The Wolf Den #379 - Beware Of Impermanent Loss!
Bitcoin Thoughts And Analysis
Bitcoin took a turn for the worse on low holiday volume in the midst of an irrational global overreaction to the announcement of a new variant in South Africa... or it's just liquidating traders up and down and making a predictable move that we have been watching for on the chart. You can choose your narrative.
We finally have potential bullish divergence with RSI on every time frame from 4 hour to daily.
We have been watching and waiting for this for many days. The 4-hour was not there yet.
WEEKLY CHART
The weekly candle is currently ugly, showing follow through after last week's rejection. That said, it is only Friday and we often see the candle "fixed" over the weekend. For now, 53K STILL looks like it needs a healthy retest. But that comes with a warning.
We all seemingly want to see 53K, which usually means we get front run at 53.5K or price nukes straight through. The crowd rarely gets what it wants.
If we continue to drop and price does not bounce above 53K for the front run, I will be watching for a wick below to cause panic and then for price to reverse to the upside.
DAILY CHART
Clear rejection at the 50 MA and continued downside. Last time this happened, price traded below the blue line for about 12 days before reversing to the upside.
There is quite a bit of volume on the sell off today, especially considering the holiday in the US.
Bollinger Bands continue to expand downward with price tracking the lower band. Ugly for the moment. We want to see the bands start to contract and for price to head towards the centerline. This was unexpected after the move above the upper band recently, but no indicator is perfect.
The daily is STILL not oversold on RSI, but is forming another potential bullish divergence after a hidden bearish divergence. This is shown on the 12 hour below, but is the same on the daily.
12-HOUR CHART
We had bull divs (blue), hidden bear divs (red), now bigger potential bull divs (purple). Not confirmed yet.
Hidden bear divs cancel bull divs, so this is impeccably following technical analysis. Confirmation would come with a clear elbow up on RSI.
4-HOUR CHART
We finally have potential bullish divergence with RSI coming out of oversold on the 4-hour chart, my favorite reversal signal. I will be watching.
Price was rejected yesterday at resistance of the wedge and quickly dropped and wicked below the lows. This is still a descending pattern, likely to break to the upside. But that rejection was savage.
Bottom line: I agree with my wife, especially if we see confirmed bullish divergence.
Legacy Markets
Strange things are afoot in the market, seemingly a result of a new COVID variant being detected in South Africa.
What do we know about this variant? Very little. But that will not stop overemotional investors from panicking and going risk off in the short term. As a result, we are seeing a drop in stock prices pre market and globally where markets are open.
"The selloff is “the result of the new COVID variant… alongside news of Chinese regulators asking Didi to delist from U.S. exchanges, then magnified by reduced liquidity [due to] the U.S. Thanksgiving holiday," says Alvin Tan, head of Asia FX strategy at RBC Capital Markets. The discovery of the new variant “sent Asian investors scurrying for the exit door,” wrote Jeffrey Halley, senior market analyst of Asia Pacific at FX firm OANDA, in a Friday note."
What is strange? When people go "risk off," they generally rush out of equities and into the dollar. But the dollar is down today vs a basket of other currencies, as seen here.
This could be a result of people buying other "safe haven" currencies like the Yen and Swiss Franc. Here is the dollar today agains the Franc.
When the dollar drops, gold tends to rise, which we are actually seeing today.
This can all be explained, although dollar strength would be expected. Stocks are currently down almost 2% premarket. They often trade inversely to the dollar, so seeing the dollar and stocks down is generally strange.
Important to remember that "markets can remain irrational longer than you can remain solvent."
The most glaringly strange development here is for those that believe Bitcoin is a correlated asset. Bitcoin is down, not behaving like gold. This once again indicates that Bitcoin is a beautifully uncorrelated asset, even if that means that it drops at the wrong times.
India Changes Their Mind Again
India has a long history of schizophrenia surrounding their policies on crypto. On a seemingly daily basis, lawmakers in the country go from outright bans to hardcore support. Avinash Shekhar, CEO of Zebpay in India, believes restrictions will be put in place, but there will be no bans. He stated that India “seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.” Crypto will thrive regardless of India’s restrictions. India is the second-largest country in the world by population and ranked fifth in global wealth.
Coinbase Partners With Adidas
“We’ve partnered with @coinbase. Probably nothing.”
This certainly wasn’t a partnership we were expecting, but it’s a cool one that we can all cheer. Coinbase is gearing up to step into the NFT world, so a partnership with Adidas makes sense. Apparel companies are all looking for ways to capitalize on NFTs and the metaverse. Adidas also announced a partnership with Sandbox. The details on the partnerships are extremely limited so we will have to wait and see what they look like in practice.
The Wolf Of All Streets Podcast Ft. Hailey Lennon
Members of the crypto community love to talk about regulations and laws in crypto, yet very few of us are actually experts. Hailey Lennon came on the show to explain the current state of crypto regulation and dispel some popular myths. It is her belief that we need regulatory clarity to foster the historic innovation we are seeing in the crypto world. Must listen.
In this episode, Hailey Lennon and I discussed:
Lobbying For Crypto
ConstitutionDAO And DAOs
How Hailey Started In Crypto
Has Regulation Improved?
Is Crypto A Criminal Concern?
Crypto Is More Regulated Than You Think
Opportunities Are Being Prevented
The Ripple Case Effect
Who Is At Fault In Crypto?
The SEC Denies Coinbase Product
The Purpose Of Crypto Connect
This episode is sponsored by: ARCULUS and KAVA
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