The Wolf Den #56 - Alts, Bitcoin, Hedge Funds And More
Bitcoin Charts And Thoughts
Bitcoin is once again at a point where I can see a case for both up and down. I took a small long a few days ago for profit, and am currently in a small leveraged short $8840 that was underwater for roughly a day. These are purely scalp positions, not based on long term ideas or sentiment. My gut still says that there is more downside to come, but that does not mean price cannot rise aggressively from here. I am not closing my short yet. As you know from last week, my general sentiment has turned more bearish than bullish in the short term. You can read about why in last Thursday's edition.
MONTHLY CHART
Still a few days left in the candle, so hard to make a definitive assessment of the situation. That said, $9,243 looks like potential rejection. The next support down is... $7,777, my favorite line on the chart. I still have bids sitting there, nothing has changed.
WEEKLY CHART
Pretty ugly. The last weekly candle closed bearishly engulfing the previous candle, with tweezer tops into a clear area of supply that rejected price for 3 weekly candles in a row. All three had wicks into that zone and closed below. Not what you want to see if you are bullish. Price is struggling now with the 50 MA on the weekly time frame, which has held as support for the past 3 weeks. A break of that with all of these other factors should be cause for more retracement.
Remember, a drop is generally considered healthy after a move up! Bitcoin loves to retrace 61.8% of a big move - that would be around $6,200 and still not bearish. I am not saying we are going there, but am once again reminding you that it is possible and still not even bad.
DAILY CHART
I still see that blue potential bullish breaker on the daily as a massive magnet. I have orders there and down to $7,777 for now. If Bitcoin wants to bring the pain, it would test that area, break below and then pop back up after finding liquidity. I do NOT expect that black path to actually happen, just an illustration of what I am talking about. This would not surprise me AT ALL.
There is confirmed hidden bullish divergence with RSI on the daily, but honestly these have failed as often as not. I am really trying to stick to actual bull div, with lower low on price and higher lows on RSI. Some traders would definitely play this as a bullish entry, but I am not convinced after seeing them fail a few times. In fact, if you draw the line back to the previous clear point on price and RSI, there was a hidden bull div that failed.
4-HOUR CHART
Mixed messages. The premise of my short was the retest of the 200 MA as resistance, which seems to have held in that regard. On the flip side, this is a nice descending channel, which should eventually break to the upside. Price was clearly rejected a few candles ago at the EQ (the equilibrium, center line), which helps confirm the channel. This could continue down in the channel to our bids and then pop up. Right now, it does not seem to want to move up. I will be watching to see if we get any bull divs.
VOLUME
Volume analysis of this downtrend leaves some cause for optimism.
Volume has decreased on each price drop (black Xs) - yesterday's drop was on extremely low volume. The overall volume trend is down (red arrow) with lower spikes per drop. That's not a true downtrend (for now). A true downtrend is confirmed by volume when volume increases as price drops When price drops on decreasing volume, it is consolidation before another move up.
That said, it can keep going far down on lower volume. Also, volume could kick in at any time on a big sell off.
Interesting to note, volume in general is now MUCH higher than it was before the March 12th crash. The red box shows volume back to November. The blue box is everything since mid March. It is important to view the macro trend as well. You can also see it by viewing the blue volume MA that passes through the volume bars.
Bitcoin did rise from the bottom on "decreasing" volume, much like the stock market. However, there were spikes towards the end AND volume was much higher than before the crash.
The Wolf Of All Streets Podcast Ft. CryptoISO
I invited my buddy Tripp, aka CryptoISO, who is a Professional Trader, Educator and Adventurist onto the podcast. We discussed our shared entrepreneurial spirit, monetizing a hobby, the evolving nature of bitcoin narratives, avoiding the herd mentality, 7 white claws and the entire history of bitcoin, crypto's distortion of time, money and reality, 100x longs becoming the norm, locating liquidity and a gamblers stop loss, the magical 61.8% Fibonacci retracement, what is an ISO and more. He's a really smart cat - very enlightening interview, especially if you are looking for a new way to approach your crypto trading.
Trading Tip - Cut That Loser
My friend @NebraskanGooner on Twitter posted a great thread about managing underwater positions, which I will share here for you:
"If you're in an underwater position and scrambling to decide what you should do...
The answer every time is:
-CLOSE IT.
-Slap yourself.
-Ask yourself why you entered a position without a plan.
-Stop trading until you understand how to plan entries/exits and stop losses.
DO NOT:
-Overexpose yourself.
-Panic and ask everyone what to do.
-Look for every single bullish thing you can find to justify why you're still holding.
-Watch your 50% loss to back to only 20% and hold because "I'm almost at break even now" before it goes back down 60% more"
Wise words. If you are in a position and have no idea what to do with it, it means that you entered without a plan in the first place. At that point, it's probably best to exit, step away from trading for a while, and reconsider your strategy. You should not be taking any trades without knowing exactly where you plan to exit - on a loss or win.
Altcoins
The past few days have been epic for trading altcoins. I sent a special newsletter out on Friday when I was confident that we were going to see some serious moves. Alts did not disappoint. Almost every trade is in serious profit, some with mega pumps. Never forget to take profit on your trades when they go well. This is basically altcoin roulette until the market turns. You take the profits from one, then find another that has not moved as much and trade that. Continue doing it until Bitcoin ruins the party. That said, nothing I am watching is screaming buy to me at this exact moment and it seems like the immediate alt momentum is slowing. I am sure there are some alt setups that look amazing that I am not seeing - I can't follow everything. But here is what I am watching - most of them are setting up for POTENTIAL moves that have not happened yet.
I wrote these about an hour ago, and some have already dropped a bit. Keep your risk management tight!
ALGO/BTC
Flipped the 200 MA to support on the 4 hour, which has been a common entry on alts. My orders are in the green circle for a potential retest. This is clearly trending up, so I am looking for a dip to buy. The area of the 50% is strong resistance - a really risk averse trader might want to see that flipped to support.
CELR/BTC
Another beautiful setup from last week that popped up. It is presently testing the recent high at 33 as support. If that holds, it could be a good entry before continuation up. This has already moved significantly, so it carries some risk, But technically, the downtrend is broken and this should continue up if Bitcoin allows it.
COS/BTC
Rumors are swirling about potential partnerships, so I have my eye on this to see if the chart lines up. Right now it is working on flipping the daily 200 MA to support. Anything above the pink line still look good, with a break of the descending blue wedge really being the confirmation I am looking for. I have alarms set on the blue line for another attempt.
COTI/BTC
I shared this on Friday before it exited the lower trading range and called for an entry on a flip of the top as support. It did exactly this, to the sat. That's where I entered the trade and I exited most of the position at the 61.8% fib. As I said, my expectation at the high end (did not expect it this fast) was around 280, so I sold before that. I am still holding 25% waiting for those higher targets.
At present, this has formed a local black ascending support which I am watching to see if it holds. It has formed a new trading range and is trading in the upper half, using the EQ as support. The 50% retracement level is at 253, I am also looking for that area to hold as support. Either way, this appears to be a "buy the dip" situation now that price has exited accumulation in the trading range at the bottom. This all requires Bitcoin behaving. For now, I am not looking to enter more, just to manage the bit I have left.
ERD/BTC
Same setup as last week - just a remind that I have orders at 22-23. Patiently waiting, if it doesn't drop, so be it.
HBAR/BTC
I shared this on Twitter on Sunday and entered at 413. It went insane for a 33% pump into a clear level of resistance. It is currently consolidating above support at 482. I consider anything above this as bullish. Again, clear break of the macro downtrend and movement up. It "should" consolidate before continuation.
MATIC/BTC
I have to assume at this point that every alt trader who follows this newsletter has been trading MATIC like a crazy person for the past few months. It has been by far the most consistent gainer. They announced a Binance trading competition today and have the mainnet coming soon. It's a bit late, so now we want to see a flip of 271 as support or a drop down to test the ascending channel. If it flips 271, this could go into another epic MATIC move.
ONE/BTC
Still in a huge descending channel - should eventually break to the upside for a sizable move. But that's a very macro pattern right now. At the moment, I have orders at 37 sats for another potential retest there as support. Not too complicated, likely to leave me behind.
VET/BTC
This broke through descending resistance with decent volume and launched directly from a key support. Really nice move. 50 was the best entry - now I am watching for either a drop back down to 50 or a flip of 60 from resistance to support. The key levels after that are marked. The downtrend here is technically broken, so it "should" continue up. Bitcoin may have something to say about that.
WRX/BTC
I have shared this setup many times and it is finally playing out. As you know, I was accumulating in the daily demand zone shown, waiting for a potential double bottom. The neckline (pink) is finally broken and has candles closing above it on the 4 hour. I want to see a daily close above. If you are not in already, the textbook entry would be a retest of the pink line as support, at 1575. That is AFTER a candle closes above.
ZIL/BTC
This call turned out perfectly as well, much like COTI above. Price retested the top of the trading range, a signal that accumulation was over and then rocketed up to the targets. Beautiful and quite profitable. I exited at both black lines. I am now watching for a retest of 119 as support, if I can get it. Otherwise, a flip of 151 to support would be a sign of continuation. This clearly bottomed in that blue zone.
Rich People Pay The Lowest Tax Rate - Animated
Click on this tweet and watch this chart. It's really incredible and sad to see how the tax rate has been reduced for the rich over time - to the point where their effective rate is lower than that of the poorest people in the United States. This is just another symptom in the systematic destruction of the lower and middle classes of the USA by the wealthy. It used to be the top 10% - then 1%. Now it's the top 1% of the 1% that control the wealth in this country.
France Tests The Digital Euro
Digital currencies are making the slow transition from science fiction dream to actual reality. As stated in this article, it is now a "global" race to launch a central bank currency. We all know that China has been planning this for quite a while, but it appears that the Euro is not far behind.
Cash is dying. Digital is the future.
"Further experiments are set to take place in the coming weeks, Banque de France said, as the global race to launch a central bank digital currency heats up In Banque de France’s experiment on May 14, a blockchain developed by its team was used to settle an issue of digital securities by Société Générale. Covered bonds worth $44 million were issued as security tokens directly registered on a public blockchain."
NGrave Hardware Wallet
This is the hardware wallet that the world needs and it's being sold for the first time today. The blockchain space is about to see some solid innovation with the advent of NGRAVE, a blockchain technology company on a mission to make owning and managing digital assets radically more seamless and secure. To that end, the startup has aligned world leading players behind its cause and has developed a unique and jaw dropping product suite.
NGRAVE’s flagship product – the NGRAVE ZERO – is a completely offline touch screen device that can create a cryptocurrency wallet out of thin air. Even for receiving and signing transactions, the device remains fully “airgapped”, meaning no USB or network connection (e.g. Wifi, 4G, NFC, Bluetooth) is required. Moreover, the secure firmware of the apparatus has earned the highest security certification in the world: EAL7. The ZERO looks “Apple”-esque and, following the same philosophy, has hidden all complexity – including the most advanced contemporary cryptographic protocols – behind a high-end 4 inch touch screen.
They just went on sale for the first time an hour ago - 50% off to the first 300 people that buy them. I ordered mine. Do your research, and if you like it get it while it's hot.
https://www.indiegogo.com/projects/zero-the-most-secure-easy-to-use-crypto-wallet#/
Goldman Sachs Client Call On Bitcoin
It is nice to see that Bitcoin is back on the docket for Goldman Sachs, as they are having an official client call focusing on inflation, gold and Bitcoin. It is hard to predict what the content of the call will be, whether Bitcoin will be painted in a positive or negative light, of if it will be discussed at length or just superficially. What we can glean from this is that there HAS to be interest among their clients and investors for them to even breach the subject - something that have not really been doing in the past few years, after discussing it heavily in 2017 and even setting up a trading desk.
I am leaning very bullish on this news.
Stablecoin Usage Hurts BTC As Payment Method?
This is an interesting thread from Ari Paul about the impact of growing stablecoin usage on the case for crypto as a payment rail. The argument is that it's far easier and more efficient to use a stablecoin for payment, because it lacks the volatility of other crypto assets. If you pay someone in Bitcoin, the value of that payment can change quickly - before you even complete the payment. This is due to the volatility of Bitcoin price. It's hard to argue with this idea, although it is far from proven as of yet.
His conclusion?
Gold + Bitcoin Index From CoinShares
This is really interesting. CoinShares has created an investable index that pairs cryptocurrencies with gold. "Dubbed the CoinShares Gold and Cryptoassets Index (CGCI), the index is designed to provide investors exposure to cryptocurrencies, in a "risk-managed" way. The index comprises of 31.75% cryptocurrency in 5 equally weighted constituents, with the remaining 68.25% consisting of gold. The aim is to create a diversified fund by countering the volatility of cryptocurrencies with gold, a low-risk asset."
While gold bugs like Peter Schiff constantly criticize Bitcoin and Bitcoin maximalists show disdain for gold, the truth is that they should both be a part of a well diversified portfolio. If you believe this and Modern Portfolio Theory (owning uncorrelated assets to reduce risk), then this could be a great investment vehicle. It will be interesting to see how this product is received and how it reacts to global economic uncertainty.
Replicating this fund on your own is not difficult - buy the underlying crypto assets and gold in the same proportion. However, it's easier to buy the fund if you trust the research that went into the composition. I will be digging deeper.
Hedge Funds Are Getting Crushed
13% of hedge funds made money in March and April. Hedge Fund traders are supposed to be the best in the business and the market has been ripping up since the lows. Shouldn't they have successfully shorted the top and then bought the bottom in March?
That rarely happens.
Professional traders have been getting crushed in the market, both on the way down and the way back up. As I have mentioned a number of times, volume has been relatively weak on the market's climb, indicating that there is not much interest. Price is likely rising on Fed buying and stimulus and because there are endless shorts to squeeze - shorts from hedge funds and other traders. If hedge funds cannot navigate this successfully, then retail traders have even less of a chance. That is why I remain sidelined as a trader in the stock market and continue to invest regularly through dollar cost averaging.
Voyager
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This is where I personally invest in Bitcoin on a daily basis. They are a publicly traded company on the Canadian Stock exchange - I trust them implicitly to protect my funds.
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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.