The Wolf Den #383 - Trading Lessons Learned From Poker
Bitcoin Thoughts And Analysis
Bitcoin continues to chop sideways and unnerve traders. While not the most reliable indicator, it is interesting to note that the fear & greed index is still showing fear. I found that astounding with Bitcoin trading just under 60K, which would have been a dream just a year ago.
Humans are emotional, and nothing drives them crazy more than indecision. Right now, Bitcoin is effectively worth ignoring on smaller timeframes as a trader. As an investor, we are always buying for the long term.
MONTHLY CHART
When in doubt, zoom out. As you know by now, Bitcoin has been in this ascending channel for nearly a decade. Every single time that the EQ (equilibrium, center dashed line) has been flipped to either support or resistance, price has visited the coinciding side of the channel. We just flipped it again to support over the past few months, meaning that we should visit the top. Six figures, easy.
Don't get chopped up when the chart look like this long term. Be patient.
DAILY CHART
Price is being repeatedly rejected around 59K, and at the centerline of the Bollinger Bands. Bulls want to see price trading in the top half of the bands and heading up. At the moment, this indicator is still leaning bearish, although the lower band is now starting to curl up.
The bullish daily trend is still very much intact, with higher lows and highs shown by the blue checks. The question mark shows that we do not have a confirmed higher low yet, which comes with a new higher high. Price is currently trading right at the local $56,425 support. It has clearly struggled to rise and to pass the 50 MA above. This remains sideways chop in my eyes, so I can't see any convincing case for either way.
We have confirmed hidden bearish divergence on multiple time frames again, meaning that our beautiful oversold bull divs are not longer relevant. Hidden bearish divergences, shown in red with higher highs in RSI and lower highs on price, indicate likely continuation to the downside, but are historically weak signals.
4-HOUR CHART
Gross. Price finally broke the descending blue resistance that it had been struggling with, only to dive once again below. We now have a new line worth watching, which is black.
Bitcoin is trolling. There's nothing to trade here for the moment. Chop.
Altcoin Charts
I do NOT share signals in this section. I share setups and charts that I am watching, in an effort to help show you how I view a chart and what criteria would be necessary for me to consider taking a trade. NEVER blindly buy something because it is listed in a newsletter or posted on twitter. You need to have a plan when you enter a trade. These are just ideas, and are almost always “if, then” scenarios. If a certain set of things happen, then I would consider a trade.
I also do not push charts when the market is looking shaky, which is how I would describe it today. Paid subscribers have enjoyed the LUNA trade from this week, but great setups have been a bit harder to come by. I will share my larger time frame analysis on ETH again from earlier this week, since I think it is still important and valid.
ETH/BTC
This is an absurdly bullish weekly chart.
Ethereum has quietly outperformed Bitcoin for over 2 years after bottoming on the pair in September of 2019. I have been beating the drum on this trade for as long as I can remember, stating that Ethereum has seemingly far more upside with regards to price. I still believe Bitcoin is the more “important” asset for investors to focus on first, although my allocation now is roughly 60/40 BTC/ETH in my long term portfolio.
After breaking out in April and retesting long term resistance from the all time high as support, Ethereum has continued up, consolidating in a large bull pennant. Price is now attempting a breakout from this pennant. If the week closes above the descending blue line, we would consider this move confirmed. Target of the pennant is shown in red, based on the length of the flag pole. The ultimate target of the initial breakout through the black line is still the all time high, with price discovery after that.
There was a time when I had almost no followers and called the generational bottom of Ethereum on the USD pair in December, 2018, which hit $80 a week later. This should show my level of conviction in Ethereum.
I am still holding these coins, which should illustrate the power of diamond hands and simply HODLing.
I made a video about this as well:
Bitcoin Holders Hit New All Time High - 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 Holders Hit New All Time High
As of December 2 through IntoTheBlock’s Bitcoin addresses stats
Bitcoin recently achieved another milestone. It recently reached 39 million addresses holding Bitcoin’s token, which is the second largest number of holders after Ethereum.
Even though one address does not equal a user, the number of addresses with a balance provides a valuable approximation to monitor the community of holders
The number of Bitcoin holders has increased by roughly 7 million addresses since December of last year
What’s next for Bitcoin?
On-chain data can also help us determine key areas of buy/sell pressure based on historical trading activity. IntoTheBlock’s In/Out of the Money indicators groups clusters of addresses depending on their average cost of purchase, providing an indication of the price levels that are expected to act as support or resistance.
As of December 2 through IntoTheBlock’s Bitcoin financial stats
Bitcoin is currently facing major resistance. 1.6m BTC were previously acquired just above $56,600 which is expected to act as a major point for sellers prior to potentially aiming for new highs
On the support side, Bitcoin is currently at a crucial support level between $54,800 — $56,500, where 1.17m addresses previously acquired over half a million BTC
If this level were to break, there could be some buying activity at $53,000 but the greater support level is closer to $49,000
The recent news regarding the appearance of a new Covid variant has shaken global markets. Overall the long-term perspective remains bullish for BTC, with high inflation hinting at being more than temporary and investors seeking assets to hedge. Nevertheless, it would be a good idea to keep updated with how the Covid uncertainty develops and how US markets perform over the next few days.
Legacy Markets
Legacy markets are looking avoidable for the moment as a trader, reacting irrationally to COVID news, both to the upside and down. Yesterday saw a late session selloff on the news that the Omicron Variant had reached US shores, as if there was any doubt that that was inevitable. Futures are currently trading green. Good luck figuring it out!
Many people have been calling for a stock market top and crash for ages, but timing it is a fool's errand. Even if we do see a correction, bear market or recession, stocks have historically returned to their highs with enough time. Keep this in mind. If we do eventually see a major drop, that is the time to buy - not to sell. Investors with a long time horizon do well buying the blood.
As a general statement, if you have conviction that the market is topping and are looking to trade it, then you sell on the way up. Always take profit.
I have no great trade ideas at the moment, but did find this interesting piece that is worth considering. Clearly I am not the only one who thinks you need to take some profit.
Chart Requests
Every Wednesday I take requests from paid subscribers and chart them on a livestream - Chartapalooza. Here is yesterday's stream - enjoy!
Powell Retires The Word Transitory
The nonsensical word “transitory” was first used by the FED early this year and is now being laid to rest. The term sparked endless debate, particularly in the crypto community, because none of us actually believe the FED’s claims that inflation is temporary or under control. The word ended up meaning different things to different people and caused more harm than good.
One FED official said it best - “the first principle of effective communication is if people aren’t getting it, don't speak more loudly and more emphatically.”
Here is Powell on the meaning of the word:
“The concept of transitory is really this: It is that the increases will happen. We’re not saying they will reverse. That’s not what “transitory” means. It means that the increases in prices will happen, so there will be inflation but that the process of inflation will stop so that—so that there won’t be further—when, when we think of inflation, we really think of inflation going up year upon year upon year upon year. That’s inflation.”
If this rotten word salad confused you, you aren’t alone. Good thing the word is now “retired.” Can this be seen as the FED waving the white flag and throwing in the towel? Are they no longer claiming that inflation can be stopped?
I don't know the answer to this question, but I do know how I intend to deal with it... by buying Bitcoin.
Square Becomes Block
Jack Dorsey stepped down as CEO of Twitter a mere two days ago, and he is already rebranding Square. Considering his love for Bitcoin and blockchain technology, one can only assume that the overhaul is related. According to the official announcement, “Block is an overarching ecosystem of many businesses united by their purpose of economic empowerment, and serves many people—individuals, artists, fans, developers, and sellers. Block is a new name, but our purpose of economic empowerment remains the same. No matter how we grow or change, we will continue to build tools to help increase access to the economy.” As a part of the rebrand, Square is also renaming Square Crypto to "Spiral." Facebook becomes Meta, Square becomes Block. The most powerful corporate leaders in the world are steering the ship towards Web3.
Facebook Ends Cryptocurrency Ads Ban
Facebook/Meta made news a few years ago by banning cryptocurrency ads on the platform.
That was stupid.
The good news is that they are slowly lifting the ban, allowing 27 companies to advertise, as opposed to 3. This is necessary, as Facebook rebrands to Meta and moves squarely into the Web3 Arena.
While I rarely cheer Meta, it is nice to see an error rectified.
The Wolf Of All Streets Podcast Ft. Haseeb Qureshi
Haseeb Qureshi isn’t like most people. At just 19 years old, Haseeb established himself as one of the greatest self-taught professional poker players in the world - his future was set. Unsatisfied with his accomplishments, Haseeb reinvented himself and gave away nearly everything he won. From pursuing an earn-to-give lifestyle to finding his way into cyber security and crypto, this episode unpacks one of the most interesting success stories we have ever shared. To top it off, sprinkled throughout the episode are some incredible analogies built around Haseeb’s current investment ideas.
In this episode, Haseeb and I discussed:
Haseeb’s Background
Reinventing Yourself
Similarities Of Poker And Trading
Haseeb’s Craziest Poker Hand
Work Smarter, Not Harder
Becoming A Crypto Investor
What Makes A Compelling Investment?
We Are So Early
Ethereum Is Like Manhattan
Investing In Alternative Solutions
What If Blockchain Isn’t The Future?
Crypto Will Prevail
This episode is sponsored by: ARCULUS and KAVA
My Recommended Platforms And Tools
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Rewards Code: WOLF
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.
Subscribe to my YouTube channel for free daily content.
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.