The Wolf Den #393 - Markets Hate Uncertainty
Some Facts About Trading NFTs, Part 2 - IntoTheBlock
Yesterday, we did an extensive analysis on how the minting of an NFT works and how many of these drops become successful. Today, we want to focus on some key indicators you should consider when analyzing a collection in the secondary market.
Indicators to measure demand and momentum
As you are evaluating a particular NFT, one of the most common indicators or metrics the users consider is the total volume traded over time. But in many cases, volume can be a misleading indicator as a way to assess demand.
Let’s take a look at an example of one of the most famous NFTs collections of all time, Bored Apes.
As evidenced by the graph above, even though the volume traded decreased dramatically at a certain point, the floor price remained relatively stable. If you think about it, it does make sense because when a collection increases in price it becomes less affordable, and thus is expected to have less traded volume, but that doesn’t mean that investors have lost interest in the collection
A better way to measure the demand of a collection is to look a the number of offers in a collection. This is only measurable in marketplaces that allow buying offers like OpenSea.
We went ahead and analyzed the number of offerings in Crypto Punks. As can be seen in the image above, when a sudden increase in the number of offers happens, it serves as a leading indicator of floor price appreciation. This makes sense considering that when one buyer is willing to spend a certain amount of ETH in a Crypto Punk, he would first try to send several offers over certain pieces and if they are not accepted, it would end buying the Crypto Punk at the market price. This is an analogy of how order books work, with limit and market orders. Certain bots spoof really undervalued offers to try to trick sellers, but we think that activity is relatively minimal and it would be masked under the noise floor of the chart.
Bitcoin Thoughts And Analysis
Bitcoin saw a small move up after the Fed meeting yesterday, leading the community to once again become overwhelmingly bullish on a technically meaningless move. On low time frames, Bitcoin is simply chopping sideways in a range. Keep that in mind, although we are starting to see hints of reversal signals. Nothing is certain, and price can easily drop to the range lows without changing anything meaningful.
MONTHLY CHART
Checking into the monthly chart because we are halfway through the candle. Nothing to see here yet (15 days to close), but Bitcoin is still trading right around the EQ of the ascending channel that has existed since 2013. This is the macro view, so always important to keep it in mind. Every time that dashed line has broken as resistance or support, price has traveled to the coinciding side of the channel. It just broke as resistance a few months ago, so price "should" head to the top of the channel.
WEEKLY CHART
Three more days to close the weekly candle, so impossible to judge as of yet. That said, for now we have another test of the 50 MA, a backtest as support of the descending blue line, and a potential higher low. We also have a nice down wick for the moment, indicating buying demand in this area.
If the candle closes like this, there's a lot to like. Big if.
Bullishness resumes for me with a clean break above 53K. Everything below that is noise.
DAILY CHART
As much as people seem to be flipping bullish, it is clear that Bitcoin is simply chopping sideways and doing nothing. It is encouraging that the 200 MA is holding for now (red) and that the top half of the range is holding. That said, anything in the range (52K or 53K to 42K) is sideways chop.
Breaking the descending black line would be a great signal that price is ready to reverse.
As you know, we have confirmed bullish divergence with RSI coming out of oversold on the daily chart. That's great.
We are also flirting with hidden bearish divergence (higher high on RSI, lower high on price), which would effectively cancel the bull div. So don't get ahead of yourself. The daily needs to close above $50,100 (roughly) to invalidate the immediate hidden bear div. If it does confirm, I would expect another, larger bullish divergence to form as we bottom on another drop.
Just ideas, I have no idea what will happen. But this tends to be the way. A drop below $46,500 or so would give us bullish divergence on almost every time frame below the daily.
Remember, bottoming is a process. These divs can continue to build over many candles.
Altcoin Charts
I have not shared many altcoin charts of late, as the market has been shaky and I try to avoid trading or sharing setups during suboptimal conditions. That said. the LUNA and AVAX trades that I have recently shared have done well, leading me to continue to focus on Layer 1s. Yesterday's AVAX trade is looking great, if you missed it.
I am still VERY wary of this market and am unconvinced that these moves up are much more than relief bounces as Bitcoin finds a direction. Be very careful if you choose to trade right now. Use solid risk management and have a plan to exit on both the upside and down.
As always, investors should continue with their existing plans, undeterred by price action. Buy dips and wait if that's your strategy.
EGLD/USDT
EGLD is off to the races... again. Layer 1s have continued to lead the charge on any bullish price action, as we saw with AVAX yesterday. Elrond has broken descending resistance, as well as flipped the previous all time high back to support after losing it for a couple of weeks. Anything above $303 remains bullish, with a target of the recent all time high at $544. This is ALL dependent on Bitcoin remaining stable, which is a huge ask.
Either way, EGLD remains one of my largest and most profitable positions ever, so I am always watching. This looks very promising.
ELON/USDT
Frankly I am hesitant to share this chart, because this is a low cap coin that is a meme. That said, a good chart is a good chart and there's still a strong chance that dog coins have more momentum left. To be clear this is STRICTLY A TRADE IDEA and should not be viewed in any way shape or form as an investment or long term play. You should know my thoughts on meme coins by now.
This is also RISKY. I would not dedicate any meaningful amount of money to it. Hopefully you guys get the disclaimer! Plan for it to go to zero if you decide to enter.
I am sharing because quite a few people have asked me about the coin, leading me to believe that it is starting to build a bit of buzz after the recent move up. I have friends that I trust who have apparently been accumulating, and there are rumors of future listings.
This led me to look at the chart, which is setting up for a monster move, if and ONLY IF the upper resistance is broken. This is a massive bull pennant with the potential to easily 2x or 3x (if not more). I actually started a tiny position on the coin myself, but would buy more heavily on a break of that descending line.
Keep in mind, this could have quite a bit more downside before breaking that line, if it ever does. My position is so small that this coin could go to zero without me noticing. That is intentional, because it COULD GO TO ZERO.
That plan will change if it breaks out.
Chart Requests
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Jack And Jay Make Progress On Bitcoin Trust
Earlier this year, Jack Dorsey and Jay-Z created a Bitcoin trust to give away 500 Bitcoins. Named the “₿trust,” the endowment was formed to support development in Africa and India and is designed to leave both Jack Dorsey and Jay-Z entirely out of the decision-making process. As Jack Dorsey described it earlier this year, “it‘ll be set up as a blind irrevocable trust, taking zero direction from us.” A team of 4 people was just selected to take over the trust, chosen from over 7,000 applicants. Each of them is a vocal advocate for Bitcoin in Africa. It will be fun to watch this story unfold, and to see Bitcoin change so many lives.
First Doge NFT
A Dogecoin developer made a breakthrough discovery by minting the first-ever NFT on the Dogecoin blockchain. According to the creator, the cost to mint the NFT was .01 Doge. The discovery captured the attention of the Doge community, including that of Billy Markus one of the original creators of the coin. It will be interesting to see if NFTs become viable on Doge, and if this helps with adoption of the world' favorite meme.
Sotheby's Made 100M On NFTs This Year
Not a bad take for a genre of art that barely existed a year ago.
"The centuries-old art auction house Sotheby’s reported that it earned $100 million from non-fungible token (NFT) sales this year.
More than three-quarters (78%) of the NFT bidders were new to Sotheby's and over half were under 40, Sotheby's notes.
Barring the 20 auctions left, Sotheby’s earned a total of $6 billion from its 2021 auctions — up 71% from 2020 — and $7.3 billion in year-to-date consolidated sales."
The Wolf Of All Streets Podcast Ft. Hester Peirce
Regulators in the United States get a justifiably bad rap for their handling of crypto, seemingly unable to offer clarity to both companies and individuals that are innovating and investing. SEC Commissioner Hester Peirce is an exception to the rule and is a fierce advocate for the crypto space that has been fighting for sensible regulation. Her mission is to protect consumers, while concurrently allowing entrepreneurs to innovate with minimal friction. She is more than just our “crypto mom.” She is leading the charge for financial freedom, opportunity, and access.
In this episode, Hester Peirce and I discussed:
What Is The SEC?
Gary Gensler’s Role
The Safe Harbor Proposal
Coinbase Comes To The SEC
The Howey Test
Are Stablecoins Securities?
Regulators Want A Piece Of The Pie
Stigma Around Bitcoin
I Am More Than A Crypto Mom
Protecting Or Preventing?
Questioning The Accredited Investor Laws
Companies Propose SEC Framework
The Bitcoin Futures vs. Spot ETF
When Can We Get Clarity?
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.