The Wolf Den #390 - Bitcoin Is The Needle
Bitcoin Thoughts And Analysis
WEEKLY CHART
The weekly close was... fine. Not particularly bullish or bearish, with a spinning top or doji (depending on your interpretation). This means there was small body candle with wicks both up and down, showing indecision. Price is still holding the 50 MA and the blue descending support for now.
We need another week for more clarity.
As I have said, my expectation after that drop was that we would range for a while. That's what we are seeing so far.
DAILY CHART
Not much to see here. It still looks like we have bearish consolidation after the major drop, with volume dropping and price chopping sideways. I have added a descending line, a confirmed resistance with 3 touches. This can be used as a signal that price is ready to reverse. We are not close to breaking it yet. The 200 MA is holding as support, with much larger area of historic support between 39K and 42K.
12-HOUR CHART
I am using the 12 hour to show you something that exists on many time frames. We had a small local bullish divergence a couple of days ago, which sent price up over 50K briefly. As you can see, we now have likely hidden bearish divergence, which is there from the daily down. This indicates that there is bearish momentum and that continuation down is likely.
I still think that price will continue to range, which means at some point likely visiting the bottom. Not a big deal, just be prepared for it to happen if it does.
Right now there is little to be bullish about below 53K, and no reason to be overtly bearish above 42K.
Altcoin Charts
BITCOIN DOMINANCE
While charting dominance is a bit of a meme, it can still give us an idea of what is happening with altcoins. There are no buyers and sellers creating supply and demand, so the chart should be taken with a grain of salt.
For those who like to chart it, it's clear that Dominance has bounced once again from a strong area of support (blue box). This is a result of altcoin weakness relative to Bitcoin. The chart would indicate that Dominance could rise short term after finding support, meaning alts could continue to underperform. The worst case scenario is dominance rising while Bitcoin price drops, so let's hope that is not the case.
I am still cautious of altcoins at the moment and not looking to trade them or share many setups.
Legacy Markets
DXY (DOLLAR INDEX)
The dollar continues to look strong, which can spell bad news for other assets that are inversely correlated. That said, stock are also knocking on the door of new all time highs, making this correlation appears weaker than in the past.
As you can see, the dollar has almost reached the target of the double bottom that I shared, and appears to be making a small bull pennant, which would have an even higher target. A strong dollar could put downward pressure on other assets, so this is worth watching.
Remember, the dollar can be weak but the index can rise. It is relative to other currencies, not judged in a vacuum.
High Gas Fees Are A Growing Pain
There is an ongoing debate around the functionality, cost, and availability of Ethereum’s network space. Critics point to high gas fees as a design flaw, while proponents take this same fact and interpret it in a positive light. Joseph Lubin, one of the co-founders of Ethereum spoke on this exact topic and articulated a rational viewpoint.
“High gas fees are a measure of success. They're a growth pain, they're something that can't be avoided. When a new technology becomes successful, it always has scaling issues. So whether it's CPU cycles, or screen real estate, or memory, you're basically going to have software engineers max out the capabilities of the technology. And it turns out we're seeing consumers max out the capabilities of the technology.”
Ethereum’s challenges prove that there is high demand for the network. If there was a “perfect” blockchain, it would be immediately adopted by everyone. We will likely continue to live in a multichain world, with each chain finding it's ideal usecase.
Hacker(s) Promotes Bitcoin To 73 Million Followers
India’s Prime Minister Narendra Modi’s personal Twitter was briefly compromised by a hacker, who took the opportunity to spin a fabricated story about India and Bitcoin. The tweet read, “India has officially accepted bitcoin as legal tender. The government has officially bought 500 BTC" and would be "distributing them to all residents of the country.” It was accompanied by a scam link. The tweet was quickly taken down, but the account is followed by 73 million people, so the media quickly ran with the story. It is obvious why our industry often gets a bad rap when we stunts like this, but that is the nature of the beast.
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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.