The Wolf Den #448 - Expected Value
Bitcoin’s Buy The Dip Narrative - IntoTheBlock
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB). ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data.
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.
Bitcoin’s Buy The Dip Narrative
Climbing from $34,000 to $43,000 over the past seven days, on-chain analysis indicates that Bitcoin has been experiencing significant buying activity and accumulation by large holders.
Although Bitcoin tumbled to $34,000 on Feb 24th, it has quickly recovered.
Currently, Bitcoin is trading between $43,000 and $45,000, showing signs of accumulation and supporting the “buy the dip” narrative.
On-chain echoes the spot buying among market participants over the past few weeks. Bitcoin’s Net Flows from centralized exchanges have turned negative once again with over 180,000 BTC being withdrawn from exchanges in 2022. The last time we saw consistent outflows from exchanges was in early November 2021, back when BTC hit a new ATH.
IntoTheBlock’s Exchanges Flows Indicators
Besides exchange outflows, the buying the dip narrative was also supported by analyzing the addresses' profitability. The Historical In/Out of the Money (HIOM) is useful when comparing the percentage of addresses making money at two different points in time where prices are at a similar range. The difference in the addresses profiting provides an idea of whether momentum is.
IntoTheBlock’s Bitcoin Financial Indicators
Currently, the percentage of addresses “in the money” is at 68%. When comparing this to the last time Bitcoin had 67% or more of holders in the money, we observe that Bitcoin’s price was in the high $43,000s. Despite the drop in price, the percentage of Bitcoin holders profiting from their position climbed back to this level, pointing to many addresses bringing their average cost down. This cost average buying from holders can also be reflected in IntoTheBlock’s ownerships indicators.
Since the beginning of the year, the total balance belonging to hodlers has grown significantly. Unlike other crypto-assets, the balance held by hodlers has only continued to increase consistently since November.
IntoTheBlock’s Ownership Indicators
Hodlers balance's grew significantly as BTC price crashed to $32,000 and $34,000. Over the last 30 days, the balance held by these addresses increased by a whopping 4.63%.
While this does not necessarily mean this is the bottom, it does show long-term holders continue to have strong conviction in BTC, growing their holdings amid volatile times.
Bitcoin Thoughts And Analysis
I am still long Bitcoin from 35K and my plan is to add on dips rather than look for an exit at the moment. I could be wrong, but my bias is that the bottom is likely in and that I have an opportunity to ride a position with almost no risk. Price hit a major area of resistance and is struggling - not a surprise after such a massive move. Consolidation below resistance usually leads to expansion up, but that does not mean the market won't drop to shake out weak hands first.
WEEKLY CHART
Remember when I added the blue line to the weekly chart? Now you can see why.
I am not sure if the week will close below that line, but it's the clear resistance the bulls need to clear now to keep the momentum rocking. Yesterday's quick move up was stifled right at that line, in confluence with multiple resistances on lower time frames.
Right now, it appears we have consolidation below resistance, which is expected in any move up.
45.5K is the main resistance now. 42K and 39.6K are the main supports, where I would look to add on dips if they hit.
This area of resistance is also the EQ of this red trading range. Very strong resistance, as you can see.
DAILY CHART
There is resistance on the daily chart in almost the same spot - $45,478. The same key levels are below on the daily as the weekly, with the 50 MA also screaming for a retest as support. The blue descending line also has not been retested, although neither of things "have to happen."
4-HOUR CHART
I am not particularly worried about lower time frames. As I said, I am looking to add on dips. But this looks a bit like a local rounding top, with lots of wicks up and weakness into resistance. This is not a bull flag or pennant, which is what you would ideally like to see forming.
I would not be surprised to see price come back down to test the levels mentioned. RSI is getting a nice reset, no longer overbought (not shown).
Chart Requests
Here is yesterday's Chartapalooza, recorded at the new time. Enjoy. Altcoins are still looking shaky with Bitcoin Dominance rising. Hard to get extremely excited in the very short term.
Exchanges Are Winning
The Russian-Ukrainian conflict has put crypto exchanges in an ethical dilemma. On one hand, exchanges want to maintain/achieve good terms with regulators. On the other hand, exchanges understand the importance of their product and that they are ushers of neutral technology. Walking this fine line, crypto exchanges are being pressured to block Russian users. The response has been a resounding no. While the exchanges are on board with sanctioning criminal accounts and suspicious activity, it seems like no exchanges are enacting blanket bans. This may be the most important ethical decision exchanges have ever faced and they are crushing it.
The SEC Has Their Eye On NFTs
The SEC has turned the flaming eye of Sauron on the NFT space. Multiple subpoenas have reportedly been sent to specific NFT creators and marketplaces. Supposedly, the SEC is viewing NFTs like securities, especially those that are fractionalized and used to raise money. I'll be the first to admit that a lot of NFTs appear to be knockoff investment scams, but regulatory guidance is needed rather than penalties, lawsuits, and fines.
This will be very interesting to watch.
The Wolf Of All Streets Podcast Ft. John Warren
Bitcoin mining has quietly taken the world by storm, as the network’s hash rate has continued to grow at unprecedented speed. John Warren from Gem Mining, one of the largest private U.S. miners, came on the show to discuss the current global mining environment and why many of the popular myths in the media are false. It’s his belief that mining is one of the greatest arbitrage plays in the entire space and the opportunity is still growing. Both John and I believe that miners are the unsung heroes of Bitcoin and probably forever will be.
In this episode with John Warren, we discussed:
Mining Is Arbitrage
The Logistics Of Mining
What Happened To Mining Stocks?
Mining Is A Leveraged Play
Miners Are Pro-Environment
Carbon Neutrality In Mining
Regulation Risk On Mining
Educating The Public On Mining
Can The Average Person Get Into Mining?
How Price Affects Mining?
This episode is sponsored by: ARCULUS
My Recommended Platforms And Tools
This is where I trade with leverage and can also trade spot with no fees.
This is where I invest, commission-free. They now let you earn interest on your Bitcoin held in Voyager, so you can compound while trading. Not only that, you’ll get $25 in free BTC when you download & fund.
Rewards Code: WOLF25
Mining for everyone! You can buy an ASIC and have it set up at a destination of your choice by them, and you only pay the electricity cost. Absolutely awesome.
I use RoundlyX to buy small amounts of Bitcoin every single day. They automatically round up my credit card purchases (with 10x multiplier) and invest them in crypto. Absolutely brilliant. Passively invest money you don’t need without a thought. Further, they have integrated with Voyager (see above) to offer commission-free purchases.
Rewards Code: WOLF
Concierge Phone Service for Americans that protects your from SIM Swaps and other phone related hacks. I cannot stress enough how amazing this service is.
Subscribe to my YouTube channel for free daily content.
Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
On-chain and fundamental analysis, research, predictions and indicators, all in one place. Highly recommend.
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.