The Wolf Den #370 - Technical Analysis Is A Risk Management Tool
Bitcoin Thoughts And Analysis
The Evergrande default news was reported and markets quickly reacted, although the news was later proven fake when Evergrande paid their debts. Markets always tend to overreact to news events, even though everyone has been watching Evergrande and knew this was coming. Further, open interest was high on Bitcoin and longs were piling up. As I always mention, whales use these news events to cause a liquidation cascade and make money, which is likely what happened here. It is HIGHLY unlikely that your average investor and institution reacted immediately to the Evergrande news and sold off their Bitcoin. Not what happened.
Either way, this small correction ( so far) has had little impact on the larger timeframes. As you may recall from yesterday's newsletter, I was looking for some retracement, but not necessarily as quickly as it happened! Bitcoin tend to take the stairs up and elevator down. There was bearish divergence with RSI on the daily and some signals that we needed a healthy correction.
DAILY CHART
Yesterday's candle is what we affectionately call a "Darth Maul," because of the similarity to the Star Wars character's light saber. This candle liquidated both longs and short, with huge wick up and down. No fun for leverage traders.
Price ultimately broke support at the fresh all time high break, but has come down to almost retest the descending line as support and has held a key level at $64,300 that was marked and noted. I don't see any cause for major concern here, this looks like a flush and healthy correction. We will see if there is a further drop today or if we form a clear bear flag or pennant to indicate further downside. As always, you want to sit on the sidelines and digest a big move before making an impulsive decision.
The overbought daily bear div clearly has played out. We will watch for hidden bullish divergence if price drops further.
Altcoin Charts
The market is a bit shaky at the moment after yesterday's flush, so there's nothing brand new that I am looking at. Many recent setups broke support, but quickly bounced back - a textbook sweep of stop losses on a lot of coins. Others gave very quick and beautiful retests of former resistance as support that I was looking for and have shared as ideas here and on YouTube. Take a quick look at AVAX, ETH and SOL on both pairs. These ideas were all drawn in days and weeks past. Things still look bullish to me, barring further downside. These were the entries we were watching for.
AVAX/USDT
ETH/USDT
SOL/BTC
SOL/USDT
WOO/USDT
WOO is officially in price discovery, with a break of resistance and retest as support. I have shared this setup countless times, currently 2x from the break of the bull pennant. The fun should just be starting with price discovery. Enjoy the gains.
The Bitcoin Run Is Not Over Yet - 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.
2 Key indicators that show that the Bitcoin bull market is not over yet.
(1) Institutional adoption in BTC is trending higher
The Average Transaction Size indicator shows the average daily amount in dollars that have been transacted on the Bitcoin blockchain. This is calculated by taking the value of all transactions divided by the number of transactions.
As of November 11 using IntoTheBlock’s Bitcoin financial indicators.
The fact that this indicator is at all-time highs and rising means that the average of Bitcoin transactions is six figures, which is a good hint that many of the transactions performed on the Bitcoin network are done by institutions. The first half of the year had an average transaction size that was fairly constant ,with figures around $250k-$350k. Since July this amount has at least doubled with averages of $550k-$650k and some single peaks of more than $2B recently.
The fact of the growing interest of institutional investors seeking exposure to Bitcoin is a bullish sign for its price action due to its scarce nature. The recent news of ETFs successfully launching in US markets supports the thesis of this institutional activity growth.
(2) Investors are buying way more BTC on centralized exchanges than selling
The netflows indicator is calculated by adding all the inflow volume of Bitcoin entering in all exchange addresses and subtracting the outflow volume that comes out from all exchange addresses to users’ wallets. Net Flows are positive when more funds are entering than leaving exchanges. On the opposite side, net flows are negative when a greater volume is being withdrawn from exchanges.
A trend in positive netflows could be a sign of distribution between investors since there is a higher volume of coins entering the exchanges, likely to be sold. Conversely, trends in negative flows indicate that investors have been buying coins and accumulating them by sending them to their own addresses instead of holding them on the centralized exchanges.
As of November 11 using IntoTheBlock’s Bitcoin exchanges indicators.
The last few weeks had major negative netflows, with one day peaking at $2.68bn. This points to a large sum of coins leaving exchanges to investors’ personal addresses. This trend suggests accumulation and may alleviate selling pressure that could arise when surpassing all-time highs for Bitcoin again.
The sum of bullish indicators and the cumulation of recent positive macro perspectives over Bitcoin do not point at any signs that would make investors turn their bullish view to bearish for the end of the year. Even though some Altcoins will outperform Bitcoin, it still remains the leader with more than 40% of the total crypto market, and the first onboarding coin for many investors that enter the space, either retail, institutional or countries.
Chart Requests
Here is yesterday's chart request stream. After the Bitcoin drop, many of these ideas are likely invalidated. Welcome to crypto!
Evergrande On The Edge Of Default
Yesterday was a nail-biter for Evergrande, its investors and global market participants. The world's most indebted developer ($300B in liabilities) once again found itself on the brink of disaster. By what seems to be a miracle, the money to cover Evergrande’s $148M debt obligation was scraped together just hours after the deadline - with the media wrongfully reporting the default and causing a market panic. The payments were due by the end of the business day and when it was discovered not everyone was paid, reporters were quick to call the situation a default. The close call likely explains the heavy mid-day selloff, but Evergrande lives to see another day. The world will have to continue to hold its breath, because there is a $225M payment due on December 28th. Buckle up.
Twitter Is Going All In On Crypto
Twitter is forming a crypto-focused team, dubbed “Twitter Crypto.” We have already seen Twitter add and discuss some crypto features like tipping and NFT galleries, but these were just the tip of the iceberg. According to the team leader, “first, we’ll be exploring how we can support the growing interest among creators to use decentralized apps to manage virtual goods and currencies, and to support their work and communities.”
Jack Dorsey remains committed to Bitcoin and blockchain innovation, so it is no surprise that Twitter is going all in on crypto. The true question remains - will Twitter become decentralized?
Dogecoin Is Going To The Moon - Literally
A Dogecoin-funded CubeSat is going to the moon – and it may be the first to ever do it.
A mini satellite funded by Doge is being sent into space to conduct research in Q1, 2022. The mission’s name is DOGE-1 and is being made possible by a collaboration between Unizen, a crypto exchange, and GEC, a company interested in lunar data. NASA has been planning its own CubeSeat launch, which is what the Doge mission is, but that has been delayed leaving room for the meme-inspired mission to be the first of its kind. Although the story for the most part has nothing to do with cryptocurrency, it’s collaborations like these that remind us of the fun possibilities we will see as a result of the value created in crypto. “Houston, we have a problem, Doge is on the moon.”
The Wolf Of All Streets Podcast Ft. Campbell Harvey
Professor Campbell Harvey is a world-renowned economist and professor known for being ahead of the curve in the world of finance. Learning about decentralized finance was a life-changing experience for Professor Harvey, which started him on a path of educating his students and the world on crypto. Professor Harvey has written a book entitled, “DeFi and The Future Of Finance” and spends his time diving deeper and deeper down the crypto rabbit hole.
How Campbell Learned About Crypto
Traditional Finance Has Let Us Down
What Is DeFi?
Is DeFi Under Threat?
Central Banks And Their Grip
Tokenization Of Finance
How Do We Value Coins?
Will DeFi Evolve?
Can The Government Catch Up?
One Final Piece Of Advice
This episode is sponsored by: ARCULUS and KAVA
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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.