The Wolf Den #447 - Is Bitcoin Correlated To Stonks?
Bitcoin Thoughts And Analysis
There is very little to see on the Bitcoin chart, which is a good thing. Price is currently consolidating around 44K, just below key levels of resistance. This is common - price stops at resistance and builds strength (hopefully) for another push to the upside.
I am impressed with the price action - Bitcoin has managed to push this far without forming a bearish divergence on any meaningful time frame, meaning we can get a bit of an RSI reset now for another push up.
Bottom line now is that 45-46K is strong resistance, 42K and 39.6K are the main support. Between those we are consolidating.
WEEKLY CHART
I have shared quite a few charts that show strong resistance in the 45-46K area. As you can see, if we pull a trading range from the 65K highs to the 28K lows, we are right at the EQ (equilibrium, center dashed line). The 50 MA is lurking ahead on the weekly as well.
DAILY CHART
This is the general view, showing the lines mentioned above. This looks like it has bottomed, breaking descending resistance and the 50 MA. Let's see what happens next!
Altcoin Charts
I will be taking a long look at your chart requests in a few hours on YouTube, so I am mostly reserving my judgment on alts until then. NEAR still looks great, and DOT also looks ready to break out.
Legacy Markets
DXY
This is the chart of Bitcoin Vs. DXY, mentioned in the intro. As you can see, the largest peaks and valleys on this chart are opposing, showing at least a loose inverse correlation between the dollar and Bitcoin. That said, I marked January of 2021 last year as a time when they seemingly diverged. Both started to rise, and since then Bitcoin has largely gone sideways as the dollar has ripped. I do not really view this inverse correlation as meaningful at this point.
First, it is important to note that the DXY is a measure of dollar strength vs. a basket of other currencies - not in a vacuum. The dollar can be weak, the government can be printing, and the DXY can go up. It just has to outperform other currencies.
I have been sharing this chart for years. The dollar was in an ascending channel since the great recession and broke down in 2020. It dropped hard from there but has rallied for the past 9 months. My expectation is that we will see a retest of the channel support and then a drop. Remember, the name of the game is devaluing the dollar. That said, the bottom could be in and it could continue to rise vs. everything else. These are just idea, and there's a lot more at play for the dollar than a simple chart can tell us!
I was predicting shorter term strength, as I have shared this chart:
DXY broke out of the ascending blue channel and formed a double bottom. It had a perfect break and retest of the neckline, triggering the green target, which just hit, months later. DXY is now at resistance, so it will be interesting to see what happens from here. Is this double bottom a macro reversal, or has it played out?
Again, if DXY rises hard, that is historically very bad for stocks and metals. Bitcoin at times, but I view this as less likely now.
The SEC Sucks
It’s fairly common for regulatory bodies to offer amnesty to honest entities that come clean with their records and offenses. Not in crypto, apparently. The SEC’s newest attorney general of enforcement said this on the topic of crypto amnesty during his first speech: “our message to them is not, ‘register your product and we’ll just ignore the billions you have under management in this crypto lending product and your violations of the securities laws.” Offending entities should expect “more favorable treatment but still penalties and fines.” This isn't the worst possible outcome, but the crypto space is growing fast and the SEC has yet to offer a shred of clarity. Instead, they have primarily ignored the topic or hinted that the activity is illegal. It is basically impossible to safely operate a crypto company in the US.
Ukrainians Are Scooping Up Crypto
A report from Arcane Research has found that Ukrainians are buying "more crypto than ever on Binance" since the conflict began. Prior to the invasion, the average 24-hour trading volume rarely exceeded $3M. Now it ranges between $6M and $8.5M. But Ukraine isn't the only country buying crypto, Russia has also seen major increases in buying volumes since the conflict.
The reasoning here is pretty simple. Citizens know that currencies fail and their savings are at risk. Conventional store of value assets are not easy to acquire during a conflict, but crypto is. The conflict is making it clearer than ever before that crypto is our way out.
Ukraine Airdrop To Donors
Ukraine has announced that they will airdrop an unknown asset to anyone who has donated to the official crypto addresses of the country. They also said that there will be no tax on... captured Russian tanks! Here is a bit more info on the airdop.
It’s the first time a country will conduct an “airdrop” for donations.
FTX Launches Philanthropic Fund
Named the Future Fund, FTX's newest philanthropic venture fund has plans to donate between $100M to $1B this year. Falling under the umbrella of the FTX Foundation, the fund plans to inject digital assets into a wide range of important areas ranging from, "AI ethics, pathogen sterilization technology, alternative voting systems," and more. So far, the fund has identified 38 different projects that it will consider investing in. Sam’s earn-to-give philosophy is incredible to watch unfold and is beyond inspiring.
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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.