The Wolf Den #398 - Tax Loss Harvesting 101
Bitcoin Thoughts And Analysis
Bitcoin is ranging! This is sideways chop. When price dropped a few weeks ago, I stated that I believe we would be down here for a while. That has been the case, and I see no reason for that to change as of yet. Below 53K and above 42K is simply a range that will drive people nuts. Very little that happens within that range is meaningful. Above 53K and we can start discussing bullish cases again.
WEEKLY CHART
Decent candle forming, but too early to tell with three days left. We will have bullish market structure, with a series of higher highs and higher lows. This would be invalidated by a break below $39,600. Price is trading around the 50 MA on the weekly, a line that was slightly broken but held in July before the massive move up. Watch that blue line.
DAILY CHART
The black descending line is the first key resistance that I want to see broken before I get at all excited. Not so close yet. Nice to see the 200 MA holding as support, for now.
Daily MACD looks great. Bullish divergence formed as I discussed a couple of days ago. We now have a clear bullish cross of the shorter moving average above the longer, and the histogram in the middle has flipped north of 0. This is very encouraging for people who use this indicator.
Now for the less exciting news. We have potential hidden bearish divergence forming, which would be confirmed with a more definitive elbow down on RSI. This is there from the daily down, which would effectively cancel the bullish divergences that we have been playing. Hidden bear divs are weak continuation signals, but do signify the end of the bull divs, if confirmed. I will be watching for a clearer signal if RSI heads more aggressively down.
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 many charts when the market is looking shaky, which is how I would describe it today. Paid subscribers have continued to enjoy the LUNA trade from the past few weeks, but great setups have been a bit harder to come by. I am still cautious at the moment, since there is the potential for further correction.
Also, you can check out the ELON setup from the newsletter a week ago here - it appears to be preparing for a breakout. It's a meme coin, be very careful, as I say in the description of the setup.
AAVE/USDT
I had an alarm set on the descending black resistance which went off. As you can see, price is still in a range, after deviating below slightly. Now we have a clear hold of the range lows as support, which should target the middle of the range, the EQ (equilibrium, dashed line). This is at roughly $335. That said - I would not personally buy this right here if you already missed the breakout. $252 is a key resistance, so a flip of that level to support would give more confirmation that this is a true reversal. The 50 MA and 200 MA are both above and will likely add resistance.
Either way, this is a confirmed breakout on increasing volume, which is what you are looking for to consider a trade.
If price hits the $335 target and flips it to support, the range highs are in play.
Again, this is BELOW RESISTANCE now, so you missed the first move. Better to wait for further confirmation.
Bitcoin’s Institutionalization - 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’s Institutionalization
For years, the crypto crowd shouted “institutions are coming.” During this bull market it has become evident that they have arrived.
Not only did public companies like Tesla, MicroStrategy and Square invest in Bitcoin, but even a nation-state acquired BTC and made it legal tender. Square went as far as rebranding to Block and is currently working on a decentralized exchange on top of Bitcoin.
Interest in Bitcoin has grown within Wall Street, with renowned figures like George Soros and Paul Tudor Jones investing and publicly backing the asset. Many more legacy institutions have indirectly gained exposure to Bitcoin by owning stocks that have BTC on their balance sheet. This is the case with Blackrock and JPMorgan owning a substantial share of MicroStrategy and Coinbase, respectively.
The growth in Bitcoin’s institutional interest is also evident in on-chain data.
As of December 23, 2021 through IntoTheBlock’s BTC large transactions volume
Large transactions volume 4x — the aggregate volume transferred in transactions of over $100k increased by a factor of 4 from an average of $450B per week in January to $1.9T in November.
Large transactions volume acts as a proxy to institutional and “whale” activity, given that $100,000 minimum transactions filter out retail traders
The growth in large transactions volume outpaced Bitcoin’s price, suggesting that these institutions have been both large buyers and sellers
Put into context of the total volume processed by the Bitcoin blockchain, the institutionalization of Bitcoin becomes even more apparent.
99% large transaction volume share — The percentage of total volume being managed by institutions and whales reached record levels of 99.3% in the fourth quarter of 2021. This is up from 97.5% in the first quarter of the year and 58% the first quarter of 2017, arguably when Bitcoin’s institutionalization started.
Bottom-line — Bitcoin has matured as an asset, now routinely processing hundreds of billions per week. This transition did not happen overnight, but it is likely to last. As a wide range of institutions and a few nation-states continue to look into the space, institutions have indeed arrived for Bitcoin in 2021.
Donald Trump Despises Crypto
Former President Trump stresses the only currency he wants is the dollar.
Interviewer: I saw that Melania has an NFT.
Trump: She is going to do great, she has a great imagination.
Interviewer: What do you think about crypto?”
Trump: I never loved it because I like to have the dollar. I think the currency should be the dollar. I was never a big fan. It’s building up bigger and bigger and nobody is doing anything about it. I know it so well. I don't want to have all these others and that could be an explosion someday the likes of which we have never seen. It’ll make the big tech explosion look like baby stuff. I think it's a very dangerous thing.
Whether you are a Trump fan or not, it’s hard to take these comments seriously. Melania launched NFTs on the Solana blockchain, which ironically require payment in crypto to obtain. The contradicting views in just a few sentences are astounding, showing a clear lack of understanding of crypto.
I don't blame him - most people his age will never understand or care to do the work on crypto. That's why we need younger politicians.
That said, we are at an inflection point with crypto and politics. Our community is large enough to impact policy and elections, as seen clearly with the infrastructure bill. There are plenty of politicians on both sides of the aisle that have shown their support - we should show them ours. Crypto will become an important topic of conversation in the next presidential election.
Twitter Drama Is Boiling
Twitter is ablaze with an ongoing feud around Web 3.0. The concept of a third iteration of the web is still being developed, but it revolves around the idea of blockchains powering the internet in a decentralized manner. Many of referred to it as an "internet of value," with the core idea being that money and value can be exchanged directly, just like information is with Web 2.0. Elon Musk and Jack Dorsey, the main critics of this concept, don’t seem to think that Web 3.0 is all that it's hyped up to be. In fact, they think it's a money grab for powerful entities, as Jack describes. The market conditions are ripe for drama, but I think their gripes are worth considering.
I have not thought deeply enough about this topic to offer a well considered opinion. I constantly discuss the institutional money that is pouring into the space via venture capital - the picks and shovels approach of investing in the companies rather than the coins. I have always viewed this as a positive - more money coming in, more development, more price appreciation. But perhaps there is a darker side that I have failed to consider, which I intend to dive deeply into. Stay tuned.
SBF Discusses Regulation
We can always count on Sam Bankman-Fried to make a complicated topic seem simple, and to propose no nonsense ideas for crypto to move forward. Here's what he said:
"“How do we get from where we are today to a truly mainstream global industry that has the consumer protection and the trust that people [are] used to?
I think that you have people going back and forth on like ‘this is a security, this isn’t a security and it has really great regulatory implications right now.
Where we need to get to I think is a world in which we say look some of these things have properties that are like traditional equities or securities. Some of them have properties, they’re like commodities.
Instead of arguing about exactly what classification they should have, let’s make sure that the sort of regulatory oversight that needs to be there is there.
And that oversight that doesn’t make sense isn’t gumming up the industry.”
According to the FTX founder, implementing regulations that normally apply to traditional assets to some aspects of the crypto industry makes “sense” but requiring decentralized projects to demand user information does not.
“Having the kind of standard controls that you see with equities around the supply, the issuance, the burning of tokens would make a ton of sense.
But you know not mandating that they fill out forms that one couldn’t fill out as a decentralized token project.”
Bankman-Fried says that in the case of stablecoins, requiring transparency on the holdings would be a reasonable step to take.
“I think with stablecoins having a website that shows they have what they say they have makes a lot of sense.”
The Wolf Of All Streets Podcast Ft. Matthew Hougan
Matthew Hougan is an expert on ETFs. As the CIO of Bitwise Asset Management, Matthew and his team bring to the table decades of experience building and promoting new financial products. As Matthew describes in the episode, ETFs are the mother’s milk of the investment world, meaning their role and importance can’t be understated. Matthew is able to explain why ETFs are the pinnacle of gateway investments that will unlock the world’s money.
In this episode, Matthew Hougan and I discussed:
The Bitcoin Futures ETF Rug Pull
Picks And Shovels Over Bitcoin
The Bitwise Investment Thesis
Security Laws In Crypto
ETFs Weren’t Always Trusted
Is Inflation Transitory?
Crypto Will Change The World
Crypto Is Growing Exponentially
Common Crypto Criticisms
What Comes Next For Bitwise?
The History Of Bubbles
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.