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In This Issue:
Measuring The Bottom
Bitcoin Thoughts And Analysis
Legacy Markets
Remember The Rainbow Chart?
Could Arizona Make Bitcoin History?
Celsius Proposes Launching Another Token
Kevin Rose, NFT Legend, Hacked
Measuring The Bottom
When an asset climbs from $0 to $69,000, there will naturally be pullbacks. If Bitcoin is going to eventually reach the $1M mark that we all dream of, there are going to be many more.
Let’s glance at the history of Bitcoin’s corrections.
The steepest correction in Bitcoin's history from an all-time high to a bottom was around 86.9%. This occurred in 2013-2015 when the Bitcoin community was smaller and investors believed the cryptocurrency was "dead" and ”going to 0” due to China's ban and the fall of Mt. Gox. This correction was more severe than current market conditions.
Let’s look at the 5 worst Bitcoin corrections.
November 2013 - January 2015: -86.9%
December 2017 - December 2018: -84.12%
April 2013: - 82.65% (this drop happened in 2 days)
June 2019 - March 2020: -72.26%
April 2021 - June 2021: -55.95%
Along with these corrections, there are 5 others that were not as steep, but were still meaningful: -55%, -49%, -42%, -40%, -38%.
If you'd like to see this data mapped out, you can do so HERE and HERE.
With the history out of the way, let’s measure our “possible bottom” to see how it sizes up. Also, keep in mind that none of these numbers are exact. Different exchanges record different highs and lows, especially the further back you look. From the high of $67,500 in November of 2021 to the possible bottom of $15,800 in November of 2022, Bitcoin dropped -76.59%. If this does turn out to be the bottom, this would rank #4 in Bitcoin’s history of worst corrections. For this correction to take the #3 position, it would need to drop as low as $11,700 to have an -82.66% correction.
Let’s suppose Bitcoin has not yet bottomed. If Bitcoin were to drop down to $11,700 from current levels, it would need to drop -48.84% from its current price. Considering Bitcoin’s corrections and returns have softened over the years, it’s hard to imagine Bitcoin managing to lose half of its current value and out-drop a 2013 correction. How likely is it that $220B (half of the current Bitcoin market capitalization) is wiped from the market?
I’d say unlikely.
For Bitcoin to go an inch lower than the current bottom at $15,800, it would need to drop 31.2% from current levels.
Still a sizeable drop.
Either way, we have to recognize that Bitcoin has dropped 76% in this cycle. This is a substantial correction compared to other crashes… but also better than would be expected with the sheer number of catalysts and the contagion. Bitcoin is becoming more resilient.
The 2013 crash, which ranks #3 and lasted 2 days, was the result of a DDOS attack on Mt. Gox and Bitstamp. It was a horrific example of market manipulation. The #2 crash was the result of the ICO boom along with extreme greed and market saturation. If we are being honest with ourselves, we should feel lucky if Bitcoin does not drop more than it did in 2017. The catalysts for this current correction are far more serious. This proves that Bitcoin is strengthening over time and will probably continue to soften its gains and losses in each cycle. Also, the floor of die-hard believers is only growing, which means it will be increasingly harder to drive down Bitcoin’s price.
Still, I don’t think it is time to get too excited yet. We are only in the first month of the year and we know that corrections will come and that the biggest rallies often come in bear markets. Bitcoin has never been up only, so there’s no reason to fall for that assumption now.
Pain and profit go hand-in-hand. Without one, there wouldn’t be the other. I think it’s reasonable to expect a healthy amount of both this year. It is important to remember that corrections are a normal part of the market and to keep a long-term perspective.
Bitcoin Thoughts And Analysis
Volatility is back. Bitcoin made a new 2023 high yesterday, only to immediately retrace the entire move, as you can see with the huge wick up. That looks like a liquidity grab for shorts, so I would proceed with caution. Still, price has formed a very clear range, so there is little to do unless candles close above or below.
While it may not happen, I am still looking for a correction.
Legacy Markets
Key events:
Earnings for the week include: American Airlines, Blackstone, Comcast, Diageo, Intel, LVMH Moet Hennessy Louis Vuitton, Mastercard, SAP, Southwest Airlines, Visa (Thursday); American Express, Charter Communications, Chevron, HCA Healthcare (Friday)
US fourth-quarter GDP, new home sales, initial jobless claims, Thursday
US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.2% as of 5:46 a.m. New York time
Nasdaq 100 futures rose 0.6%
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 0.5%
The MSCI World index rose 0.2%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0906
The British pound was little changed at $1.2395
The Japanese yen fell 0.1% to 129.76 per dollar
Cryptocurrencies
Bitcoin fell 2.7% to $22,958.51
Ether fell 0.9% to $1,604.61
Bonds
The yield on 10-year Treasuries advanced three basis points to 3.47%
Germany’s 10-year yield advanced two basis points to 2.18%
Britain’s 10-year yield advanced four basis points to 3.28%
Commodities
West Texas Intermediate crude rose 0.9% to $80.91 a barrel
Gold futures fell 0.3% to $1,954.20 an ounce
Remember The Rainbow Chart?
Price prediction models are never easy to rely on, especially in bear markets. However, with the recent rebound in the market, it's worth taking a closer look at some of the available tools. One such tool is the updated version of the Bitcoin Rainbow Chart (V2). This new version includes some significant improvements over the previous version, such as:
A completely new formula that is fitted with data until 2022
The new formula explains every move so far, including wicks that were outside the rainbow in the previous version
The potential trajectory for the Bitcoin price is not as bullish as the previous version due to recent events
The ability to zoom and pan into the chart for a closer look
The option to add more years to the chart for longer-term analysis
According to the Bitcoin Rainbow Chart (V2), Bitcoin has exited the "Fire Sale" category and is now comfortably in the "BUY!" zone. For Bitcoin to approach the "Is this a bubble?" category, the current price would have to reach between $59,000 and $76,000. As of now, Bitcoin is still far from bubble territory. Additionally, Ethereum is currently in the lowest category, "Fire Sale," with 3-4 more price categories to push through before reaching true greed. While it's important to keep in mind that these charts should be used with caution, they can still provide valuable insights into the current market conditions.
Could Arizona Make Bitcoin History?
Bitcoin may have the opportunity to become legal tender in its first US state. Senator Wendy Rogers (R-AZ) has introduced a bill that, if passed, would allow state agencies to accept Bitcoin as payment for debts, taxes, and other financial obligations. The idea was first introduced in January 2022 and has now been revised for a better chance of passing. However, the US Constitution restricts states from creating their own legal tender. With other states also exploring ways to incorporate Bitcoin, there is a growing chance that this bill could pass and make history. Senator Rogers has been vocal about her support for Bitcoin, stating, "Centralized digital money controlled by the central bankers is slavery." It's clear that she understands the potential impact of this legislation.
Celsius Proposes Launching Another Token
It's questionable whether issuing a new token is the most effective way to repay creditors. While it's not uncommon for bankrupt crypto companies to attempt this, it's still a relatively new and risky practice. For a new token to be approved, it would need the support of creditor groups and the approval of the bankruptcy court. The offers for Celsius's assets have reportedly been insufficient, likely due to the company's lack of assets. In 2019, Bitfinex issued LEO tokens to repay creditors and the plan seemed to have been successful. While it's possible that Celsius could prove otherwise, issuing a new token seems like a desperate attempt to make something out of nothing. This feels like scamception - a scam within a scam.
Kevin Rose, NFT Legend, Hacked
Even the most technically savvy founders and investors are susceptible to social engineering and hacks. Kevin Rose is the CEO of proof, a legendary NFT collector and the creator of Moonbirds… and still fell victim to a phishing scheme. Be careful out there!
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.