The Wolf Den #411 - Market Tops And Bottoms
Bitcoin Thoughts And Analysis
Bitcoin bulls showed conviction and interest on the break below 40K yesterday, with a major return of volume and buying.
That said, there is almost ALWAYS going to be a huge bounce when liquidity is tapped at a key level of support. This does not mean the bottom is in. What comes next is what matters.
We need to see significant follow through and fresh resistance being flipped back to support. That is yet to happen.
We are still far from confirming any sort of reversal or bullishness here, even though people are celebrating at resistance once again. Further, leverage funding remains positive, meaning that traders are still net long - we have not even seen shorts pile up yet, or longs capitulating.
WEEKLY CHART
The move down yesterday came within a few dollars of the red support at $39,600, almost making a "lower low" on Coinbase. Bitstamp actually swept the low, hitting roughly $39,550.
With a higher low (Coinbase) the bullish market structure is intact. With a slightly lower low, it technically is not... but a sweep of a low in general is considered very bullish if it holds.
For now, if these lows hold, we are in very good shape. But I am far from certain that will happen.
As I often say, on a big drop, you usually either get front run at support, or price nukes aggressively through. You can se see the candle in May where 42K was supposed to be support and price dropped almost straight to 30K. Yesterday it was slightly front run on most exchanges.
We often see a "test dump" in a situation like this, where bears push price down to see what the reaction is. If they have conviction, the standing orders are now cleared and the walls are less defended. This will be an interesting time.
Bulls still want to see a weekly close above 42K, a tough nut to crack. That would just be the beginning. 53K is STILL the real line for a bullish case to be made.
DAILY CHART
The daily chart shows a major spike in volume. When you zoom in, we had the highest 4 hour and hourly candle volume since the drop in early December. The move below 40K woke up the bulls.
That said, you can see that price has broken support at ~42K and that bulls have been unable to push price back above that level. We have continued wicks and weak attempts, but need to see follow through.
We want a bullish candle today to confirm yesterday's bullish hammer. That long wick down is a great reversal sign, but we need to see follow through.
You can see the slight break of the lows here on Bitstamp.
On the line chart, the low was $41,535 on the daily. Line charts only account for the close. Any break below that could give us a very small bullish divergence. You can see that the daily has hit oversold once again.
4-HOUR CHART
Lower time frames have once again confirmed hidden bearish divergences, but any further drops will likely continue to build more bullish divergence. You can see that almost no time frame actually had a close below 40K, so we don't need dramatic lows to keep the momentum going.
Altcoins
I want to reiterate this idea that I shared at the end of last week.
The next phase will likely continue to be rough on altcoins.
Nothing is certain, but these are the most likely scenarios and I like to be on the side of the better odds.
If Bitcoin goes up fast, BTC Dominance will likely rise and alts will lose value against BTC, treading water against USD. You're losing sats.
If Bitcoin dumps, BTC Dominance will rise and alts will get slaughtered against both BTC and USD. This is the worst case scenario and is playing out at the moment. You're losing sats and dollars.
Bitcoin sideways is generally considered good for alts, but there's a catch.
Alts do well when Bitcoin is sideways and consolidating after a move UP. When there is fear in the market and Bitcoin is sideways after a move down, people are generally too scared to enter alts.
Charting BTC Dominance is a bit of a meme, as there are no orders to create support and resistance.
But if you do chart it, it's clearly at "support" and looks likely to bounce.
I have been talking about this for weeks and generally avoiding altcoins. I am NOT suggesting you sell all of your altcoins or do anything drastic. I am just preparing you for a likely scenario so that you can formulate a plan.
If you are investing, change nothing.
Billionaire Bill Miller Believes In Bitcoin
Yesterday, I discussed the fact that Bill Miller now has 50% of his portfolio in crypto. I did not tell you why.
There’s a reason Bill Miller is considered one of the greatest investors of our time - he is never afraid to buy the blood. Bill Miller is proof that the easy part of investing is knowing what to do, while the hard part is executing on that plan. Bill Miller has mastered this and set his eyes on crypto, proving to the world that he can stomach the pain, even stating that he knows it will work out in the end. This type of courage comes from decades of experience. Did you know that Bill Miller lost 90% of his net worth in ‘08 and built it all back? Here is what he had to say about his strategy.
“There are a lot more people using it now and there’s a lot more money going into it than in the venture capital world. There’s a lot of people who are skeptics who are now trying it out. The richest people usually concentrate their wealth instead of diversifying it. Maybe 50% is a good starting point but if it goes down 80%, I’ll buy it all the way down. In 5,000 years, gold has gone from a nickel to $1,850, and in 10 years, Bitcoin has gone from a nickel to $57,000. So why would I own gold? Especially since gold in the last 10 years has gone down. In the last 10 years, Bitcoin is the best performing asset category in the world.”
Gary Gensler Won’t Help Us
There was widespread optimism in the crypto community when Gary Gensler was appointed chair of the SEC.
Not anymore.
If Gensler declared Ethereum a security, he would quickly become the most hated regulator to ever lead the SEC. So instead, he continues to dance around the subject, providing zero clarity. The outcomes of the Ripple lawsuit will likely have a meaningful impact on the future direction of the SEC. If Ripple wins, the SEC may decide that pursuing crypto companies is a losing battle. If the SEC wins, they will likely be emboldened to take further action and will have precedent to do so. Whether you like Ripple or not, the future of crypto in the US hinges on the success of their case. Luckily, they are doing well in court. Here were Gensler's words regarding Ethereum.
Interviewer: Can you explain your view whether Ethereum is a security or not?
Gary: I am not going to speak to any one matter. We don't get involved in public forums talking about any one project. But generically, the overall market, if you are raising money from the public and the public is in anticipation of profit from the project's efforts, that is within the security laws. Congress wants to protect you. If they call themselves a token, they are still probably a security.
Jerome Powell Re-Confirmed Today, CPI Tomorrow
Jerome Powell is being reconfirmed today as Chair of the Federal Reserve and CPI numbers hit tomorrow - 2 chances for him to open his mouth and completely mess with the market. While any rational investors knows that anything he can say at this point is priced in, we still tend to see volatility in markets around his comments.
As per the article above, every single time the Fed meets is an opportunity for them to raise rates.
"Investors are awaiting Tuesday’s re-confirmation hearing of Fed Chairman Jerome Powell and Wednesday’s release of the consumer-price index report. That report is expected to show a 7.1% headline year-over year figure for December, which would be the highest level in four decades."
Land In The Metaverse Or... A Real House?
You think the real estate market in the real world is hot? Check out prices of land in the metaverse, which have gone up roughly 400% to 500% in the last month.
In fact, prices of land in the metaverse are not high enough to be compares to actual homes in the real world. Want to buy a private island in The Sandbox?
“Today they’re selling for about three hundred thousand dollars each which coincidentally is exactly the same as the average home price in America,”
I am still of the mind that I would rather own a physical home than a speculative parcel of land in the metaverse, but there is no doubt that we are still early and that the future is in the digital world.
The Wolf Of All Streets Podcast Ft. Alex Tapscott
Alex Tapscott, the son of previous guest Don Tapscott, is carrying on the family’s legacy of investment success across capital markets. Alex is the author of Blockchain Revolution, a 2016 book that remains a crypto-best seller, with over 500,000 copies sold worldwide. It’s Alex’s belief that the best is yet to come for the crypto space and that massive capital formation and investment into crypto are still on their way. Listeners of this episode should keep an eye out for Alex’s top 2022 predictions.
In this episode with Alex Tapscott, we discussed:
Alex And Don Discover Bitcoin
Ethereum’s Initial launch
Can DAOs Work?
Navigating VC Laws
The Tech And ICO Boom
How Early Are We?
Is Crypto A Misnomer?
What’s Coming In 2022?
Overcoming Financial Barriers
Decoding DeFi
The Layer 1 War
This episode is sponsored by: AMBER GROUP, HORIZEN and HBAR FOUNDATION
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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.