The Wolf Den #61 - Sideways Bitcoin, Trades, Hertz And More
Bitcoin Thoughts And Analysis
There is almost nothing to say about Bitcoin or the chart at the moment. Nothing has changed from previous analysis and price is sideways, trading in a tight range. Boring coin, but unlikely to remain that way for long. I am currently long from $9,400. The trade is discussed in the "4-Hour Chart" section below.
MONTHLY CHART
Nothing to see here. We already discussed the monthly close from May, which managed to break resistance. June's candle has tested that level, $9,342, as support. Call me in 21 days or so to see if it held!
This is interesting. It does appear that price is working on a monthly breakout of descending resistance. More importantly, MACD looks like it could be crossing bullish this month. You can see in the image below that a cross is imminent (depends on the price action this month) and that the histogram at the bottom has reached the midline. I will be watching this closely.
WEEKLY CHART
Mixed messages. This chart can be read either way depending on your bias. We have seen 4 weekly candles wick into the supply zone and get rejected. That said, the last weekly candle cleared the top of the zone, implying that the supply there has been eliminated and the runway is clear of old asks if bulls decide to make a push. It's never ideal to see so many candles with long upper wicks, especially into resistance. The last 6 weekly candles have all had shadows of various size on top, an indication that there is a ton of selling in this area. Bears are really holding that zone, so it will take real conviction to finally clear that red line that signals a higher high.
DAILY CHART
A clear ascending wedge has formed, which is technically more bearish than bullish. That said, BTC has smashed more ascending wedges at the top of moves than I care to remember. The more important thing to watch is that ascending support in general. Bulls want to see that line hold. The 50 MA is screaming up below it, so if it continues up, a move to the bottom of the wedge and the blue 50MA together would be a nice potential confluence of support. I STILL have orders in that blue zone (potential bullish breaker) and at $7,777 if price continues down.
4-HOUR CHART
I closed my long from last week ($9,300) when price broke down from the black support on the 4-Hour that I discussed at the time. I then opened another long at the 200 MA which I am currently still in. Entries are shown with the blue arrows, while the exit is shown in red. I have been having fun trading with MAs on the 4-hour, not something that I have done much of in quite a while. As I often say, how you identify trades is nearly meaningless - managing the risk is what matters.
At the moment, price is finding support on the 50 MA, but it is being tested over and over again. Bulls wants to see a clear break above, leaving it in the dust.
HOURLY CHART
This is why we can't have nice things. This is also why trading Bitcoin on small time frames with high leverage is dangerous. Price is trading in a tight sideways range. Smart traders generally look to long a breakout of the top and retest as support, or short a breakdown of the bottom with a retest as resistance. Bitcoin did both in a single hourly candle, destroying leveraged traders above and below the range in a matter of minutes. Neither move offered a close above or below, so there was no "retest" to be found for those smart traders.
The 50 MA is completing a golden cross, notably right below price which makes it more meaningful than usual. When price is actually touching the MAs at the cross, you expect movement up. Price is still struggling with the EQ (mid line) of the channel. Still, best to wait until there's clear direction. This is dead sideways and a no trade zone for me if I was not already in.
India's Citizens Are Betting Big On Bitcoin
You would think that more people would be talking about the fact that the second biggest country in the world by population was buying up crypto like there was no tomorrow. Surprisingly, I have not seen this widely reported. You would also think that they would be talking about the fact that this is occurring during a global economic crisis - the very time when crypto maximalists want to see a marked increase in demand. This is massive for the crypto space and is something that we should all be watching with baited breath.
The Wolf Of All Streets Podcast Ft. Alex Saunders
Alex Saunders, Host of Popular YouTube Channel Nugget's News has a keen eye for markets around the world. His educational platform has reached millions of views because of his ability to think years ahead in the realms of real estate, cryptocurrencies, technology and banking. Alex and I discuss disrupting the fed machine, leaving banks in the dust, Bitcoin's potential multi-trillion-dollar market cap and much more.
Bitcoin And The Byzantine Generals Problem
Written By Adam Tarlowski:
We may all be proponents of Bitcoin for a number of reasons and there is a good chance your grandmother or jealous friend said it can't be trusted. Share with them this lesser-known aspect of Bitcoin and the Blockchain and their relation to the Byzantine General Problem. The Byzantine Generals Problem is a thought experiment rooted in the idea that a number of generals and their armies surrounding an enemy city need to agree when to attack. Separated by distance and lack of cellphones, they need consensus to stage a successful attack. Messages can be sent from general to general but an overlying fear exists that the messages could be intercepted, delayed, or tampered by the enemy. To win the battle, trusted consensus must be met amongst the generals.
History has provided us with a number of clever ways to verify the truth, including but not limited to signatures, official seals, blue social media checkmarks, security strips, trusted friends, secret handshakes, serial numbers, and background checks. These tactics have continued to evolve as bad actors within and outside the network have strived to undermine the system for their advantage. The recent development of bitcoin and the blockchain is the way in which a group of skeptical generals can reliably send each other messages to coordinate a successful attack when they may have never met before.
For our purposes, it is imperative for you and me that the Bitcoin we transact with isn't manipulated just like the generals must know their messages must remain untouched. Satoshi Nakamoto's decision to have the blockchain function legitimately through Proof-of-Work solves this problem with math, encryption, and computing power rather than outside third parties assigning blue checkmarks or secret handshakes. In the words of Satoshi in the original white paper, the creator of bitcoin, the transactions are “computationally impractical for an attacker to change if honest nodes control a majority of CPU power.” In other words, the more people involved in the system, in theory, the more trusted the network of transactions. The official white paper fully explains this, the link is below (it is incredibly dense). Satoshi laid all his cards on the tables and his work may stand as today's closest system to solving the Byzantine Generals Problem in the world of finance. So convincing your skeptical friend may just make the network that much stronger.
Bitcoin’s Original White Paper: https://bitcoin.org/bitcoin.pdf
Hertz And A Lesson For New Traders
Carl Icahn sold the dead bottom of Hertz. He was the company's biggest investor, adding to the position on the way up and making huge bets that he could help the company to grow. This was before the global economic meltdown. He ultimately dumped roughly 1.88B into the company and sold at a remarkable 1.8B loss, only managing to pull 40M out of the position when he liquidated.
Then Hertz immediately went up 800%, immediately after filling bankruptcy.
Truly remarkable lesson - trading can humble anyone and everyone has bought the top or sold the bottom. It also teaches us that markets can be completely irrational - at the time, people praised him for his ability to cut a loser and salvage the last bit of investment that he had left.
Adding to the irony is that many of the major benefactors of this massive move were retail traders on Robinhood, with zero knowledge of trading or investing strategy. They merely bought the stock because it was "insanely cheap" and watched it perform like XRP in 2018.
Do you think the majority of the 73,000 Robinhood accounts that have been buying Hertz know about it’s significant debt load, that Fitch put it on Ratings Watch Negative, that Moody’s downgraded it to Outlook Negative? I don’t think so. They got lucky.
Just because you did a 7x on Hertz does not make you smarter than Carl Icahn.
Here's the lesson.
Retail stock traders are getting really cocky. Crypto Twitter has turned to Stock Twitter. Everybody is a genius in a bull market. It’s amazing to watch people who have never bought a stock in their lives before last month opine on market movement and the underlying factors driving price as if they are professional pundits. This never ends well.
Even newly minted genius Robinhood traders need to use a stop loss.
Don’t be a jackass because you got lucky in an irrational bull run during a global economic meltdown. If you managed to 7x your portfolio going all in on a bankrupt car rental company in a week then you are lucky, not skilled - which is amazing. I LOVE to see it. Retail deserves their piece of the pie.
I hope you learned something from trading altcoins a few years back. TAKE SOME PROFIT! We have all seen assets do a 10x and retrace beyond where they started. This happens with stocks as well.
If you’re crushing it, take some profit, manage your risk. Don’t give it all back.
Dave Portnoy's video (which is half sarcastic) displays EXACTLY what I am talking about. These are the sort of things you see at the top - not the bottom.
Altcoin Trades
I am not seeing many setups that are jumping off the screen, beyond what I have already shared over the past couple of newsletters. Here are a few that I am actively trading or watching.
ENJ/BTC
I am a bit iffy on this one, but I did post it last week and it has basically done what I was looking for - hold the black support line at 2077. You can also tell that it's consolidating bullishly, regardless of how you draw the lines I did not draw them, but it's either a wedge or pennant). Volume has decreased daily while this has happened, which is what you want to see before volume returns on a breakout. I am NOT in this, but I can see the argument for taking a position and I may do so.
IOTA/BTC
This looks good for the moment. It found support on the black horizontal line, as well as the daily 200 MA. Both very good signs, as there is confluence of support and volume is rising on the move away. Fibonacci levels line up well with support and resistance in this case, and can be used as targets and for placing stops, depending on your position size and risk tolerance.
TCT/BTC
This has massive potential. Price has clearly broken the descending resistance, indicating a likely reversal and that the bottom is in. Further, price has retested that line successfully as support on a number of daily candles. All of that said, the 50% retracement level is proving to be strong resistance, so I would really love to see this holding above 97 sats if I was not already in.
You can also see a nice and sustained increase in volume over the past week. Fibs can be used as targets. Stop losses below the descending line.
TOMO/BTC
Rhymes with FOMO. Seeing a lot of chatter on Twitter and the chart looks ready. Price is presently breaking the key green resistance line, which we want to see flipped to support. It was rejected here yesterday, so we still need to be cautious and make sure we are not buying resistance. That said, zooming into the 4 hour shows that price has broken the green line and has retested it as support already. When you choose to enter is based on your own risk tolerance and how conservative you are. I am already in.
I love the breakout from the descending white line and the perfect retest as support (circled).
As tends to happen, the Fibonacci levels line up well with the general areas that I would draw resistance lines. You can use these as targets.
If price drops, I will be watching this demand zone. For now, my stops are just below 450, based on today's lows before the breakout.
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Diamonds - A Lesson In Supply And Demand
The coronavirus pandemic has devastated the diamond world.
Obviously! Further evidence of the disconnect between markets and economy. From the article: "
This is a crazy story and a perfect example of how the global pandemic is affecting multiple markets. The five biggest producers of diamonds are sitting on excess inventories worth about $3.5 billion, diamonds that need to be stored and protected until demand returns. It's an interesting article on the inner working of the industry, but more just an illustration of the true state of the world's economy and the likelihood that true economic recovery will take a very long time.
The United States Is In A Recession
Obviously! Further evidence of the disconnect between markets and economy. From the article: "The National Bureau of Economic Research said Monday the U.S. economy peaked in February, ending the longest expansion in U.S. history at 128 months, or about 10½ years.
In truth, the announcement codifies the painfully obvious. States began shutting down nonessential businesses in mid-March to contain the spread of the coronavirus, halting about 30% of economic activity and putting tens of millions of Americans out of work.
The NBER called the recession just over three months after it began, the fastest such determination since the 1980 recession and far shorter than the typical nine months to a year, says Gregory Daco, chief U.S. economist of Oxford Economics."
Nothing groundbreaking here - we all could see the writing on the wall. It's nice to finally see it reported as "official."
Did The United States REALLY Add 2.5M Jobs In May?
We all know that the United States did not REALLY add 2.5M jobs in May. Each week, unemployment numbers are reported on Thursday morning. In May, over 10M people filed for unemployment, 2M last week alone. This implies that 12.5M people gained other jobs to give a cumulative 2.5 M net gain. Nobody is buying that. You can find a ton of articles explaining why the numbers are misleading. Have at it!
My Recommended Platforms And Tools
Voyager
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RoundlyX
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.
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TexasWest Capital
This is where I spend my days teaching and learning! Our Discord group is a one stop shop for everything you need to learn to trade and control your emotions. Feel free to DM me on Twitter or respond to this email for questions.
Choice IRA by Kingdom Trust
Self-Directed IRA for Americans - allows you to invest in Bitcoin and any other asset for your retirement, with all of the tax benefits of a normal IRA.
Efani
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.
Ternio Blockcard
A new crypto rewards debit card that I have been testing and loving.
BlockFi
BlockFI is where I personally store part of my long holdings. They offer up to 8.6% annually, compounding, depending on the asset (BTC, ETH or GUSD), which is much better than any legacy savings account or investment.
Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
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.