The Wolf Den #408 - Celebrity NFT Cash Grabs
Bitcoin Thoughts And Analysis
Volatility and volume have returned, and it is once again time to start paying attention to Bitcoin. While it is unfortunate that this occurred to the downside, nothing has happened that we were not discussing or potentially anticipating. As I said in the newsletter and on twitter roughly a month ago, the most meaningful levels are between 42K and 53K, and people would likely became desperately bearish at support and bullish at resistance. I wrote this a month ago today.
And I shared this chart, which I have showed you guys a number of times.
Here is that chart today. Of course price did not follow the line, but you can see that the idea is correct.
People are predictably EXTREMELY bearish at the moment, and I cannot blame them. Suffering portfolio losses is never fun. That said, from a technical perspective, nothing has really happened... yet.
Here is the fear that we all knew would be present at the range lows. The Fear & Greed Index is pushing to lows that are rarely seen, historically a good buying opportunity long term. That does not mean that price can't continue to drop, obviously. But it usually means that a bottom is close, especially if you are willing to wait and buy more a bit lower.
Side note... this is the dilemma of being an analyst and sharing daily analysis. We search for things to discuss, low time frame moves and indicators. But the reality is, you need to zoom out and remain patient. As you know, I have been largely avoiding the market for the past month, recommending that you do the same so that you don't lose money trading the chop.
The narrative for the drop is the Fed meeting, but I don't buy it. Everyone knew exactly what the Fed was going to say. More likely, whales were waiting for the opportunity to easily sell coins when the market participants are fearful and unwilling to step in.
Further, you will now hear endless arguments that Bitcoin is simply a correlated asset that drops when other markets do. Remember, everything is correlated in those rare moments when people go risk off, but to pretend that means Bitcoin is correlated is a false flag and ignores the rest of the time (the majority) when it travels separately. People love to cherry pick data to prove a point.
More than anything... I know that you are likely scared and suffering. Zoom out and chill, everything is going to be fine. Just remain patient.
WEEKLY CHART
The weekly chart looks rough, breaking through the more local range lows (blue lines) that I have been discussing. As you can see, we still have higher lows (bullish market structure) above the red line. The 50 MA is far above now, so it will be interesting to see where the week closes. That has not been resistance since March, 2020. The descending blue resistance also appears to be failing, but the candle is not yet closed.
The huge wick from the beginning of December has now been "filled," which is something that often happens.
Interesting to note, and something I have discussed in the past.... 42K has been THE LEVEL on Bitcoin for a year. It is seemingly a magnet from both above and below for price action. We are there again. This is the level that broke when Tesla added Bitcoin to the balance sheet... and broke when Elon Musk announced that they would no longer accept Bitcoin for payments.
DAILY CHART
Price broke local support and headed down on increased volume. Not ideal. As you can see, the massive blue level around 42K has been THE key area for Bitcoin over the past year. We also have potential tweezer bottoms, meaning that the two daily candles have the same wick low... but that's with 12 hours left and a whole lot of day left. Too early to tell. For now, we have few reversal signals, beyond the fact that we are hovering above support.
Bullish and bearish divergence on the daily chart, in oversold and overbought territory have been a predictable tool for finding bottoms. That said, it's hard to be exact. As you can see from the last correction, it took weeks of building divs to finally bottom. The first top shown was the same. We had a bullish divergence recently, which sent price to the range highs around 53K. We now are potentially building a bigger one. We need to see RSI reverse to avoid it being invalidated.
4-HOUR CHART
This is the 4-hour range. Support has not even been tested yet. You can see what happened at the range highs on the last test - a bearish SFP, with price wicking slightly above to find liquidity. Let's hope we see something similar here at the lows.
Altcoins
The short term "worst case scenario" that I have been discussing is happening for altcoins. As I continued to mention, Bitcoin Dominance was sitting at extremely low levels and "support" if you believe in charting it.
That was a good indicator that Bitcoin Dominance was likely to bounce. That's ok when Bitcoin price goes up - because at least alts maintain their USD value, even as they drop against BTC. But when Dominance bounces from support and Bitcoin price is dropping, you get the double whammy of losses against both USD and BTC. It happens, but alts remain avoidable for now, at least as traders.
Legacy Markets
SPX (S&P 500)
The stock market reacted negatively to the FED announcement, even though everyone on the planet knew exactly what the FED was going to say. This is not uncommon, and history shows that these reactive dumps are usually long term buying opportunities on valuable assets. This could be "the top," but every time someone calls that, the market seems to eventually bounce and head to new highs.
That said, we know that the FED is going to continue to taper and wind down stimulus, which means that the stock market will be forced to continue up with less manipulation and help from the government. That could certainly mean that we are in for a more extended period of volatility and correction.
I am not sharing this is a trade, merely wanted you to see the major sell off from yesterday and offer some thoughts on what it could mean.
Over a long time frame, every correction in history, including the Great Depression, was a buying opportunity for patient investors with cash on the sidelines. This lesson should apply to Bitcoin as well.
Chart Requests
As you would expect, the charts largely looked rough, even before the big drop. Here are your requests, but there's not much to see in this market!
The Fed Is Sticking To Its Guns
The central bank also discussed how to start shrinking its almost $9 trillion balance sheet.
The Fed has always used cryptic language to describe their intentions, often moving markets with the simple usage of one word over another or the tone of that word.
This is what one expert had to say regarding the Fed’s meeting yesterday: “almost all participants agreed that it would likely be appropriate to initiate balance sheet runoff at some point after the first increase in the target range for the federal funds rate.” And the meeting indicated, “the appropriate pace of balance sheet runoff would likely be faster than it was during the previous normalization episode.”
In other words, the meeting revealed that the Fed is taking inflation seriously and is cutting back on stimulus sooner rather than later. They refer to this as tapering. The Fed has clearly realized that their reckless behavior over the past couple of years will be difficult to correct, and that they need to start now. Buckle up.
The Wolf Of All Streets Podcast Ft. Eric Weiss
Michael Saylor famously sparked a bull market by buying Bitcoin and putting it on the balance sheet of MicroStrategy. That’s not the beginning of the story. Eric Weiss, a Bitcoin OG, is the legend that successfully orange-pilled his best friend, Michael Saylor, convincing him to buy billions of dollars worth of Bitcoin. This episode contains the incredible true story of how one man’s advice changed the crypto landscape forever. On top of that, Eric Weiss is a successful digital asset manager for high-net-worth individuals, so he really goes deep on why Bitcoin is a once-in-a-lifetime opportunity.
In this episode with Eric Weiss, we discussed:
Orange Pilling Michael Saylor
Eric Weiss’s Bitcoin Advice
How To Orange Pill A BTC Virgin
Bitcoin Is Bipartisan
Politicians Have To Support Bitcoin
The Greatest Trade
When Will Institutions Join?
Bitcoin As A Method Of Payment
Bitcoin Is An Immaculate Inception
Bitcoin Is Better Than Gold
Bitcoin Will Consume The World
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.