The Wolf Den #410 - Is This Downturn Different?
Bitcoin Thoughts And Analysis
Bitcoin continues to look decidedly weak, with little buying volume or conviction being shown by bulls, even at the range lows and on a breakdown. That does NOT mean they will not step in, but we can only process the information provided.
As you know, I took a leveraged long on Friday at $41,470. I closed it right after the weekly close yesterday at $41,950. A decent profit after an uneventful weekend.
Why did I manually close the trade without either my stop loss ($39,300) or take profits orders (starting around $45,000) being hit?
Because my premise was invalidated.
The trade was based on the idea of Bitcoin being at support and oversold, with bullish divergences on multiple time frames. As the trade progressed, I saw hidden bearish divergences form, which were once again confirmed at the weekly close. The weekly close itself was slightly below macro support - I wanted to see 42K hold. That was enough for me to exit and sit back in spot, where I would see the benefit of an upside move regardless.
WEEKLY CHART
The macro bullish trend remains intact, as can be seen by the series of blue check marks - higher highs and higher lows. That would be invalidated with a break of $39,600, although we all know that whales would love to sweep this low and trigger mass panic before reversing on a mega wick. That would not surprise me at all. Regardless, we have a new bearish trend formed since the 69K high, with lower highs and lower lows. The lower low can go even lower, of course, but we do have a lower low now confirmed.
The 53K level was key to me because that was where we broke the last local series of lower highs and lower lows from the 65K top. As you know, I believe we entered a "bear market" when 53K broke down. I hate using the terms bull and bear, because they need to be qualified with a time frame. I am macro bullish, but less so on smaller time frames.
The sentiment I shared above, two days after the large early December drop, is still the same. We have "lost" 42K now, although we are trading right around it and it's still somewhat acting as a magnet. Officially, lower prices are certainly in play. We have lost the recent range, but barely. Now we are in the $28,000 - $42,000 range below.
This does NOT MEAN that we are going to $28,000. My hope is that we quickly recapture $42K (we are still right there) and that it's a slight deviation below. But we have to be realistic about where we are.
DAILY CHART
As you can see, the range was broken to the downside and has now become resistance. The last two daily candles traded back up into the range and closed below, with today's candle doing the same for the moment. Bulls really want to see the range lows recaptured, preferably on significant volume. Buyers have not stepped in here at all, which is less than encouraging.
4-HOUR CHART
Over sold bullish divergence has once again been replaced with hidden bearish divergence. Further, there is something very telling on this chart that you may not notice. RSI went from oversold to 50, which is considered the barrier between bullish and bearish RSI. More importantly, it reset all of the way to 50 without any major price appreciation - tons of effort to barely move price. Not an ideal sign for bulls, which is why I happily closed my position.
BOTTOM LINE: support has been lost, but without much conviction. It could easily be flipped right back to support from resistance, meaning we would be back where we are for the past week - at the range lows. Lower prices are officially in play now if we cannot get back up in that range.
More importantly, TA is just one tool. This should not shake your belief in Bitcoin in any way, shape or form!
The Federal Reserve And Bitcoin
This is a great summary of the recent Fed pivot and it's likely effect on markets, including Bitcoin. Alex is a popular economist and former podcast guest, so I take his opinions seriously. While I am not as convinced as others that the Fed is the most meaningful player in Bitcoin price action, I am certainly willing to consider it. Read the thread.
Raoul Pal Predicts Unprecedented Growth
In a recent crypto interview, Raoul Pal made headlines for a bold prediction on the upcoming growth of the sector.
“If I look at the total derivatives market, it’s $1 quadrillion. I think there’s a reasonable chance of this being a $250 trillion asset class, which is 100x from here, which would be the largest growth of any asset class in all of history in the shortest period of time.”
To run some math, if the crypto market cap were to become a $250T asset class in a decade, it would need to roughly 10x in total market cap each year, on average. Since the statement was made, the total marketcap has actually dropped; meaning it now needs to reach 125x from current prices to achieve Pal’s prediction. Considering current market sentiment, it’s hard to conceive these numbers. Even if Pal is partially right, we will all become extremely rich.
PayPal Plans To Launch A Stablecoin
Reports from Bloomberg are indicating that PayPal is currently in the early stages of developing its own stablecoin called “PayPal Coin.” Supposedly, developers found code in the app including the name, how the asset is backed (USD), and how payments would be handled. When reports surfaced, PayPal’s senior VP of crypto confirmed the rumors stating, “we are exploring a stablecoin; if and when we seek to move forward, we will, of course, work closely with relevant regulators. There would have to be clarity on the regulation, the regulatory frameworks, and the type of licenses that are needed in this space.” As much as the space isn't a fan of centralized entities creating projects, a PayPal-based stablecoin could bring a strong sense of legitimacy to a sector currently under heavy scrutiny.
CZ Is Worth $96M - Not Counting His Crypto!
Just a few months ago, CZ made headlines when Forbes estimated his net worth to be 1.9B. They underestimated!
Bloomberg just claimed that his net worth is $96B - WITHOUT COUNTING HIS CRYPTO HOLDINGS. Recently, he said the majority of his net worth is in the form of BNB and that he doesn’t personally own equity in any other projects, crypto or non-crypto, to avoid potential conflicts of interest.
If he is worth 96B, but that does not count BNB, which is the majority of his net worth, then the true numbers must be astounding. He is likely the wealthiest person in the world.
Credit to CZ - he intends to give away almost his entire net worth before he dies.
Bill Miller Has Half Of His Net Worth In Bitcoin
Bill Miller's net worth is split between Bitcoin and Amazon
Bill Miller has been a long time advocate of crypto, but many assumed that he was a proponent of the 1-2% in Bitcoin mantra shared by fellow billionaires.
He recently revealed that 50% of his portfolio is in Bitcoin, with nearly 50% more in Amazon stock. This is actually not far off from my own allocation, with Amazon being the bulk of my equity holdings.
Bill Miller has had a roller coaster career, famously blowing up in the global financial crisis in 2008 and losing 90% of his net worth. He came back and became a billionaire again.
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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.