The Wolf Den #391 - 2021 Crypto Market Summary
Bitcoin Thoughts And Analysis
The Crypto Fear & Greed Index has once again hit "extreme fear," dropping from 28 to 21 in the past day alongside asset prices. Last month was we were at 74 - extreme greed.
It's amazing how fast sentiment turns. The more fearful people get, the closer the bottom may be, at least for a while.
The negativity is palpable on Twitter. I shared this yesterday, before looking at the index.
I am not convinced that the macro bottom is in, but I think that we are at least close to some more relief as we continue to range.
WEEKLY CHART
It is only Tuesday, so way too early to judge. For now, we are watching the descending blue line as support, the ascending blue 50 MA as support, and whether Bitcoin can hold a higher low above $39,600. Back above 53K would renew some bullish sentiment.
DAILY CHART
Bitcoin is testing the EQ (equilibrium, 50% level, dashed line) of the trading range as support, which is in perfect confluence with the 200 MA on this time frame. A break of the descending line would be the first local signal that price is ready to reverse to the upside. For now, still chopping sideways.
BTC recently hit oversold on the daily chart, meaning it is time to look for divergence. We have a potential bullish divergence forming now on the daily chart, with a lower low in price and higher low on RSI confirmed. We need to see a very clear elbow up on RSI to confirm this idea. Lower time frames do not have this same div, and would likely require one more small drop. This would give us bullish divergence on almost every major time frame and would be a solid indicator that the bottom is in or close.
12-HOUR CHART
A quick glance at the 12-hour shows us what is going on with lower time frames. As you can see, we had recent hidden bearish divergence that I pointed out before the drop (red). We have a small bullish divergence that is about to confirm (blue) and could send price up. That said, the bullish divergence we really want would be purple, and would require a 12 hour close below $46,588. This applies to both the 6 and 4-hour charts as well. This would be a real potential bottom signal, because the div originates in oversold territory and would basically exist all of the way up to the daily. That's what we want. Confirmation on multiple time frames.'
The blue div could send price up before making another hidden bear div, then seeing the drop to confirm the larger one. Or the blue div could lead to daily confirmation and we could bottom.
Just ideas, but lots of potential to start bottoming here.
How To Margin Trade Like The Pros
Margin trading has been a hot-button topic of late, as billions of dollars have been liquidated in the recent market downturn. Roughly speaking, 90 percent of margin traders use the tool incorrectly, putting their portfolio at unnecessary risk. This is the reason we see such epic drawdowns in the market, as traders are forced to exit their positions in a liquidation cascade.
You would probably be surprised to learn that margin trading generally offers worse odds than a casino. The majority of traders will use it to increase their position size in the hopes of getting even greater returns, generally without any risk management strategy.
The blog above summarizes the proper strategies for approaching margin.
Spanish Bank Offers Ethereum Product
BBVA, Spain’s second-largest bank, will be the first traditional bank in Europe to offer Ethereum to its private clients. Just a few months ago, the bank allowed Bitcoin trading and offered custodial products, Following up with Ethereum is a growing trend. This is great for Ethereum’s presence in Europe, but also proves that the world generally sees value in both BTC and ETH.
TIME Magazine POY Is A Contrarian Signal
Interesting thread. The idea presented is that being awarded TIME’s Person of the Year has been a leading indicator to a downfall. The thread includes 12 examples throughout history, and you can probably think of more on your own. Elon Musk is PoY. What does that mean for Tesla?
Below are a few examples from history.
“Biden Harris was PoY last year (2020). One year later and Biden's approval rating is in the tank and Ds are figuring out what to do with Harris.”
“In 1999 Jeff Bezos of Amazon was POY and the following year (2000) saw the peak of the 1990s tech stock mania. BY 2001 Amazon’s stock was down 94% from its 1999 peak.”
“2007 Putin was PoY. In 2008 the Russian stock market fell 75%.”
The Wolf Of All Streets Podcast Ft. Kyle Samani
Multicoin Capital is arguably the most successful hedge fund of all time. After leading the first three investment rounds for Solana, the Multicoin Capital team was faced with the tough decision of whether to sell. The simple choice to hold was proven correct. Kyle’s thesis-driven approach makes for an episode filled with balanced and well-considered takes on the future of the crypto space - a must-listen for anyone looking to dive deeper into what is coming.
In this episode, Kyle and I discussed:
The Greatest Hedge Fund In The History Of The World
The Vision For Layer 1’s
The Future Of Interoperability
What Is A Thesis Driven Investment Firm
How Does Multicoin Invest?
The Notion Of Time In Gaming
The Centralized Corporate Metaverse
What’s The Next Big Play?
How Should The Average Person Approach DeFi?
The 2022 Thesis
Is There A Bearish Case
This episode is sponsored by: AMBER GROUP, HORIZEN, and the HBAR FOUNDATION
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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.