The Wolf Den #59 - Bitcoin Dump, Altcoins Holding, Elrond and More
Bitcoin Thoughts And Analysis
Are you not entertained!?
I was just finishing up the newsletter when Bitcoin took an epic drop. Fun. The good news is that I viewed it as likely, due to clear potential bearish divergence on the daily chart. I had a nice long yesterday which I closed when I saw this. Further, when trading we look for areas that whales are likely to inflict the most pain on retail. What better spot than when longs were starting to pile in with hope of price finally making a higher high? They did it a few months ago at almost the same spot and seemingly have done it again... for now. Let's try to figure out whether this is a shakeout or the beginning of a major trip down.
Also, please note that price dropped to $9,300 on most exchanges, while hitting $8,600 on Bitmex. DO NOT TRADE THERE.
I am once again long at $9,300. This is a scalp position, no real expectation and minimal risk.
MONTHLY CHART
It is the second day of the month, so ignore this candle. Just reminding you of the key levels on this timeframe.
WEEKLY CHART
Yikes. Good thing we have plenty of time left in this candle (maybe good?). Price finally breached that supply zone, meaning that the orders there should largely be cleared out. As you can see, price failed to reach the red line which is the only one on the chart that truly matters at this point. That's the line that makes a higher high. I tweeted about the same line in February - rejection there led to a move down to the $3000s.
DAILY CHART
This is the story, in my opinion. The large move up yesterday left a massive potential bear div (still not technically confirmed) on the daily chart. That is an indicator that I cannot ignore, especially with RSI exiting overbought. The potential good news? We could see another hidden bull div, depending on where the daily candle closes. We need to see price make a higher low with RSI making a lower low. It's there at the moment, but will take the close today and then a definitive move on RSI tomorrow to confirm. A hidden bull div here would effectively "cancel" the bear div and signal continuation up is more likely.
4-HOUR CHART
This is where we find a bit more hopium. The 50 MA was almost certain to cross below the 200 MA - a death cross (not my favorite indicator, but always worth noting). It curved up and avoided this and price is currently trading above both. It also stopped at a key resistance to support flip at the pink line. I am watching to see if that holds now. If it does, my bias is towards this being a shakeout and not a true reversal. Further, for now (may not last long) the wick is below all of the recent wicks down, which means that there was quite a bit of liquidity. Let's hope it holds. however unlikely it may seem. I took a small long here at $9,300, I like the risk/reward if it does hold.
Elrond - The Future Of Crypto?
Elrond is a project that I have been watching for ages and have been trading successfully as well. The quick and dirty on one of my favorite projects, Elrond:
State of the art tech: 65k TPS, 5s round time, $0.001 transaction fee
Samsung, Binance & 40 other partners; Samsung blockchain game
Smart Contracts, $BUSD stable coin, DeFi, decentralized identity
$5.15mn raised, $22.5mn market cap, $3mn daily volume
Staking ongoing with 25% APR, will be 29% APR after mainnet
Mainnet launch imminent
Elrond is a blockchain which was built from scratch to be 1,000 times faster and more efficient than existing implementations. It shattered that goal when it achieved 65,000 Transactions Per Second (TPS) in tests, which is a big deal, especially compared to Ethereum’s 15 or Bitcoin’s 7.
Elrond managed to build this with only $5.15m raised from Silicon Valley VCs and big crypto investors like Binance Labs & NGC. It currently has a $22.5m market cap. Price is up 4x since “Black Thursday.” The project launched as an IEO on Binance, where it is traded against 4 liquid pairs.
Binance will issue their $BUSD - the fastest growing stablecoin - on Elrond. Stablecoins are making up the bulk of crypto transactions, driving Ethereum transaction time & costs. 5s transactions with $0.001 make Elrond a very interesting DeFi platform, especially for high-volumes.
Binance will also operate Elrond validators as part of its staking program and is constantly organizing $ERD trading competitions, short term lending programs and is overall very engaged with the project.
Elrond has also made its way onto every Samsung flagship device, both as a cryptocurrency available in the Korean corporation’s blockchain wallet, and as a blockchain mobile game which was released only a few weeks ago.
What’s more impressive about the European startup is that it has a team of PhDs, researchers and engineers which are churning out code at an impressive rate. Over the last 3 months they have made more commits than Ethereum and Cosmos did together, with only a tenth of the man power:
Elrond: 5484 commits from 23 people
Ethereum: 2117 commits from 132 people
Cosmos: 2065 commits from 92 people
*Source: https://coincodecap.com/coins
And that is quality code, audited twice by Trail of Bits, of Facebook, Apple & DARPA fame.
Soon after launching its Genesis Staking program, with 25% APR before mainnet and 29% APR after mainnet (Validators actually earn 36%!), $7.2m in $ERD tokens were locked for staking, which is oversubscribed as of the 24th of May, only 12 days after launching.
There is an incentivized testnet event coming up for Elrond, which will draw attention to its technical accomplishments & get the crypto community excited for 15 uninterrupted operations at the highest TPS possible, as final test before the mainnet.
A state of the art blockchain that does today what Ethereum 2.0 aims to achieve in a few years. Built by developers who clearly outperform their peers. Outstanding marketing & with Binance & Samsung already on board. Generating 25% APR already and soon launching its mainnet. Undervalued is an understatement.
You can check out Elrond’s minimalist wallet at https://wallet.elrond.com, the fully-featured blockchain explorer at https://explorer.elrond.com and their ongoing Genesis Staking program at https://genesis.elrond.com
They have also just announced the Battle of Nodes, which has sent the coin flying today.
As you likely know, I am in ERD from 22 sats, and have been posting about it for many issues. This was a very clear area of support after a flip from resistance. You can see how well this trade has continued to play out for members. It's actually following the path that I drew perfectly.
Don't Buy Resistance And Sell Support
I know that the trades represented on this chart are familiar to all of you. It's an obvious rule in trading - don't buy resistance or sell support. For some reason, it is nearly impossible to follow this rule, because your emotions kick in at these predictable levels. Charts are merely a visualization of human emotion. They consistently capture fear and greed in a way that no other indicator can, which is why you panic at the bottom and sell and fomo at the top and buy.
What you are seeing above is classic sideways price action or "chop." Pro traders, unless they are scalping within a range, generally try to avoid getting "chopped up" in sideways action. The solution is usually to zoom out and look for stronger probability positions on exits from the range.
In the case above, the 2 available strong trades would theoretically be to wait until the resistance line is broken to take a position, or to wait until support fails. I prefer extra confirmation in the form of a retest as support if resistance is broken, or a retest as resistance if support fails. I am aware that I will miss some strong breakouts as a result, but I like the added layer of confirmation.
Here is a recent range bound asset (ZIL) that I posted, waiting for a resistance to support flip of the range at the top. I have labeled this just like the chart above. By buying support above the top of the range, we found the strongest entry. There was no need to find the bottom - this has done a 2X since that retest.
Patience and calm are key in trading - don't let your emotions cause you to buy resistance and sell support. That is what the whales want you to do - don't let your exit be their entry, or your entry be their exit.
The Wolf Of All Streets Podcast Ft. James Todaro
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Large Cap Altcoins - USD And Bitcoin Pairs
I have had a number of people continue to ask me to look at the USD pairs of large cap altcoins. I know that these are very popular for trading, and I dabble in them personally on occasion. Anyone who has been with the newsletter for a while knows that I showed large cap USD pairs many times as a sign that Bitcoin was likely to rise as they were all breaking out of their long term downtrends in January. Here are a few charts of what I am watching now - not all of them because they are all similar. This is analysis, not necessarily trades. You ask, I deliver.
I WROTE THIS SECTION BEFORE BITCOIN DROPPED.
EOS/BTC
EOS has lagged behind other large caps, although it is following a similar pattern. It had a bullish divergence with RSI on the daily (not shown) and is not making higher lows towards descending resistance. At this point, bulls want to see 2911 flipped to support and ultimately a break of the descending black line. Check ETH/BTC for what EOS bulls want to happen.
EOS/USD
This is a cool chart. You can see the same breakout the other majors had from their long term downtrends in January. This was followed by a major move up... then a head and shoulders that I posted. You can see the result of that! Price is currently in an ascending channel, heading towards a key level of resistance at the red line. Breaking this would be a higher high and would end the bear case. Much like ETH and every other large cap.
ETH/BTC
You know by now that I am very bullish on ETH against BTC. I shared the clear bullish divergence with RSI on the daily chart weeks ago, the breakout through resistance and continued rise. Nothing has changed for me. We can currently see that the ETH/BTC pair is consolidating above a key resistance in a low time frame bull flag. Yesterday it looked far more clean, but the idea is still there.
ETH/USD
Much like BTC has to make a higher macro high, ETH is working it's way towards a definitive end to bearishness. This requires a break of $290, making a high time frame higher high. For now, this pair has made every move you could want, climbing the ladder and flipping resistance to support. For now, the ascending line and $222.78 are they supports that bulls want to see hold. You can see the macro breakout of the descending channel in January that I mentioned before.
LTC/BTC
I have shared this pair a number of times in the past few weeks. I entered at around 450 when the bull div confirmed a few weeks ago. Nothing has changed for me since. Price is still climbing towards the descending resistance. The hope is a breakout like ETH and an end to this downtrend. Volume has been generally increasing towards a breakout. At this point, conservative traders will wait for the break of that descending line.
LTC/USD
Still in a huge descending broadening wedge. Price is currently at a key resistance. Flipping $50.742 would be bullish here. Lots of resistance overhead. You can see the red line, supply zone, and descending line. I expect this to continue up to those levels and then we will see. Still, generally optimistic.
XRP/BTC
This has performed the worst of any large cap that I have watched. Every time there is hope, XRP moves coins to exchanges and dumps on holders. That said, there's some hope here that it could move nicely as a lagging participant in this alt season. It was the only large cap not to have a bullish divergence with RSI, and now it is working on confirming one today. If that happens, I expect movement up. That said, it's nothing but resistance above, and anything below 2365 is really pretty awful if you are looking for a significant move.
XRP/USD
Similar to LTC. Huge descending broadening wedge and trading at resistance. Really want to see it above that blue box and ultimately above the descending blue line. If the bull div plays out on the BTC pair, I expect to see this rise if Bitcoin behaves.
Chinese Citizens Can Officially Inherit Crypto
China has officially put into law that citizens can inherit cryptocurrency. This is an important step in the recognition of crypto as a true asset and a further admittance by the Chinese government that crypto is no longer "illegal' or banned. I view this as a large step in the adoption of bitcoin and other cryptocurrencies - fear of what happens to your holdings when you die prevents a lot of people from buying crypto. That fear is gone, at least in China.
“When a natural person dies, the legacy is the personal legal property left by she/he.” Lixin Yang, a professor of Renmin University of China told China Central Television that this means “internet property and virtual currency will be inherited”.
Dovey Wan, founding partner at Primitive Ventures also recently tweeted that Bitcoin users should care more about their Bitcoin private keys, regardless of the new law.
The new inheritance law, which allows China’s citizens to pass on their cryptocurrency and other virtual assets to their heirs, will come into effect on January 1, 2021, according to the report."
Wall Street Wants Your Bitcoin
Wow. I reported recently that Grayscale had purchased 50% of the Ethereum mined since the beginning of the year, and 33% of the Bitcoin mined in the past few months. That was only the tip of the iceberg. They are also buying like crazy over the counter. Only 12,337 Bitcoin have been mined since the halving - and Grayscale has bought 18,910! They are outpacing mining by 50% in their purchases, which is really astounding. They would ONLY do this if there was tremendous demand from the institutional clients.
Wall Street is here and they are buying like mad.
Dollar Sell-Off Beginning?
As of yesterday, investors have sold the dollar and begun buying riskier currencies on optimism about an economic recovery as countries emerge from coronavirus lockdowns. The ICE U.S. Dollar Index, which measures the greenback against a basket of currencies, hit its lowest level since mid-March on Monday, dropping as much as 0.5% before recovering somewhat. Currencies that tend to gain when risk appetite returns rose against the dollar, with the Australian dollar up 1% and British pound 0.3% higher.
Prospects for an economic recovery internationally have improved in recent weeks. Factories and schools are reopening in parts of Europe and Asia. The rebound in oil prices has also boosted petroleum exporting nations such as Russia and Mexico, both of whose currencies have risen strongly against the dollar over the past month. And the European Union proposed a recovery fund that will provide more grants than loans to the nations hit hardest by the coronavirus.
At the height of the stock-market selloff in March, investors sold other currencies and bought the dollar, which is seen as a safer asset due to its prominence in global finance. The dollar has benefited in recent years from higher interest rates and stronger growth than most developed economies. But with rates slashed, investors are increasingly looking to the rest of the world for returns, Mr. Turner said.
Investors see an upside to European growth after the EU proposed borrowing €750 billion ($821.6 billion) from capital markets to aid recovery from coronavirus pandemic—a sign of regional cohesion. The proposal helped send the spread between the Italian and German 10-year government bond yields—seen as an indicator of financial stress—lower. The euro is up 1.5% against the dollar over the past month and traded slightly higher Monday, for $1.111.
The dollar will only continue to sell off if the attempts to open the economy are successful.
Chinese Factories Are Open - With Few Customers
"More and more Chinese factories have reopened for work in the past three months as authorities have eased their once-aggressive coronavirus measures. But now they are facing the dire reality of falling orders from overseas customers. The conundrum can be seen in official and private gauges of China’s factory activity. China’s official manufacturing purchasing managers index and a closely watched private survey, the Caixin China manufacturing purchasing managers index, both showed factory activity expanding in May.
For the official factory survey, the reading of 50.6 marked the third straight month of expansion, while the Caixin survey showed factory activity jumping to a four-month high of 50.7 in May, from 49.4 in April. For both indexes, the 50 mark separates expansion from contraction. While China’s official PMI, released by the National Bureau of Statistics on Sunday, showed continued expansion, the magnitude of the gains fell for a second straight month, and a subindex to measure production slipped to 53.2 from 53.7 in April—pointing to sluggish demand. Worryingly, the new-export-orders subindex, a gauge of external demand, continued to remain deep in contractionary territory, though it improved to 35.3 in May, from 33.5 in April."
I have talked about this endlessly, but this is a rare global economic crisis where there is both a supply and demand problem. Factories reopening is nearly meaningless if they have no customers to sell and ship their goods to. For a true economic recovery, we need to see demand return. For demand return, we need economies to open and remain open, which is a huge challenge considering most are expecting a second wave of the virus.
The next article speaks to that...
Congressional Budget Office - 10 Years To Recover
10 years. The Congressional Budget Office expects that GDP will continue to contract until 2030. So much for a "V Shaped Recovery." Regardless of what the stock market does, the real economy is going to continue to suffer for a long time. Even the government believes so.
Altcoins
I once again find myself hesitant to share many alt setups, because Bitcoin made a major move yesterday and it's hard to predict what will happen if it moves again. Alts are very risky.
That said, we have had some MONSTER trades here lately, a few of which we literally traded on perfect entries to the sat. ERD, ALGO , STORM and ZIL have all been incredible in that regard and the VET trade from last Tuesday has blown up too. ZIL has given multiple entries and has doubled in price since I entered.
There have been quite a few setups that did not play out as well. That said, besides WRX (which I still like and am in, but the double bottom failed), none of those really triggered. So no harm no foul. You should not be just buying coins that are listed - we wait for specific criteria to be met before entering - candle closes above certain lines, resistance to support flips etc. That's why I watch a lot of coins and set alarms. You never know which one will give you the entry that you desire. Most setups that I am watching never meet the criteria to enter.
I WROTE ALL OF THIS BEFORE THE BITCOIN DROP!
BAND/BTC
BAND/BTC
BAND looks to have formed a little bull flag which it is currently breaking out of. I am in, but at this point one should probably look for a retest of the flag as support. That's the safest entry, but up to you. It may not come. Target is shown based on the length of the flagpole.
ENG/BTC
Nothing has changed on this setup. I am still in this and looking for a strong move through resistance. I am a bit disappointed that it did not follow through on the weekly, but my entry is still in slight profit. Price is currently back at horizontal support, so there's good risk/reward to a position here.
REN/BTC
I shared this on Friday and said that I was interested in the demand zone shown, around the pink line. I have filled my orders here and will put my stop comfortably below that zone. I am looking to target the top of the ascending channel, but am ready to exit quickly if Bitcoin moves.
TRX/BTC
I have been in this for weeks and nothing has changed. Still waiting for a clean break of the descending resistance. I am not in love with all of the wick that have penetrated it, but I see no reason to exit this position as of yet. A clean break would be a safer entry, especially on a retest as support.
WRX/BTC
I added to this position - maybe I am a glutton for punishment after the failed double bottom setup that I posted. Now we have potential tweezer bottoms on the daily and a potential bullish engulfing daily candle. More important? We now have a massive potential bullish divergence with RSI coming out of oversold. Conservative traders will wait for the candle close to confirm.
Phemex Adding More Spot Trading Pairs
What's your opinion? Vote now: Bitcoin Cash (BCH), Cardano (ADA), Binance Co
The fine folks at Phemex are looking to add more spot trading pairs to the exchange and have asked me to help solicit feedback. If you have time, please click on the poll above and fill it out so that we can help them decide which coins to add!
Remember, they have recently added NO FEE spot trading for a very low monthly subscription. Crazy deal.
If you are not already trading on Phemex, you can sign up HERE.
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.