The Wolf Den #421 - Is The Market Manipulated?
Bitcoin Thoughts And Analysis
Bitcoin finally saw some relief, putting in some amazing bounce signals. If you were on my morning livestream yesterday, you saw that I was eager to get in a leveraged trade, which I did - long from ~$34,300. I took this trade on the confirmation of the massively oversold bullish divergence with RSI on the 4-hour chart. I did not "catch the bottom" but waited for confirmation of the divergence, in the form of a clear elbow up on price and RSI.
Yesterday was meaningful for a number of reasons. Perhaps most notable was the fact that Bitcoin rose from the open of the stock trading day, as stocks crashed in epic style. There has been much talk of correlation between the two markets, which is always the case in a full on risk off environment. For brief periods, all market correlate and drop together. But this is rarely the case and the majority of the time, which is what matters, Bitcoin trades as an uncorrelated asset.
Bitcoin rose when stocks dumped and remained strong when they went up again. Stocks were once again volatile to the downside overnight and Bitcoin remained stable.
It is clearly trading on it's own, even in the face of significant volume and volatility in the stock market.
Most importantly, we saw a ton of volume.
WEEKLY CHART
It is only Tuesday, but I would love to see a candle like this print by the end of the week. WAY too early to tell. We want to see weekly closes above $39,600 and ideally $42,000 to confirm any sort of potential reversal. Below those lines is just relief.
DAILY CHART
Yesterday's candle was a high wave spinning top, a good sign for bulls. My friend Big Cheds had some thoughts.
This was the largest volume daily candle since December 4th (the drop) and the hourly volume on the pump was the highest we have seen in ages. There was real buying interest.
TD Sequential printed a red "buy 9" on the daily. We already had one on the weekly, which is now in the 10th candle of the cycle.
Life below the Bollinger Bands is over for the moment. Two daily candles trading almost entirely below was a major anomaly and signal of at least a temporary bottom. Now that price is back in the bands, it should target the centerline as resistance, even if it is going to drop again.
4-HOUR CHART
Thar she blows. Beautiful oversold bullish divergence with RSI. This is also present on the 6-hour and 12-hour charts. The daily closed too high for a divergence, but was still massively oversold.
More importantly, the potential hidden bearish divergence has been invalidated, as both RSI and price made higher local highs.
CME GAP
There has been talks for months about the unfilled CME gap around $32,000. No more. It filled yesterday, almost to the dollar. I'm not a big believed in this narrative, but that was pretty epic.
Altcoin Charts
As discussed yesterday, altcoins continue to be in a tough spot. The likelihood of them doing well in the current situation is low - especially on their Bitcoin pairs. Any major Bitcoin move is likely to hurt them. If Bitcoin does rise, there will be opportunities on USDT pairs, although Bitcoin vs. USD is likely to be a better performer.
There are a few coins sitting near key supports against USD that I quickly found. If buying support knowing it could easily break is your style, here are a couple ideas. EVERY SINGLE ONE OF THESE COULD FAIL AT THE SAME TIME. THE BITCOIN PAIR CHARTS GENERALLY LOOKG BAD.
If you are trading these, a tight stop a few percent below support is warranted. I am not going into the great detail - these are all coins near a key support.
I am not taking these setups. I bought Solana at $82 (and higher) as an investment, because I want to own SOL long term. That's the only reason I would approach an alt now - as a longer investment. But each of us has our own strategy.
ADA/USDT
The real trade here was to have bids at support already, at 92 cents. That was a solid entry for those who caught it. Currently it's hanging out between levels, no real reason to buy. Another test of 92 cents would be risky, but it is a key support. I'm not touching this, but some of you are fans.
AXS/USDT
The key support is $48.10. We have multiple wicks below, aka bullish SFPs. Lots of liquidity below that area for now.
DOT/USDT
This demand zone between $16.8 and $18 has been a key support and resistance are in the past (you would have to pull it back further to see). Below this is a free fall to the next support at $10.37.
FTM/USDT
$1.94 was an entry target from an old setup in the newsletter, a key support that was never hit. Now it was. If you missed it, this train has potentially already left the station. If you had bids there, congrats.
LINK/USD
Anything above $13.38 is safe. That is a major support worth watching.
MANA/USDT
$1.599 was never retested as support on the breakout. Price is trading above now, but might be worth bidding that area if we see more downside. Otherwise, you want to trade this back above $2.44. Right now it's in no man's land.
SUSHI/USDT
Currently holding $4.33 with multiple wicks (bullish SFPs) below. If the market is bottoming, this could be a nice potential entry.
Legacy Markets
What a wild ride. Buckle up, it ain't over.
Yesterday saw one of the biggest intraday comebacks in stock market history. After gapping down massively at the open and then trading down for most of the day (as much as 5%), the market rallied and closed green. If you were following me on twitter, you know that I was buying aggressively... perhaps the most aggressive buying I have ever done on stocks in a single day. This is not because I am convinced that the bottom is in, but because I am a long term investor and this is a significant dip. I believe that in the long run, these will be cheap prices. I bought Coinbase, Amazon, SPY, QQQ and a few other positions.
Things are getting wild in equity markets as traders try to size up the latest outsized moves
Dow futures are currently trading down by nearly 300 points. The roller coaster commences. This is par for the course. In the tweet above, Carl points out that this was the largest comeback since 3/19/2020. On 3/20/2020, stocks opened down 500 pts and from a much lower level. It was a more significant drop on a percentage basis. As you all know, stock did not bottom for a few more days.
SPX put in one of the most beautiful candles a trader could ask for... but is still trading below the 200 MA.
QQQ (which tracks the Nasdaq) was the most oversold it has been in years, and the 4th most in it's 22 year history. A bounce was somewhat inevitable. This was the second highest volume day for QQQ EVER! There was one higher day in 2008.
The market is at an important inflection point, and the Fed meeting will likely determine the tide. In December, Powell pointed to 3 rate hikes in 2022 as likely. Goldman has predicted 4-5, which is what the market is likely pricing in. As strange as it sounds, if Powell sticks to 3, it will be considered "good news" and the market will probably bottom. If he is more hawkish, then we could see more downside.
Even a slightly dovish tone could signal a bottom.
I did some digging into the history of tightening cycles, assuming that the market performed poorly. I was wrong. Big time.
There have been 12 tightening cycles since the 50s. Stocks went up 11 times, down once.
Yup. Markets have generally performed well in tightening cycles. When you dig in deeper, the velocity of tightening matters. The slower the better, which is worth watching. Further, this is amortized over the entire tightening cycle, meaning that this does not show us what happened specifically at the beginning, which is what we are approaching. Either way, if you zoom out, this should not be a big deal.
When midterm elections are happening, performance is even stronger… because politicians like to, you know, get re-elected. The caveat is that the bulk of midterm years have been historically down and volatile, with prices ripping in the final three months and into the next year.
Right before and after the actual election goes full bull.
Meanwhile, we have some evidence as to who panic sold the open on Monday, and it is not a surprise. It was retail.
The average person was in a panic after the terrible weekly close, chomping at the big to sell their holdings the second the market opened... right into the hands of the big players.
“The stock market is a device which transfers money from the impatient to the patient.” —Warren Buffett
This reeks of capitulation and panic selling.
Why Are NFTs So Volatile?
There's quite a bit of confusion around the source of volatility in the NFT market and a simple concept that I think may be overlooked. I am not an NFT expert, but but have some basic insight that may help explain this phenomenon. There are many factors that influence the price of an NFT. This section is simply a foundational perspective. Let’s look at a made-up example.
Let’s say Wolf-NFT #01 is currently valued at 100 ETH and the trading price of Ethereum is currently $3,000. That NFT is susceptible to serious swings, because both the value of Ethereum impact its value, as well as the amount of ETH someone wants to pay for it. Let’s say Ethereum drops to $2,800 overnight. That means our NFT is now valued at $280,000 from its initial $300,000 value. Let’s say demand for Wolf-NFT #01 has slowed and now the top bidder is offering 96 ETH and the asking price is 98 ETH. If the NFT sells for 97 ETH, at $2,800 per ETH, it is worth $271,600. If you held spot ETH, your position would be at $280,000. You would have been better off holding your coins.
With this reasoning, the opposite scenario is equally valid - anything priced in crypto is susceptible to large upswings. The caveat to this line of thinking is that it assumes the underlying value of an asset is viewed in USD. If you reject that premise, which is fair, then the market’s volatility isn’t compounded as I describe above. Considering how volatile NFTs are, especially those that are minted on blockchains outside of Ethereum, I recommend using the dollar as your base to protect against losses. Pricing the world in crypto is a future possibility, but for now, it’s not much of a reality - especially if you are paying taxes in the United States.
Solana Is Struggling
If you were wondering why the price of Solana has dropped significantly more than its peers, then I may have an answer for you - it hasn’t been working well. High network congestion resulted in longer than normal delays and failed transactions over the past few days. Some exchanges have even suspended withdrawals to prevent users from losing their cryptocurrency due to network failure. A blog by Solana pointed out that some accounts on the network were liquidated due to erroneous volatility, which created arbitrage opportunities for savvy traders.
This isn't an ideal situation, but it’s not all bad. Solana, like many other explosive L1s, is navigating growing pains. This is expected as blockchains scale and just evidence that we are still early. I even bought some recently because I believe in the project long term.
Biden Is Planning A Crypto Executive Order
According to Bloomberg, the Biden administration is outlining a directive regarding cryptocurrency compliance in the U.S. According to the sources, the plan could release as soon as next month, and a number of meetings have already taken place regarding the executive order behind closed doors. The order will reportedly task federal agencies with conducting their own research on the asset to better understand the risks and benefits of this newly emerging sector. Supposedly, one of the goals of the report is to ensure the U.S. remains at the forefront of a competitive world that’s rapidly adopting digital assets.
The Wolf Of All Streets Podcast Ft. President Of Palau, Surangel Whipps Jr.
In a hyper-connected world with a global economy, it makes increasingly less sense to restrict ourselves with artificial borders and limiting fiat currencies. The nation of Palau is redirecting the course of history as the first country to implement digital residency through blockchain. Palau’s President, Surangel Whipps Jr., came on the show to explain why the concept of digital residency enhances freedom and gives power back to the people. This podcast is the incredible true story of how barriers are breaking from the evolution of stone money to digital money - you can’t miss it.
In this episode with Surangel Whipps Jr. we discussed:
Digital Residency Is Economic Freedom
How Digital Residency Works
Setting The Crypto Example
Palau Considers A Stablecoin
A CBDC In Palau
Stone Money To Digital Money
The History Of Palau
Crypto Is Growing In Palau
More Digital Residents Than Physical
How To Become A Digital Resident
This episode is sponsored by: AMBER GROUP and HORIZEN
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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.