The Wolf Den #69 - Correlation, RSI Divs, Bitcoin And More
thewolfden.substack.com
This newsletter is sponsored by 2 amazing companies: VOYAGER and PHEMEX.I use Voyager for my spot trading and investing (and to compound interest) and I use Phemex for trading with leverage. Sign up to both with the links above and get some free Bitcoin. I really encourage you to check them both out - you know that I never endorse a product that I do not use!Make sure to use code SCOTT25 after you download the Voyager App to get $25 in free Bitcoin.As a borderless digital asset not controlled by governments or centralized companies, bitcoin’s price should, in theory, travel its own path, independent of other currencies and markets. Crypto’s pioneer asset, however, has seen varied views suggesting correlations to traditional markets, such as stocks, “safe-haven” investments such as gold, or even arguments that bitcoin is not correlated to anything. Available data shows no firm answer, as bitcoin’s correlation seems to change with the wind, while a number of experts have varying thoughts on the matter.There has been much ado about bitcoin's correlation to the stock market and more specifically SPX in recent months. While most assets become temporarily correlated in a global crisis and drop together, bitcoin has continued to be largely uncorrelated outside of a few bad days or weeks. As it stands, bitcoin's historical correlation for the past 10 years (depending on whether you use Pearson or Spearman) rests around .16. Lack of correlation. Correlation is calculated on a scale of 1.0 to -1.0 (with 1.0 meaning two assets are completely correlated and -1.0 meaning they aren’t correlated at all).The highest it has reached during this global pandemic is around .5, defined as "moderate correlation" although this was temporary. Currently the correlation is around .2. Nominal correlation, if any.Given that most people invest for longer-term horizons, it’s really the longer-term correlations that matter most. We want to see the benefits of diversification over the course of our holding period, not across every day/week/month within that holding period. So far, Bitcoin is still uncorrelated to most major assets over longer-term horizons.Trading based on the movement of the stock market is a risky pursuit at best.So is there anything interesting to note about bitcoin's relationship to other assets?Yes, and the answer is not the stock market or gold, but rather the good ol' USD. Bitcoin has had a much stronger INVERSE correlation to the movement of the dollar in the past than it has had an actual correlation to any other asset. This is not directly reflected by the mathematical equation used above, as they fall around -.2 historically, still largely uncorrelated. That said, pulling up a chart of the 2, it is blatantly obvious. The chart is in the newsletter below, I cannot embed it in the intro.The peaks and valleys on this chart could not be more clear to the naked eye. At their best and worst moments, Bitcoin and the dollar have had a gaping chasm between them. I will go into this more below.I, along with many other traders, used to discuss this inverse correlation all of the time in previous years. The idea seems to have lost steam, as the crypto community has the attention span of a brainless gnat and moves from narrative to narrative like Usain Bolt moves from line to line in the 100 meter dash. The fact is, this is still the most solid narrative that we have.I will take a look at DXY today in the newsletter to see what this is telling us moving forward. It is important to note that the US Government at the highest level desires to devalue the dollar. If they are successful at doing so, that "should" be amazing news for our beloved cryptocurrency.KEEP AN EYE ON THE DOLLAR.Altcoins do not look great today, but I do believe that they will do well on larger time frames over the coming months. I discuss this below in the Bitcoin Dominance section. I am still in the positions that I have shared on larger time frames. Most of the trades from last week never really came to fruition, or had a chance at a quick profit before dropping. MOVE YOUR STOPS INTO PROFIT when you have the chance. This saved me on AMB and others recently, where I took a small gain instead of becoming a bag holder. We are in one of those moments where good setups seem to fail more frequently, which is a time to exercise caution. My biggest altcoin holding outside of ETH remains ERD, which is swimming against the tide in the past week, still doing well. Nothing much to see on the chart, because it's really broken all of the lines worth looking at!There are no stock or altcoin trades in this issue today. I spent hours looking for something compelling, and there is just nothing jumping out at me. I DO NOT FORCE TRADES and, even though I know some of you are here for setups, I will not share any if I don't think they are worth taking. I have done that on a few Fridays and the trades have had mixed results. Instead, I am sharing my macro views on the altcoin market, dollar, gold and silver. If you have been here a while, then you know that I have been VERY bullish on silver and gold, both of which have led to epic trades that I have shared. I trade metals over very long time frames.What’s In This Issue?Bitcoin Thoughts and AnalysisBitcoin Dominance Retest And Alt SeasonThe Wolf Of All Streets Podcast Ft. Daniel GouldmanThe Dollar (DXY) And BitcoinRSI And Divergences 101 - The BasicsCheck Your Bias At The DoorMetalsHedge Funds Are Covering ShortsMortgageBee AppFinancial Lessons Learned From Covid-19My Recommended Platforms And ToolsPhemex - The Fastest Growing Derivatives ExchangeVoyager Adds 2FA and COMP
The Wolf Den #69 - Correlation, RSI Divs, Bitcoin And More
The Wolf Den #69 - Correlation, RSI Divs…
The Wolf Den #69 - Correlation, RSI Divs, Bitcoin And More
This newsletter is sponsored by 2 amazing companies: VOYAGER and PHEMEX.I use Voyager for my spot trading and investing (and to compound interest) and I use Phemex for trading with leverage. Sign up to both with the links above and get some free Bitcoin. I really encourage you to check them both out - you know that I never endorse a product that I do not use!Make sure to use code SCOTT25 after you download the Voyager App to get $25 in free Bitcoin.As a borderless digital asset not controlled by governments or centralized companies, bitcoin’s price should, in theory, travel its own path, independent of other currencies and markets. Crypto’s pioneer asset, however, has seen varied views suggesting correlations to traditional markets, such as stocks, “safe-haven” investments such as gold, or even arguments that bitcoin is not correlated to anything. Available data shows no firm answer, as bitcoin’s correlation seems to change with the wind, while a number of experts have varying thoughts on the matter.There has been much ado about bitcoin's correlation to the stock market and more specifically SPX in recent months. While most assets become temporarily correlated in a global crisis and drop together, bitcoin has continued to be largely uncorrelated outside of a few bad days or weeks. As it stands, bitcoin's historical correlation for the past 10 years (depending on whether you use Pearson or Spearman) rests around .16. Lack of correlation. Correlation is calculated on a scale of 1.0 to -1.0 (with 1.0 meaning two assets are completely correlated and -1.0 meaning they aren’t correlated at all).The highest it has reached during this global pandemic is around .5, defined as "moderate correlation" although this was temporary. Currently the correlation is around .2. Nominal correlation, if any.Given that most people invest for longer-term horizons, it’s really the longer-term correlations that matter most. We want to see the benefits of diversification over the course of our holding period, not across every day/week/month within that holding period. So far, Bitcoin is still uncorrelated to most major assets over longer-term horizons.Trading based on the movement of the stock market is a risky pursuit at best.So is there anything interesting to note about bitcoin's relationship to other assets?Yes, and the answer is not the stock market or gold, but rather the good ol' USD. Bitcoin has had a much stronger INVERSE correlation to the movement of the dollar in the past than it has had an actual correlation to any other asset. This is not directly reflected by the mathematical equation used above, as they fall around -.2 historically, still largely uncorrelated. That said, pulling up a chart of the 2, it is blatantly obvious. The chart is in the newsletter below, I cannot embed it in the intro.The peaks and valleys on this chart could not be more clear to the naked eye. At their best and worst moments, Bitcoin and the dollar have had a gaping chasm between them. I will go into this more below.I, along with many other traders, used to discuss this inverse correlation all of the time in previous years. The idea seems to have lost steam, as the crypto community has the attention span of a brainless gnat and moves from narrative to narrative like Usain Bolt moves from line to line in the 100 meter dash. The fact is, this is still the most solid narrative that we have.I will take a look at DXY today in the newsletter to see what this is telling us moving forward. It is important to note that the US Government at the highest level desires to devalue the dollar. If they are successful at doing so, that "should" be amazing news for our beloved cryptocurrency.KEEP AN EYE ON THE DOLLAR.Altcoins do not look great today, but I do believe that they will do well on larger time frames over the coming months. I discuss this below in the Bitcoin Dominance section. I am still in the positions that I have shared on larger time frames. Most of the trades from last week never really came to fruition, or had a chance at a quick profit before dropping. MOVE YOUR STOPS INTO PROFIT when you have the chance. This saved me on AMB and others recently, where I took a small gain instead of becoming a bag holder. We are in one of those moments where good setups seem to fail more frequently, which is a time to exercise caution. My biggest altcoin holding outside of ETH remains ERD, which is swimming against the tide in the past week, still doing well. Nothing much to see on the chart, because it's really broken all of the lines worth looking at!There are no stock or altcoin trades in this issue today. I spent hours looking for something compelling, and there is just nothing jumping out at me. I DO NOT FORCE TRADES and, even though I know some of you are here for setups, I will not share any if I don't think they are worth taking. I have done that on a few Fridays and the trades have had mixed results. Instead, I am sharing my macro views on the altcoin market, dollar, gold and silver. If you have been here a while, then you know that I have been VERY bullish on silver and gold, both of which have led to epic trades that I have shared. I trade metals over very long time frames.What’s In This Issue?Bitcoin Thoughts and AnalysisBitcoin Dominance Retest And Alt SeasonThe Wolf Of All Streets Podcast Ft. Daniel GouldmanThe Dollar (DXY) And BitcoinRSI And Divergences 101 - The BasicsCheck Your Bias At The DoorMetalsHedge Funds Are Covering ShortsMortgageBee AppFinancial Lessons Learned From Covid-19My Recommended Platforms And ToolsPhemex - The Fastest Growing Derivatives ExchangeVoyager Adds 2FA and COMP