! This is by multiples the most in history, including the Great Depression and 2008 recession. Further, this only accounts for those who were eligible for unemployment (not gig workers, self-employed, contractors). Miserable.
The projected drop in GDP for the next quarter is greater than the drop for the entire Great Depression. Astounding.
Analysts can stare at charts all day, come up with reasons for the economy to recover, but an economy cannot function without supply and demand. People without jobs have no money. People with no money cannot spend on basic necessities. This is compounded by the fact that they are at home and businesses are closed - those necessities are not even available. This is unlikely to get much better in the near future.
Meanwhile in the halls of the government, they are planning a 6 TRILLION dollar bailout, printing money out of thin air to “help the people” and the market. But who are they really helping?
Let’s do some quick math:
6 trillion dollars are being printed. There are roughly 327 million people in the US.
6 trillion divided by 327 million is $18,348. Thats your fair share.
They’re going to buy everyone and their votes for $1,200, well below a living wage for most families. And many people will not even receive that money.
Almost ALL of the money will go to bailing out cronies of the government and to pad the pockets of CEOs. Companies that spent 96% of their cash (airlines) on stock buy backs were not even able to survive for 1 MONTH without a bailout. We talk about individuals needing to have 6 months of cash available for an emergency. This is budgeting 101 and is a basic financial necessity. These companies do not follow the same rules! The Cheesecake Factory is refusing to pay rent on April 1 after being closed for ONLY TWO WEEKS.
The bailout will be paid for with the tax dollars of the very people who are receiving $1,200. And guess what? That $1,200 only goes to the people who are the most in need and it is likely to be TAXABLE INCOME!!! You may pay taxes on the $1,200 you receive and those taxes will be used to bailout large corporations.
I am not saying a bailout for the people is a negative thing - I just believe it should be FAR MORE, with less for companies.
We have seen this playbook around the world, and even in our country before the Great Depression (Hoover). A few very rich people will benefit while everyone else suffers. The dollar will eventually be hyper-inflated and devalued. Even the pittance they give the people will likely not be worth the paper it is printed on if we continue down this path.
$1,200 for you, while companies receive TRILLIONS.
We JUST SAW this play out in Venezuela. The government printed money endlessly, causing hyperinflation in under a year. A suitcase of cash cannot buy a loaf of bread in Caracas, but they attempted to convince the people by giving them… free gas. The American people are receiving that same bribe, in the form of a $1,200 check.
If hyper-inflation sets in, our children will pay $12,000 (or more) for that $1,200 check we receive now. Our government is destroying our financial future to save their friends.
I will like to say that we did not learn any lessons from the Recession of 2008 - Wall Street continued the same bad behavior, with the same actors at it’s core. But the reality is far scarier. It’s not that we didn’t learn anything - it’s that those in power purposely repeated the same pattern, knowing for a fact that they could get fat on handouts and bailouts. It’s all intentional and part of the plan. Socialism for the rich.
And why do companies spend all of their available cash buying back stock? That’s a long conversation, but here is the very basic rational. 1) They know they will be bailed out if needed and 2) buying back stock is a guaranteed way to artificially raise share prices, even if earnings have not improved. Apple has the same earnings as they did 6 years ago, but their stock continues to rise! Accounting for inflation, they are making less money.
But what’s the real elephant in the room? Number 3) Demographics. Boomers are retiring. People are living much longer. And guess what? Boomers don’t buy stocks. As you get older, you rebalance your portfolio to safer investments, forcing you to SELL STOCK that you have held for ages. Further, at a certain age (I believe 71) Americans are forced to take disbursements from their retirement funds. That means the HAVE TO SELL THEIR STOCK - they literally have no choice! As people get older and live longer, the natural course is to sell. With that in mind, the government and corporations need to buy those shares to avoid having the stock price drop. Artificial demand props up the market. When the rug is pulled, there’s a nice big golden pillow waiting to pad their landing.
The people find a bottomless pit waiting below.
I say let them fail. The world does not need Boeing, a company that knowingly put a dangerous plane into the sky. If American Airlines goes out of business, someone will cover their routes. Cruise lines? They’re receiving bailouts when they are foreign companies that pay no taxes in America. It is ABSURD.
The system is rigged. The stock market IS NOT THE ECONOMY, the people are.
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.