The Wolf Den #649 - Psychology And Health In A Bear Market
In This Issue:
Psychology And Health In A Bull Market
On-Chain Analysis Of Lido’s stETH & LDO Tokens - IntoTheBlock
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Coinbase Settles For $100M
WTF Is A BONK?
Fed Minutes Released
Celsius Creditors Can’t Catch A Break
Sponsors
Psychology And Health In A Bull Market
A long time ago in a bull market far, far away, I released a newsletter entitled, “Psychology And Health In A Bull Market.”
At the time, Bitcoin was on a remarkable ascent. Price was just shy of breaking $50,000 for the first time and there were no signs of slow down. And in that letter, 471 editions ago, I shared some indispensable advice from Ari Paul, a master of psychology in markets.
Today’s plan is to revisit those old ideas and consider them in context of the market today.
The advice is still strikingly relevant.
Here’s Ari's opening idea that I shared: “Bear markets are brutal, but bull markets can be just as tough in other ways. Seeing random people suddenly 30x their money in scam coins (or maybe quality that you missed) is rough. Trying to keep up with the constant flood of news and opportunity is exhausting.”
The idea holds in a bear market, but instead of seeing people 30x their money in scam coins, we are seeing people lose 99% in scam coins, suffering hacks and exploits and seeing their funds evaporate on insolvent platforms. Both elicit strong emotions. Both are frighteningly rough. Also, the news never stops, it just changes in tone and direction.
Moving on.
“Go all-in mentally. This is an incredible opportunity. But… pace yourself. This is a marathon, not a sprint. Maintain your health, good sleep and dietary habits when possible, and your sanity.
Stay grounded. Hang out with non-crypto people, friends, family etc. Go for a hike, go camping, get away from screens on occasion. Read a book. Meditate. Do things that bring your cortisol and adrenaline levels down.”
If there's ever a time to make an important decision, it's during times of extreme volatility. Expert value investors are skilled at patiently waiting for the right opportunity to aggressively invest. If your strategy calls for taking advantage of the current dip, then commit fully, but remember to pace yourself. There's no way to know how long the bottom will last, so prepare for potential pain and don't rush. Also, if you feel the need for a break, take one. The market will still be here tomorrow and prices may not have changed much. Taking your mind off the bear market may make the downturn feel shorter.
And finally...
“Perhaps most importantly, don’t blow up. It’s amazing how many people end bull runs with less money than they started. The easiest ways to blow up: FOMO'ing into positions after they’ve outperformed with big chunks of your portfolio, leverage, and shorting.
The biggest/hardest question: when to sell? No easy answer to this, unfortunately. A reasonable approach is to very gradually scale out of positions on the way up. For example, you could sell 20% every 2x. Not optimal, but will likely result in a fine outcome with less stress.”
The same rules of leverage and longing apply in bear markets. If you're already down 80%-90%, it’s probably not wise to take on added risk. Bear markets, like bull markets, are a unique minefield. Your top priority is protecting what’s left.
Instead of selling, the question becomes when to buy. A reasonable approach, similar to that in a bull market, is to gradually build positions as the market declines. You could consider adding 20% to your portfolio for every 20% drop, as a low-stress strategy.
While bear markets can evoke strong emotions, the steps taken in both bull and bear markets "bear" a strong resemblance.
See what I did there?
I am hopeful that we will soon emerge from this market downturn and enter a bull market.
Hopefully, the bull market isn't far, far away.
On-Chain Analysis Of Lido’s stETH & LDO Tokens - 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.
On-Chain Analysis Of Lido’s stETH & LDO Tokens
The cryptocurrency industry crossed some important milestones during 2022; the Ethereum merge was among the most notable achievements for the space. Ethereum’s network transition into a proof of stake mechanism received wide adoption, reaching a total of almost 16 million ETH staked. This number nearly doubled since the beginning of 2022, making it more costly to attempt to attack the network while economically aligning validators' incentives with Ethereum's long-term growth.
Source: IntoTheBlock’s stETH Analytics
Lido, Ethereum’s liquid staking protocol, stands as the major staking service provider, managing a total of 29% of the total ETH staked.
In total users have staked 4.8 million ETH through Lido. This currently represents $5.8 billion.
With the upcoming Shanghai Fork, and the ability to withdraw staked ETH, more people are expected to continue to stake. This would increase revenue for the protocol.
Source: IntoTheBlock’s LDO Analytics
More recently LDO, Lido’s governance token, experienced an increase in price, spiking the number of active addresses to a 3 month high.
LDO jumped 40% in the past seven days, with prices reaching $1.4
Moreover, LDO token incentives have been reducing, making the token more attractive, since there has been less inflation
Bitcoin Thoughts And Analysis
DAILY CHART
Bitcoin closed a candle above the blue 50 MA for the first time since the FTX debacle. While this is a nice accomplishment, the 50 MA is flat and there is no clear trend, so this could just be more noise than signal. We want to see major increasing volume and a move away sooner than later. We also want to see that MA curling up.
I searched through the Bitcoin chart and could not find a time that the Bollinger Bands were tighter than they were yesterday - less than 3% apart.
This is a sign of decreased volatility and sideways action, but usually leads to an explosive move in either direction. That said, I asked John Bollinger himself what he thought and this was his response:
The move above the MA is a step in the right direction, but there's not much else to give confluence yet that the trend is changing.
Altcoin Charts
I do NOT share signals in this section. I share setups and charts that I am watching, in an effort to help show you how I view a chart and what criteria would be necessary for me to consider taking a trade. NEVER blindly buy something because it is listed in a newsletter or posted on twitter. You need to have a plan when you enter a trade. These are just ideas, and are almost always “if, then” scenarios. If a certain set of things happen, then I would consider a trade.
ETH/USDT
I wanted to share this chart to show that Ethereum made a more powerful and convincing move through the daily 50 MA than Bitcoin did.
As usual, Ethereum looks a bit stronger than it's older brother. Still, $1284 looms, which has been the key support and resistance since this summer.
Legacy Markets
Stocks were mixed and US equity futures were steady as investors weighed positive news of China's reopening against cautious commentary from the Federal Reserve's latest meeting. In Europe, a report showing that euro-area producer prices fell more than expected in November led to mixed performance among stocks, with declines in insurers offsetting gains in retailers. In Asia, Chinese mainland and Hong Kong equity gauges rose on news that the border with China will gradually reopen. Investors are looking to a private US jobs report and nonfarm payrolls data for clues on the labor market and its implications for monetary policy. The dollar was steady, while Treasuries gave up some of their prior day's gains. Crude oil rose after falling 9.5% in the past two days, and the yen steadied after a 1.2% decline against the dollar on Wednesday.
Key events this week:
US ADP employment change, initial jobless claims, Thursday
China trade, Caixin PMI, Thursday
Eurozone retail sales, CPI, consumer confidence, Friday
Germany factory orders, Friday
US nonfarm payrolls, factory orders, durable goods, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 was little changed as of 10:08 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures fell 0.1%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 0.6%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.0618
The Japanese yen was little changed at 132.59 per dollar
The offshore yuan rose 0.3% to 6.8796 per dollar
The British pound fell 0.2% to $1.2028
Cryptocurrencies
Bitcoin was little changed at $16,809.99
Ether fell 0.2% to $1,249.52
Bonds
The yield on 10-year Treasuries advanced three basis points to 3.71%
Germany’s 10-year yield advanced four basis points to 2.31%
Britain’s 10-year yield advanced two basis points to 3.51%
Commodities
Brent crude rose 2.7% to $79.91 a barrel
Spot gold fell 0.4% to $1,848.06 an ounce
Coinbase Settles For $100M
Coinbase has reached a settlement with the New York State Department of Financial Services (NYDFS) to pay $100 million for inadequate customer background checks. The settlement includes a fine of $50 million for failing to properly check the backgrounds of users opening accounts, and an additional $50 million investment in improving Coinbase's compliance program over the next two years. The NYDFS found that Coinbase's lack of diligence contributed to "fraud, possible money laundering, suspected child sexual abuse material-related activity, and potential narcotics trafficking." The news of the settlement led to a 12% increase in Coinbase's stock price, and the company will continue to work with regulators to improve its security. With FTX out of the picture, Coinbase has a clearer path to success.
WTF Is A BONK?
The Bonk token, a new meme coin rivaling Doge and Shiba, has been a temporary savior for the Solana community. The token was issued via airdrop on December 25 and has seen a 2,220% return for traders over the past week, with a 150% increase in the past 24 hours. The timing of the airdrop was a bit of a gamble, but interest in BONK grew so quickly that its trading volume temporarily surpassed Solana as yield farming became very attractive. Please don't "ape in" (invest) because if I and every other major news outlet are covering the story, the "life-changing" gains are likely over. Remember, 1,000% APR yield never lasts.
Fed Minutes Released
News, analysis and comment from the Financial Times, the worldʼs leading global business publication
It looks like the "soft landing" we were hoping for is not yet in sight, as minutes from the Federal Reserve's December meeting reveal plans to continue tightening monetary policy until there is "substantially more evidence" of easing inflation. In December, the Fed raised its benchmark interest rate by 0.5%, ending the series of intense 0.75% increases not seen since the 1980s. This means the Fed plans to maintain a restrictive policy stance until incoming data shows that inflation is on a sustained downward path toward their 2% target. So, is the Fed more worried about upside inflation risks or breaking something with excessive tightening? Your guess is as good as mine.
Celsius Creditors Can’t Catch A Break
Judge Martin Glenn ruled that the funds deposited in Earn Accounts belong to Celsius
Judge Martin Glenn has ruled that the $4.2 billion in funds in 600,000 earn accounts as of July 10, 2022, belong to Celsius and not the investors. The decision was based on the court's determination that Celsius had "unambiguous Terms of Use" stating that when cryptocurrency assets were deposited in Earn Accounts, they became Celsius's property. I think this is crap. Celsius has not yet submitted a Chapter 11 reorganization plan, which is due by February 15, 2023
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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.
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