The Wolf Den #425 - States Want Bitcoin
Bitcoin Thoughts And Analysis
Bitcoin has been floating up in price on relatively low volume. Uninspired price action at best, but weekends do tend to be slow.
Removing ourselves from the charts for a moment, it's always important to take a look at sentiment. I often talk about fear and greed, about angry responses to tweets and other signals that the bottom and top may be in. Legendary trader Peter Brandt shared this tweet, which I love.
His quick take is that mega bulls are becoming bearish at support, usually a sign that the bottom is near. It will be interesting to see this play out, but he was certainly correct about laser eyes being a clear top signal.
The Crypto Fear & Greed Index is still showing "extreme fear," even after this nearly 20% move off of the lows.
The return once again of negative funding on perpetual swaps across multiple exchanges is another signal that traders are betting bearish, not something that happens too often. When shorts are paying longs, the potential exists for a squeeze,
WEEKLY CHART
Pretty hammer candle (or high wave spinning top, choose). Strong volume, long wick into a key zone of demand.
As you know, we are not really bullish until >$39,600. Really not until price is trading above $42,000.
Bitcoin has not had consecutive green weeks in months. Every decent looking candle has been followed by more downside. That means it is very important to await confirmation in the form of a green candle this week. 2 weeks ago was a "bullish candle" as well, didn't work out.
Either way, we are definitely seeing demand in the low 30Ks, as evidenced by the long down wicks of the last 2 weekly candles.
TD Sequential is yet to start a new count, either bullish or bearish. For now, the red 9 is still in play, as the count can extend to 13 candles. This week will be candle 12 in the sequence.
DAILY CHART
Here is a chart with a lot of lines! This should show how many areas of potential resistance we will have on the way up. But have no fear, this is how it always is after a correction.
The first key is holding $37,300 as support, which is where price is currently trading. The blue descending line is still the major downtrend resistance idea for the moment, so a break through that would give more confidence that the reversal is happening.
We had major volume on the bottoming candle, which is still encouraging, but we need to see some follow through. Decreasing volume as price floats up is not bullish. It is bearish consolidation. We need volume to match price - both going up.
Legacy Markets
SPY (SPDR S&P 500 ETF Trust)
Last week was a rollercoaster for all markets and pundits seem to expect the nonsense to continue. There are still question marks surrounding the Fed and macro situation, so the chart should always be taken with a grain of salt.
The SPY is the most popular asset for trading the S&P, and has been the core of my investment portfolio for 15 years. While many still expect downside, the chart certainly is not showing it at the moment. Again, it's just a chart.
As you can see on the weekly, price just tested the 50 MA successfully as support, the first interaction with this line since June, 2020. Further, we have a massive hammer candle, closing almost at the weekly high. This was the largest weekly volume since March, 2020, when global markets collapsed because of Covid. To top it all off, we have a bullish SFP (swing failure pattern) below the previous swing low, meaning there was a ton of liquidity and buying interest below that black line.
The chart is signaling that the bottom is close, at least for now. Bulls really want to see another green candle this week to confirm.
Institutional Activity Is Picking Up
Looking at data provided by Glassnode, the past few months have shown an influx of large volume transactions, likely indicating interest among big players or institutions. One graph tracked the volume of transactions in the size of $1M-$10M and +$10M and found that both categories have been steadily rising since October 2020. According to Glassnode, "65% of recent transactions’ transfer volume in the market exceeds the level of $1 million since October 2020." To further point to institutional activity, Glassnode reported that 40% of the transfer volume in the market involves transactions +$10M. This is a good sign that whales are buying.
Max Keiser Makes A Bold Claim
In a recent interview, prominent Bitcoin maximalist Max Keiser publicly announced that he knows who the next country to adopt Bitcoin in Latin America will be. These are his words: “I know for a fact that another country is going to adopt Bitcoin […]I do know who is next but I am not going to say who it is. I can’t guess because I know the answer. I know for a fact that a Latin American country is going to legalize Bitcoin as legal tender, I am very confident. It will be by the end of 2022.”
He further specified that this will happen in Q2. Likely candidates to be next are Panama, Venezuela, Paraguay, Brazil, and Argentina, although this is pure conjecture. We have already seen Rio De Janeiro propose accepting Bitcoin as legal tender and have further seen Latin countries propose their own crypto legislations. This will be interesting.
MicroStrategy Bitcoin For Corporations Conference - Again
MicroStrategy will host another conference aiming to introduce bitcoin to corporations.
Last year at this time, the entire world was talking about institutional adoption of Bitcoin. MicroStrategy had bought and Tesla was about to. Saylor had a conference for 2000 CFOs and executives who were reportedly interested in adding Bitcoin to their balance sheets.
Then... nothing. It didn't happen, largely a result of GAAP accounting laws and the ways that companies report quarterly earnings.
Either way, they are back at it again, with a second Bitcoin for Corporations Conference coming soon. As has been proven, these huge moves do not happen over night. Regardless of the immediate results, it is clear that thousands of companies are at least superficially interested in crypto.
The 300
This is huge news that has seemingly gone unreported.
"An estimated 300 community banks in the U.S. are reportedly set to begin offering Bitcoin trading via mobile apps in response to high demand from clients.
According to a report by American Banker, around 300 community banks in the United States are looking to offer Bitcoin trading to clients within the first or second quarter of 2022 with the help of Bitcoin company NYDIG. The report claims the American Bankers Association and the Independent Community Bankers of America have made investments in NYDIG as part of the effort."
Talk about mainstream adoption!
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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.