The Wolf Den #395 - 4 Years Ago Today
Bitcoin Thoughts And Analysis
While Bitcoin continues to slide and appear weak, there is building bullish divergence on multiple time frames that we have been watching. As I have said many times, bottoming is a process, and I love to see these divergences slowly build, indicating that buying pressure is increasing as price drops. This can be a signal that the bottom is near.
I believe we are bottoming, but could obviously be wrong. The signals I look for are here.
That does not mean we are at the price lows! It just means that we are close and should head up In the not so distant future.
WEEKLY CHART
Bullish market structure remains intact. A break of the red line at $39,600 would signal a "lower low" and would dampen the case for continued bullishness. 42K is also a key support, as you know.
For now, the 50 MA has been broken on the last weekly candle, not a great sign. This also happened in July for one candle, before Bitcoin began it's epic bull run up, so it is not necessarily meaningful. The descending blue line is still holding as support as well, although this can happen with price sliding from week to week.
Bitcoin does not looks great - but it is still just ranging. I warned you weeks ago that we were likely to be here for quite a while and that we would likely test both the lows and highs of the range.
DAILY CHART
Bitcoin lost the 200 MA as support this week, but is still trading right around the line instead of dumping, which is what we usually see. Last time Bitcoin lost this level (the red line) it was only for about a week and a half before price ripped back up.
Still, Bitcoin is completely avoidable below the descending black line, a break of which would be the first clear signal of a weakening down trend. There's just nothing to do here, as I have continued to say now for weeks.
This is daily MACD, which is showing the same bullish divergence as RSI (higher lows on MACD) and a potential bullish cross, with the faster MA crossing up the slower MA. The histogram is also crossing 0 and looks like it is heading bullish. The indicator looks surprisingly bullish and indicates a reversal is likely.
As you can see, Bitcoin is building more bullish divergence with RSI, meaning that buying pressure is increasing, even as price is dropping. This is usually a signal that the bottom is near. We have these repeated divs building on basically every time frame below the daily.
4-HOUR CHART
Ranging. That's it. Don't freak out. Bitcoin is just trading sideways in the red box.
Altcoin Charts
Altcoins are obviously completely avoidable for the moment. Be patient, there will be a great time to trade them again soon. If you are investing, continue to do so.
Be Careful Buying Token Launches
This is a general warning.
The initial moment of a token launch brings both high risk and high reward. Prices are always extremely volatile at launch. This is compounded by the fact that only a small amount of a token is released to the public, causing a further imbalance of supply and demand. Also, our market is still barely regulated, is small, and is dominated largely by bots and skilled traders.
If you are going to swap into a new token right at launch, I suggest you set low slippage to protect your capital. 1% is considered standard for safe trading, but 2-3% is often necessary to fill your order. Slippage is the difference between price when the buyer hits buy and the actual execution price. When demand is high and an exchange is trying to manage a large number of transactions, the price can drastically move against you. Traders with bots will try and do everything they can to make millions when FOMO is at the highest.
Launches are inevitably front run by these bots, meaning it is very difficult to get the price you want and to avoid being dumped on, at least in the very short term.
Initial coin launches and public sales are breeding grounds for this type of activity, which is nearly impossible for any project to control or prevent.
Just be careful.
The Adidas NFT Drop Was A Huge Success
30,000 unique NFTs were claimed and minted by the public, bringing in $22M in sales in a matter of minutes. Critics claimed that an ADIDAS NFT release was a top signal and doubted that the pieces would hold their valie. Their doubts were quickly put to rest with a near-instant sell-out. Some users were even able to work the system and claim more than the allotted 2 per customer.
One person found a way to purchase 330 NFTs through a custom smart contract, which cost $350,000 in fees. The risk was worth it - the trader made a profit of $600,000 as the floor price of the NFTs jumped immediately. Adidas has announced that HODLERs of the NFTs will be granted exclusive access to clothing drops in both real life and the metaverse in 2022.
Grim Finance Hacked For $30M
A hacker exploited Grim Finance for $30M. The hacker found a way to trick the protocol into thinking they were making legit deposits, while simultaneously liquidating real assets from the pool. Immediately following the hack, the developers asked all farmers to withdraw their stake to prevent any future attacks. This caused farmers to convert their impermanent losses to realized losses, a disaster for everyone involved. The platform is yet to release a statement, so this protocol is clearly avoidable moving forward.
These hacks happen relatively often - be careful.
My Recommended Platforms And Tools
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Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
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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.