The Wolf Den #654 - Bitcoin's Million-Dollar Question
Welcome to The Wolf Den! This is where I share the news, my ideas about the market, technical analysis, education and my random musings. The newsletter is released every weekday and is completely FREE.
THIS NEWSLETTER IS SPONSORED BY MEXC!
Sign up using my link to MEXC and receive:
* Up to a $9,100 sign up bonus 🔥
* Available for US users 🔥
* 10% cashback on ALL trading fees 🔥
* 0 fees on ALL spot/futures maker orders 🔥
In This Issue:
Bitcoin's Million-Dollar Question
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
FTX Finds $5 Billion?!
JP Morgan Is Full Of Shit
Crypto.com To Delist USDT In Canada
Huge Livestream Today
Bitcoin's Million-Dollar Question
A popular thought experiment concerning Bitcoin's price goes as follows: what is more likely, Bitcoin going to $0 or $1 million? While this may seem like an outrageous question that you would never ask about any other asset, it is a valid one to consider when it comes to Bitcoin due to its mix of speculation, volatility, uniqueness, and polarization.
Crypto enthusiasts love to consider extremes.
When breaking down the question, there are two main questions at hand: can Bitcoin go to zero and can Bitcoin go to $1 million? While searching for answers to these questions, one can find a plethora of opinions online.
The best possible answer found for the question of "can Bitcoin go to zero?" was from The Economist. How could it happen? "In five words, if everyone stopped using it." This answer is in line with Occam's Razor and avoids the traps of other popular answers that are difficult to defend. In the end, the free market always decides the price of an asset.
A study conducted by two Yale economists in 2018 found that Bitcoin had a 0.4% chance of going to zero. The study, published in a report titled ‘Risks and Returns of Cryptocurrency,’ relied on Bitcoin's historic returns to calculate its risk-neutral disaster probability.
Regarding the question of whether Bitcoin can reach $1 million, opinions vary and often revolve around concepts such as yield curve control, doom loops, hyperinflation, the fall of the EU, the end of fiat, underlying technology, and a better gold. However, it should be noted that both $0 and $1 million are very unlikely outcomes. A price near $0 requires a 99.999% decrease from the current value, while $1 million would require a 5,604.51% increase from current prices.
So how should we actually consider this question?
In Bitcoin's 14 years of existence, its price has only trended upwards. While this doesn't guarantee $1 million or even $100,000, it does suggest that Bitcoin has the potential to continue trending upward. It is also worth considering the question of whether fiat currency is more likely to trend towards zero or success, and whether Bitcoin is more likely to be replaced or remain the only store of value in the crypto space.
With that in mind, instead of asking if $0 or $1M Bitcoin is more likely, a more practical question to ask would be: is it more likely that Bitcoin trends toward $0 or $1 million? By asking this question, we eliminate the need to reach the extremes and can be more practical in our approach.
I think we all agree on the directionality, it is only the final target and time frame that are up for debate.
Bitcoin is trending slowly towards a million.
Bitcoin Thoughts And Analysis
WEEKLY CHART
Bitcoin continues it's tear, rising rapidly through key levels.
$17,592, continues to be a key level in my mind, which is being tested on the weekly for the second time since the FTX crash. Price is currently above that level and also at the highs of the weekly candle from 4 weeks ago where price attempted the last break of resistance.
The one glaring issue on this chart is the death cross between the 50 EMA and 200 EMA, blue crossing down red. But crosses like this tend to be lagging indicators, and most people using simple MAs now and not EMAs.
MACD on the bottom of the chart continues to be bullish, which I have been pointing out occasionally since it crossed up bullish in August. The histogram on top remains on the top half, and both MAs are rising.
My bias is still that the bottom is in, or close. FTX ruined things, but now we are back to the pre-FTX range. Incredible resilience after the worst event in industry history.
The bullish divergence with oversold weekly RSI remains valid, and RSI looks very likely to confirm the breakout through descending resistance.
Now we have to watch for hidden bearish divergence, as RSI approaches a new local high without price doing the same. We will either need to see price cool a bit and RSI avoid the higher high, or for price to break above the 21K area to avoid this.
DAILY CHART
Bitcoin is on a serious run. There are exchanges where it has 9 green candles in a row (not Bitstamp shown), which is the most since 2020.
RSI is now overbought, which can remain the case for a very long time on the daily chart. This is the power zone, but we need to be cautious and look for bearish divergence to signal when the run may end.
Descending resistance and the 200 MA both loom ahead as resistance and $18,157 is a tough nut to crack. This is the second attempt at that line, which is currently still holding as resistance.
Ultimately, we want to see price break the descending blue line.
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
Ethereum continues to lead. As you can see, it is already testing the 200 MA, which was the target of the previous ideas I posted. Bitcoin is still quite far from the same move. ETH is attempting to push through now. If successful, this sets up a move to the red supply zone around $1750.
Impressive.
NEAR/USDT
I am starting to scan altcoin charts and set alarms. As I posted on Twitter, NEAR made a strong move through the 50 MA and the 1.54 resistance, which was in the same spot. It has retested both a number of times as support.
Now it is approaching the "final boss," the descending blue line. I would NOT personally buy this now. It's overbought and at key resistance. I would be looking for a pull back and then a move to break that line, which would be my signal that the downtrend is ending. Hitting the 200 MA would be a 2x from here, not a bad target if this continues to move.
Legacy Markets
Stock futures were whipsawed as inflation data disappointed some traders who were hoping for a bigger deceleration that could allow the Federal Reserve to slow its pace of rate hikes and prevent a harsher economic downturn. According to a Labor Department report Thursday, the Consumer Price Index (CPI) rose 0.3% last month and was up 5.7% from a year earlier, which matched the median estimates in a Bloomberg survey of economists. American Airlines Group Inc. said fourth-quarter profit and revenue exceeded expectations, helped by robust holiday travel demand. Twitter Inc.’s Singapore office workers were told to empty out their desks and vacate the premises as Elon Musk continues to pare expenses around the globe.
Key events this week:
US CPI, initial jobless claims, Thursday
St Louis Fed President James Bullard at Wisconsin Bankers Association virtual event, Thursday
Richmond Fed President Thomas Barkin speaks at VBA/VA Chamber, Thursday
China trade, Friday
US University of Michigan consumer sentiment, Friday
Citigroup, JPMorgan, Wells Fargo report earnings, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 8:42 a.m. New York time
Nasdaq 100 futures fell 0.3%
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 0.6%
The MSCI World index rose 0.4%
Currencies
The Bloomberg Dollar Spot Index fell 0.5%
The euro rose 0.3% to $1.0784
The British pound rose 0.3% to $1.2184
The Japanese yen rose 1.8% to 130.00 per dollar
Cryptocurrencies
Bitcoin rose 3.2% to $18,121.5
Ether rose 3.6% to $1,391.23
Bonds
The yield on 10-year Treasuries declined three basis points to 3.51%
Germany’s 10-year yield declined five basis points to 2.16%
Britain’s 10-year yield declined seven basis points to 3.34%
Commodities
West Texas Intermediate crude rose 1.3% to $78.38 a barrel
Gold futures rose 1% to $1,897.10 an ounce
FTX Finds $5 Billion?!
Coincidentally finding $5 billion has to be the 8th wonder of the world, unless there's more to this story than meets the eye. For the $5 billion to magically show up, it suggests that the money was probably embezzled out of the FTX system and now conveniently brought back. If you recall, back in November of last year, Sam did offer up to $5 billion to buy Twitter equity (some sources say he had $15 billion), so maybe that's our explanation. Perhaps, this is an attempt to find some money to buy a reduced sentence or favorability with the court. At this point, priority one is returning funds and killing the contagion; everything else is secondary.
If this is true, it would be great for creditors, customers, and contagion. It's currently unknown how much creditors are owed, but the number is said to be between $1 billion and $10 billion. As for the details on the money, this is what we know, “we have located over $5 billion of cash, liquid cryptocurrency, and liquid investment securities measured at petition date value. [It] just does not ascribe any value to holdings of dozens of illiquid cryptocurrency tokens, where our holdings are so large relative to the total supply that our positions cannot be sold without substantially affecting the market for the token.”
JP Morgan Is Full Of Shit
Three days ago, Jamie Dimon, the CEO of JP Morgan, criticized Bitcoin as a "decentralized Ponzi scheme" at a conference. However, just 24 hours later, JP Morgan agreed to pay a $13 billion settlement with the U.S. government to resolve charges related to the housing crisis of 2008. This settlement marks the largest deal between the government and a single company. The irony of Dimon's statements and the company's actions is notable.
From a journalistic perspective, it is intriguing to observe the CEO of a major bank criticizing Bitcoin and then having his company explore and offer crypto as an investment. Bitcoin is forcing the hand of banks, whether they like it or not, and causing confusion among them.
Crypto.com To Delist USDT In Canada
Starting on January 31st, Tether will be delisted and suspended on Crypto.com for Canadian customers. There will be no support for trading, deposits, or withdrawals, so if this applies to you, it is important to take action. The reasoning behind this decision is not entirely clear, but this is what we know:
"Crypto.com has delisted USDT for users in Canada in accordance with instructions from the Ontario Securities Commission (OSC) as part of our pre-registration undertaking for a restricted dealer license. As a result of this ongoing work, the CSA is of the view that stablecoins, or stablecoin arrangements, may constitute securities and/or derivatives."
Huge Livestream Today
Want to know where the best investors are putting their money in 2023? I've got you covered, at 9:30 AM EST with Mark Yusko, Bill Barhydt and Lou Kerner.
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.
IF YOU HAVE ANY ISSUE WITH THE NEWSLETTER OR YOUR SUBSCRIPTION, PLEASE CONTACT: PREMIUMSUPPORT@GETREVUE.CO