The Wolf Den #86 - Plan Your Losses, Trades And More
Bollinger Bands - The Basics
I rarely use indicators anymore, outside of checking RSI for divergences. That is not an indictment of indicators or a criticism of any sort - they have just fallen temporary out of my trading strategy.
That said, one of my favorite indicators are the famous bands from one John Bollinger (who I love interacting with on Twitter). The above video is a very basic but useful guide on how to approach trading with this indicator. Instead of writing out a full strategy, guide, it seems simpler to just let you watch the video.
Have at it!
Inflation 101
By Sahil Bloom:
Given all of the money printing that has taken place over the last several months, you have undoubtedly heard the term "inflation" thrown around a lot. But what is inflation and how does it work? Here's Inflation 101!
First, a few definitions. Inflation is a measure of the rate of increase of the price of a basket of selected goods and services. It is typically expressed as a % and serves as an indicator of the change in "purchasing power" (i.e. what your money can buy) of a currency.
The Consumer Price Index (CPI) and Wholesale Price Index (WPI) are the most common indexes for measuring inflation. While typically discussed on an economy-wide basis, we may see inflation in some areas of the economy (e.g. housing) and deflation (price declines) in others.
In very simple terms, inflation occurs when there is too much money chasing too few goods and services. In slightly more technical terms, inflation occurs when money supply growth outpaces economic growth. To illustrate how this works, let's use a simple story.
Imagine a primitive island society with 10 inhabitants. On this island, they use rare seashells as currency. There are only 1,000 seashells on the island. The islanders use the seashells to buy food, building materials for their homes, etc. Prices of these goods are stable.
A large storm, Hurricane FEDerico (sorry!), sweeps through the region. In the aftermath, the islanders see that another 1,000 of the rare seashells have washed up onshore. There are now 2,000 units of the currency, but the same amount of goods. What happens next?
So what we have is a 100% increase in money supply and no increase in the supply of goods. Now there is more money chasing the same amount of goods, so sellers of the goods raise their prices. Simple supply and demand. This is inflation in action.
The impact of this differs across the two types of islanders. Savers, who had stored seashells for later use, are punished as each stored seashell has become less valuable in its ability to purchase goods. Asset Holders rejoice as the value of their assets appreciates.
It doesn't sound so great, so why is maintaining steady, positive inflation a goal of central banks worldwide? Inflation incentivizes spending by disincentivizing saving. Central banks believe spending drives growth. So they seek inflation: Inflation Spending Growth
This Keynesian belief (more on this later), it should be said, is contested. Given the rapid increase in money printing in recent months, these debates have taken center stage. It is important for everyone to understand the basics.
This was a (very simple) primer on inflation. It is not intended to be exhaustive - there are certainly nuances to much of this. I plan to do threads on the basics of monetary policy to build upon this foundation. That was Inflation 101! I hope you found it useful.
Banks Begging for More Crypto Clarity
It has only been 3 weeks since the OCC (Office of Comptroller) gave the green light to American Banks to custody crypto on behalf of their clients. Now major banks are calling for more crypto clarity than they have received. It was roughly this time last year that major banks were not allowing their clients to deposit their own money onto a crypto exchange. Kraken, a top 5 crypto exchange reported in 2019 it felt, “shunned after JPMorgan Chase and Bank of America Corp closed the exchange's payroll account on short notice.” Now Kraken is welcomed by just about every major bank. Adoption is happening.
Ironically, many banks considered crypto too risky to touch in 2019, but are now claiming that adopting cryptocurrency technology is a “necessary risk.” This comment came from Steven Van Wyk, the head of technology at the U.S.’s 7th largest bank. So here we are - this time around it is the banks begging for help at the mercy of the OCC. What is even better is the fact that the OCC is headed by Brian P. Brooks, the former Chief Legal Officer of Coinbase. The weekly news in this area is almost becoming a reality show and crypto heads are loving it.
Yam Yielders Beware!
DeFi traders pour millions into a one-day-old project just to get YAM meme coins.
In an overly complicated DeFi “pump and dump fashion,” YAM tokens sprouted as an experimental project amassing a multi-million-dollar market cap overnight. Yield Farmers jumped on board without hesitation to stake this coin, which was supposed to target just 1 USD. At the time of writing this, (8/12/20) the tokens market cap sits just over 11 million dollars which CoinMarketCap has only been tracking for one day. If 11 million dollars sounds like a lot for a total market cap, 400 million was deposited into YAM’s smart contracts within 24 hours of its launch.
Projects like this highlight the excitement around DeFi, but also showcase the absurdity and risks involved. Yam Finance, the twitter page responsible for the madness, has even gone as far as retweeting public concerns over the project (look below). The moral of the story is to beware of flashy headlines and 100x gains on overnight experiments. If you don’t fully understand it, don't bother to try it.
ETH Fees Are Sky High
Ethereum fees set a new record high as mining profitability reaches a two-year high
In the land of DeFi, gas fees are the tolls to participate in the smart contracts everyone has been buzzing about. Not surprisingly, fees have reached an all-time high to catch up to the inflow of money entering the space. I can’t stress it enough to do your own research before participating in this craze. In just the past hours, the YAM project has now retraced 99%. Don’t be the fool stuck with useless meme tokens and debt in tolls. Be careful chasing the sun, more than likely you will crash and burn. I wrote about my own experience today trying to stake BASED in the altcoin section.
Galaxy Digital Is Running Ads In Newspapers
No real news here, I just think it is really cool that we are seeing ads for Bitcoin in mainstream publications and on television!
The Wolf Of All Streets Podcast Ft. Ryan Radloff
Ryan Radloff, CEO of Kingdom Trust built his name in the crypto space as the CEO and Co-Founder of CoinShares. Now he is revolutionizing the way millions of Americans are preparing to retire. With over 13 billion dollars in assets under management, he is working to connect a multi-trillion-dollar retirement market to the Bitcoin ecosystem.
Ryan Radloff and I further discuss having Bitcoin in your retirement account, zombie mutual funds, the Fed rat trap, cattle and firetrucks in your IRA, beating crusty old Wall Streeters, Bitcoin outcompeting every other asset, targeting 28 trillion in retirement money, a massive community and investment awakening and more.
Thank you to Kingdom Trust and Voyager for sponsoring the podcast!
Bitcoin Thoughts And Analysis
Nothing has really changed for Bitcoin since we last spoke on Tuesday, although it is approaching some critical areas now.
The 4-Hour chart shows what we need to know for the moment. We. have price approaching the descending blue resistance and fighting to hold both horizontal and ascending support. A clear break of the blue line or break down of either of those supports will likely give us a shorter term direction. Those wicks down below support show that there has been a lot of buying interest in this area - we will see if that lasts.
I could easily see price dropping to $10,900 - $11,000 to shake out some longs, but my general bias remains strongly bullish and UP. As I have said a number of times, sometimes you need a little retrace to fuel up the jets. On a macro level, Bitcoin looks extremely bullish, even if it drops.
Altcoin Charts
Alt season continues. All 3 setups from Tuesday have been amazing. Balance has made a smaller move, but WRX and LINK are both absolutely pumping. There's nothing more fun than the crypto market when it's like this. ALGO hit the target last week, bounced at support and has absolutely launched. I have missed the entire back half of that, as I exited at the target on the trade.
My general thinking about alt season right now is not to be too panicky, moving constantly between coins. Everything should have it's moment if this continues. ENG is a perfect example. I have been in it for weeks (months, actually) and it finally made a huge move yesterday. That was a setup on a weekly chart, like HOT. Those take time, but can make really huge moves.
I found a site where I can chart Uniswap coins and am aware there is a ton of demand for that. The charts are ugly, and I can only post screenshots, but I will start looking at a few if I see anything interesting.
I made an attempt to farm BASED today, because I feel like I need to try so that I can speak to all of you from experience. I bought sUSD to stake, sent it to the 1980s looking BASED site and tried to stake... and the gas fees were $2000!!! Needless to say, I am not presently farming based.
BITCOIN DOMINANCE
Dominance has been struggling to hold support at 61.7 for quite a while. It appears likely to break down. If that happens, alt season should continue full blast. From a chart perspective, it's in a downtrend for me until it breaks the blue line. As I have said more times than I can recall, we will see bounces and alts suffer a bit here and there, but largely it remains alt season with no sign of an immediate end for now.
DGB/BTC
I received a request for this chart and also to post a few more that are tradable for Americans. I am not personally taking this trade, but price has finally closed candles above 266, which is a really key level that it struggled with for a long time. If that area holds, I would expect this to move every well. If not, I would look for an entry on ascending blue support. My stop for any trade would be a bit below that blue ascending line.
Here are the targets that I would be watching if this breaks out.
HBAR/BTC
I am hearing whispers of a potential partnership announcement with TESLA, although it is purely rumor. It made me take a look at the chart, and I like that this coin has not pumped as much as many others. The bounce off of 417 as support has my attention here, that has been a key level. A real break of the blue line would be even better as a more certain entry. Not the "best" chart, but if that rumor is true, we know that this coin can really get moving.
LOCK/ETH
This is a Uniswap coin. Looks like it may be ready to continue up after breaking the local downtrend. I want to see it above 108 to target 164.
These are REALLY RISKY. I am only playing with a tiny stack on Uniswap to test it out, so proceed at your own risk.
MATIC/BTC
This may take off before I get the newsletter out. I have been watching it all morning and it is attacking resistance as we speak. Safer entry is still a break of 245 and retest as support - that area has not had a candle close above in quite a while. Immediate target is the top of the blue descending line, around 304. If this really gets going it could make am a major move.
WRX/BTC
I assume a number of you are in this, since I have mentioned it so many times, including Tuesday. I took profit on 25% of the position, but am looking for something like the above if it closes above that zone there. That is around 142 at the top of the zone. That is a key resistance that could now flip to support. Just play these alts level by level.
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Bitcoin Thoughts And Analysis
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.
Chart Requests
AMPL/BTC
Big drop, hard to feel particularly confident. That said, there are signs of a bottom. Price is in a descending wedge, which should target the top of the wedge if it breaks up. This is better than seeing and ascending pattern, which would be bearish. There is also clear bullish divergence with RSI. You really want to see 8876 as support before you can have any confidence that I move up is more than a relief bounce. That area was the most major support on the chart.
CHZ/BTC
Major move up, looks parabolic for the moment. At this point, you want to see price above 164 or try to catch a dip around 147. Hard to buy right in the middle. Key levels are marked.
CLSK (CLEANSPARK INC.)
Clean chart for Cleanspark. It is presently consolidating between 2 key levels in what appears to be a bull pennant - a bit early to tell. There was a bullish cross between the 50 and 200 MA and a massive move up. I would personally trade this now if it flips $13 to support.
COTI/BTC
This is in price discovery for new highs, so dips are for buying. I can't give a reliable target, there's nothing but blue skies above. This looks like a coin where you buy the dip if you want to be in. Levels below are marked.
EOS/USDT
This is consolidating between levels. This will probably follow whatever Bitcoin does, as it's a large cap and a USD pair. I would enter either on a break of the blue descending line, a retest of that line as support, or a break of the black line just above and retest as support. Stops somewhere below the bottom black line.
FTX/BTC
This chart is a bit silly - no real volume. Maybe you meant to ask for $FTT? You want to see this above 13844 and breaking the blue descending line. I would not trade this at all with this volume, but the blue line would be the trigger.
KNC/USDT
Pretty straightforward. It looks like bullish consolidation, so a break of the blue line would be a great sign. This will do what BTC does, most likely, since it is a USDT pair. Key levels are marked. This could easily make its way into price discovery.
SC/BTC
Sia did not get the memo that it is alt season. This looks boring, nothing to see really. This channel does look decent, so I would look for price to follow. But really this is not exciting at all until it's above 44 sats or so.
SPCE (VIRGIN GALACTIC)
Every time I see SPCE I think of Old Spice deodorant. Not sure why. Same chart as last week, needs to break the descending line to be interesting. That's it. If not, look for the levels below.
TROY/BTC
This is my old chart from when I posted this as a trade. 75 was the target, acted as perfect resistance for 2 candle closes. At this point, I would like to see a close above that and try to buy a retest as support. Presently between levels, so no real trade right here. Still generally looks very bullish.
XMR/BTC
Looks decent to me. It seems to be holding the top half of the large trading range that it has been in for ages, it has broken the immediate downtrend and held ascending support. I am more excited right now about "newer" coins with less bag holders, but this technically looks like it should move up to the top of the range at some point.
XRP/BTC
XRP is underperforming after its large move up. Doesn't look great, showing little sign of reversing. If you are dying to trade this, use the levels shown. On a macro level, it has technically broken the downtrend. There are just much better opportunities at the moment.
XVG/BTC
This had a huge move up (which we caught here) and has subsequently had a big drop. That said, it could be viewed as a healthy retrace and be ready to head back up. Not my favorite setup with all of the alt opportunities, but it has technically broken through the downtrend and started moving up. I don't see an immediate trade - levels of interest are shown for me.
ZAP/BTC
Clear weekly rejection and SFP at 198 - wick above but closes below. At this point you really want to see that broken and flipped to support, or to enter lower. Really the big dip down near the 50% retracement level was probably the best entry for now.
Daily shows a bull pennant, so you could enter on a break of the descending blue resistance. This pattern could easily fail. Regardless, generally bullish.
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.