The Wolf Den #66 - PayPal + Venmo, Trades, Farming Yield And More
Bitcoin Thoughts And Analysis
I am bullish at the moment and fully deployed in a long that I have already added to higher than my first entry. Let's see why.
MONTHLY CHART
Same levels as always. We are looking for a monthly close above $9,243 as support or $10,540 as resistance. A close below $9,243 could target lower levels.
MACD is still potentially crossing bullish as discussed before. It will happen if this candle closes green. Descending resistance also is presently being retested successfully as support. Lots to like here.
WEEKLY CHART
Again, little has changed on larger time frames. The big picture trades are still a long above the top blue line or short below the bottom blue line. Since we last spoke, price topped out EXACTLY at the blue resistance - $9,764. At this point, bulls want to see a flip of that line on the weekly.
DAILY CHART
The daily triggered a long position for me when it broke the top black line at $9,552. This was an addition to my position from the bottom black line, so I am heavily deployed on a long. Price is presently trapped between the bottom of the ascending wedge and that line. I still think we will go up, as the key blue descending line was broken on a sizable candle. It may be retested as support at some point, but I am thinking we just saw the dip back to the black line and that could be it. 50 MA is once again support as well.
4-HOUR CHART
Price is consolidating bullishly after a nice move up that broke the descending blue resistance. Some would call this a bull flag, although I don't love it because it does not include the wick at the top. Either way, it's a good thing for bulls, who want to see a strong break up once again. The 50 MA looks likely to make a golden cross of the 200 MA, a bullish indicator although it's a lagging one.
Price has finally flipped the EQ of the channel (equilibrium, center dashed line). That's bullish. It would visit the top of the channel.
The Wolf Of All Streets Podcast Ft. Joe Lallouz
Joe Lallouz, Founder and CEO of Bison Trails, has positioned him and his company at the crossroads between major financial institutions and cryptocurrencies. Bison Trails is bridging the gap between tech, developers, crypto projects, and major financial institutions, which has resulted in him working alongside crypto’s most notable projects including Libra, Tezos, and ETH 2.0. Joe Lallouz and I further discuss what it means to be a pioneer in the crypto space, the incredible pace of DeFi innovation, the imminence of mass adoption, the government's current role in the cryptocurrency space and more.
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Don't forget that we are now on YouTube as well!
Becoming A Full Time Trader
Peter Brandt is a trading legend, regardless of what you think about his awkward and often abrasive interactions with the crypto community. When he speaks about what it takes to be a trader, it's a good idea to pay attention.
I think that his list of things you need to be a full time trade is a good start, but that it is actually an underestimation. Let's go through his points and add a few more.
Trading capital (FROM PROFITS) equal to 2X what you need to make each year to live
All too often I see traders attempting to trade full time without enough cash to support themselves end up trading short term and taking higher risks. This only results in making trading decisions based on the need to derive an income rather than on good trading techniques. Consequently, they end up exiting trades when they should hold or entering trades in the hope of a quick profit. You should never place yourself in the position of relying on emotional decisions as this is a trader’s greatest downfall.
I agree that your bank roll should come largely from trading profits earned as an amateur or part time trader. There's less emotional attachment to money made in the market than money made from hard work, although the value is the same. That said, I think 2X is a very low estimate, and would suggest at least 4X. If you need to make 100K to live and your bankroll is only 200K, that means you need to do 50% on the year just to pay bills and not build your bankroll further. 50% is extremely hard to achieve. In my mind, aiming that high is likely to make someone push harder than necessary on trades. I would suggest AT LEAST 4x what you need, as earning 25% over the year on your entire portfolio is more realistic, but still very difficult.
The best way to set yourself up if you want to trade full time is to follow the golden rules of trading and investing - allocating 70 percent of your capital to a medium to long-term portfolio that will perform year in year out, holding 15 percet in cash allow for flexibility and buying dips, and allocating the remaining 15 percent to short-term trading to generate cash flow. This ensures you are protecting your capital by not subjecting the majority of it to high-risk trades. You can play with the numbers a bit, depending on the market, but this is a good starting point.
A year's worth living expenses saved (separate trading $)
Yes. Conventional wisdom is that everyone should have 3-12 months of money saved in case they lose their job. Those people have predictable and guaranteed income. Traders are likely to have major losing streaks and draw down, and income is nearly impossible to predict. For that reason, they need a much bigger safety blanket than the average person. 1 year is good, 2 years worth would be better. Let's actually make it 3 to be safe.
2 to 3 yrs of trading success
I think this is accurate. The more years of success before going "full time" the better.
Here are a few additional ideas.
Plan To Lose For 1-2 Years
I know this sounds brutal, but it's essential that you plan for the worst if you are going to become a professional. The game is completely different when you forego your other income to trade full time. It's VERY HARD to win consistently, especially when you feel it necessary to be in the market all the time because it is now "your job." Everything changes when you need to live on the money from trading, because you are constantly pulling out funds to pay bills.
The reality is that "full time" trader is a misnomer. It's very hard to work 40+ hours a week on trading - once you are good, you can easily identify trades that you want on the chart, set alarms and walk away. I have found that being a part-time trade with additional streams of income (or even hobbies) is far better both economically and emotionally.
Do you think you have what it takes, based on the ideas above?
Wall Street Goes Technical
Season 7 of "Stranger Things" features the Wall Street Journal capitulating on fundamentals and looking to technical analysis to explain why the market is having trouble continuing further up. Even when writing an article about TA, they put "resistance" in quotes to minimize the idea and state that TA is "akin to reading tea leaves."
But they're using it...
Altcoin Trades
Altcoins have been in an interesting spot of late, with no clear direction overall. We are still seeing large moves from select coins, but the last few days have been primarily red on the Bitcoin pairs. A lot of the setups I have posted either played out well and then dropped, or never triggered at all (which is what we expect). CELR and POLY hit their first targets from Thursday, and AMB (never flipped 163 although it is trying now) and IOTA are both still at the same price as last week. ERD was a monster trade, doing multiple times the entry and WAN has continued up nicely. From a quick glance back, the rest never really triggered, except SC which failed to hold support.
That is why I provide setups and not signals. I am looking ahead at trade ideas that only trigger if certain criteria are met.
I am cautiously optimistic at the moment, as Bitcoin Dominance looks to finally be breaking down. It continues to hold support, but looks ready to fall off a cliff. I want to see a candle finally close convincingly below that ascending line - they keep wicking down and closing above. Dominance down is good for alts.
BITCOIN DOMINANCE
AMB/BTC
The trade I posted on this last week did not trigger, as price never closed a candle above 163 sats. That said, I have readjusted the ascending channel to account for recent price movement and it has become even more perfect. Price is currently attempting to break 163 once again. If it closes a candle above, I will try to enter a retest as support.
CELR/BTC
Another potential trade on CELR. As I said in the intro, price hit the 50% fib which was my first target on this trade. I sold half there, and stopped out of the rest at my entry when price dropped. I have not reentered because I was not watching, but this seems to be finding strong support at a key level - 39 sats. Candle closes below that line would turn my sentiment bearish, but for now this looks likely to make another move up at some point. I will be watching for an entry, especially if 39 hits again, where I now have orders.
CHZ/BTC
I am looking for another trade on CHZ, which is still following the path that I drew before. I made some nice money playing the breakout and selling soon after, because I was expecting the retrace that I drew and a larger move up after. The trade here at this point is waiting for a potential drop (may not happen) into the area of the top of the ascending triangle - 134 sats. I like this because you can exit if candles close below that level at a small loss.
ENJ/BTC
A trade is finally triggering on this pair. I really like this spot, as a test of the ascending black support and a potential break of the descending blue line. For now, my target is simply the pink line.
LINK/BTC
What a beauty. At this point I want to see a close above 48182 and then a retest of that as support. Anything above that ascending black line is beautiful. Key areas are marked and can be used as targets an entries.
WAN/BTC
This still looks great. I am in from the purple zone below still, after breaking the local descending trendline (not shown on this chart). Now WAN has broken the larger trendline and looks to be coming back for a retest as support - that could be a great entry. I would like to see some stronger volume come in if that happens. The lack of volume on the break does give me pause.
Deloitte’s 2020 Global Blockchain Survey
1,500 senior executives were surveyed and 89% said digital assets will be important to their business in the coming years. This is not exchange CEOs talking about the future of blockchain - it's real business leaders each describing the future of their business. 89%. This is extremely bullish. I am surprised that blockchain is even on the radar of 89% of these business leaders, much less that they intend to use it.
You can read the entire survey from Deloitte here:
Stimulus, Round 2
Can you hear that? It's the sound of helicopters revving up their engines, ready to take off and drop some more cash on the American public. Trump has openly backed another round of stimulus checks, which will reportedly be larger than the first round. You can read about who is likely to get money and how much in the article above.
It's hard to predict what this will mean for markets. The first round of $1,200 checks has been tied to increased retail buying of stock on Robinhood. Some have posited that stimulus has been the main driving force in the stock market rise. Would that be the case again? Or do people really need the money now, after additional months of being unemployed? It remains to be seen, but it is likely to infuse a bit more money into the market.
.28 Bitcoin Puts A Holder In The Top 1%
Dan Held recently tweeted that holding .28 Bitcoin puts an individual in the top 1% of the crypto market. Like Luke Martin states above, I find this really surprising. If this is the case, it is an attainable goal, and one that people should aspire to.
Farming Yield - The Future Of DeFi Or The End?
The new crypto craze is farming yield, with some claiming it is I"DeFi Season" instead of "alt season." A proper strategy can elicit 100% annualized interest by both lending and borrowing crypto concurrently on various tokens.
This is NOT something that I intend to pursue on my side - it carries risk and requires an intimate knowledge that I lack on how to actually do it. It's outside of my risk tolerance. That said, if you have the time to learn and understand it, this could be for you.
I will be keeping an eye on it and trying to gain a better understanding of the strategy.
Tony Sheng has laid out a step by step guide for "normies" on how to farm yield.
He has also laid out the risks - perhaps this is even more important!
My Recommended Platforms And Tools
Voyager
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Phemex
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RoundlyX
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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.
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.
Mortgage Delinquencies = Bank Illiquidity
More than 8% of US mortgages are overdue or in foreclosure. For context, by the second quarter of 2008, the share of delinquent mortgages had surged to 4.5%. We are currently at 8%.
While people always comment that "this time is different" because banks have more liquidity and are not out of cash, that may not be true in the very near future. Banks depends on people making timely loan and mortgage payments to remain solvent. These payments are their main source of income, because they are taking the money that people deposit and loaning it back out.
I can't see how this ends well, unless everyone gets back to work and can afford their rent. This looks like a canary in the coal mine for another mortgage and banking crisis.
Legacy Markets
After the success of the APT trade from a week ago (shown below), I am still looking for COVID "wave 2" trades. Novabay fits the bill and is shared in this section.
The market remains ridiculous and irrational. Last night, White House Trade Peter Navarro said that the trade deal with China was dead, sending futures into a major downward spiral. The White House quickly refused the claim and the market went right back up. Insane.
APT (ALPHA PRO TECH)
I have posted one legacy market trade in the past few weeks, which was APT (Alpha Pro Tech) last Tuesday. It is up over 20% from when I posted it, and hit 32% profit last week. Not bad for a stock, especially when the market itself has started trading sideways. I am very bullish on APT still moving forward. At this point, we want to see the fresh ascending support line hold. A test of that line as support could be a nice entry.
Zooming in gives a better picture. It looks like price is bullishly consolidating in a flag. 14.49 looks like a key local horizontal support.
NBY (NOVABAY PHARMACEUTICALS)
This another COVID wave 2 play. I have attached their website below so that you can take a look at what they do, which includes N95 masks and rapid antibody testing. The chart shows a nice move up. Price is in an ascending channel and seems to be bouncing from support. This is NOT a bull flag - those have to be descending. Either way, a move off of support here should target the top of the channel. I also like the 50 MA support here on the daily.
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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.