The Wolf Den #87 - Uniswap, Trades, Gaining Focus And More
Trading On Uniswap
Let's talk about Uniswap. DeFi coins are all the rage in the crypto community at the moment and for good reason - there are people making life changing money swapping ETH and USDT for unheard of coins that are pumping and dumping left and right. It is absolutely the wild west and in many ways reminiscent of the ICO craze in 2017.
Trading in this manner is outside of my wheelhouse and does not fit my ideal risk profile. That said, I decided to try it for a few reasons. 1) I wanted to be able to speak intelligently about it and through experience and 2) if there are disproportionate gains to be made, it's worth a try with a tiny amount of capital.
The process seems daunting at first, but is actually quite simple once you get a hang of it. You need a Metamask wallet, which you load with Ethereum or USDT. The link below is the official uniswap site. They are IMPOSTER SITES that people are visiting that are draining their wallets. Again, this is the Wild West.
You search the coin you want, or you have to find its contract address on etherscan. Once you have this, you hit the "trade" button and it takes you to the swap page.
The gas fees are HIGH, but I still recommend moving them to the fastest when confirming the transaction. Again, all of this is somewhat clunky and this simple guide is not going to solve it all.
You can learn how to use the platform by referencing the video above. You will get a hang of it. What is more important to discuss is managing risk.
These coins can literally ALL GO TO 0. In an instant. For that reason, the entire position size of any trade for me has to be 1-2% of my trading portfolio. That's it. This is not like position sizing a trade on another exchange, where you calculate your position size based on your stop loss. There ARE NOT STOP LOSSES. So if it can go to 0, I size my position accordingly, expecting to lose the entire thing.
This market moves exceptionally fast - you need to watch it closely. A 3x can turn into a 50% loss in a matter of hours. YAM went to 0 in a matter of minutes. For me, I prefer to take my gains when I have them and not wait around for the chance at 100X. I have done a few 2-3x trades already - some continued up, some crashed after.
I cannot recommend trading here, but if you do, keep your risk managed and don't get too greedy.
Important note - these coins are not on tradingview. You can check for them on 3rd party sites like uniswap.vision and chartex.pro.
CoinDesk Feature On Staying Sane In Crypto
I was very fortunate to be included in this article. I spoke with the author for nearly an hour and had an in depth conversation digging into my thoughts on trading without emotion, balancing trading and your real life, and the importance of focusing on other things outside of the market. This article is a great read and has a lot of wisdom from other traders.
Having a life is everything - a lesson that I have once again had to remind myself of in the past few weeks.
Stock Splits 101
By Sahil Bloom.
Tesla ($TSLA) recently announced a stock split, which set off a frenzy of buying activity. If that left you scratching your head, you weren't alone. So what is a stock split and how does it work? Here's Stock Splits 101!
First, the basics. There are two types of stock splits: Conventional and Reverse. Let's focus on Conventional, as it is the type that $TSLA announced. In a conventional split, a company issues more shares. Its share price is now lower, but the value of the Company does not change.
Tesla announced a 5-for-1 stock split. So what happens? You own 10 shares of Tesla at a pre-split price of $1500 per share. Post-split, you own 50 (10*5) shares at $300 ($1500/5) per share. You have more shares, but there are more outstanding. Your ownership did not change.
As always, I find it best to walk through these concepts by using a simple story. Imagine you are at a poker table in Las Vegas. You have $500 in the form of 5 $100 chips. Your only opponent has $1000 in the form of 10 $100 chips. The dealer asks to exchange some chips.
He exchanges each $100 chip for 10 $10 chips (10-for-1). So now you have 50 $10 chips and your opponent has 100 $10 chips. You still have $500 total and are in the same relative position as before the exchange. More chips, yes, but no better off. That was a stock split!
In a stock split, the company increases its shares outstanding (by some factor) and reduces the per share price (by that same factor). The total value of your existing ownership in the company stays the same, just like the total value of your chips at the poker table.
So to be clear, a stock split has absolutely no impact on the fundamental value of a stock. Then why might a company decide to execute a stock split? The most commonly stated reason: to allow smaller investors to buy the stock and improve the liquidity of the shares.
If you run a poker game and only allow $100 chips at your table, people with less than $100 cannot participate in your game. But in a digital age where buying fractional shares is possible, is this reasoning sound? Rationally speaking, perhaps not. Realistically, yes.
We humans are not perfectly rational creatures. Cognitive biases impact our decision making. Buying a given stock at $100 feels like a better bargain than buying it at $500, even if it buys you 1/5 as much ownership. Being able to afford more shares of a stock feels good.
To summarize, stock splits are quite simple and have NO DIRECT IMPACT on the fundamental value of a stock. They do, however, make the stock more affordable on a per share basis for average investors. This may improve the liquidity of the stock as new buyers enter the market. That was Stock Splits 101! I hope you found it helpful.
Did Warren Buffett Really Buy Gold?
It is being widely reported that Warren Buffett is "shorting banks and buying gold."
This is not entirely true. Contrary to widespread reporting, Warren Buffett did not buy gold.
If the media would have changed the headline slightly to "GOLD" it would have been accurate but misleading.
GOLD is the symbol for Barrick, a gold miner. It pays a dividend.
Anyone who follows Buffett knows that there's nothing that he loves more than yield. A stock with a solid dividend falls squarely in his wheelhouse. So is buying a gold miner really "Buffett buying gold?" Not really. Buffet knows financials are struggling due to Covid.
And Barrick pays a dividend.
He knows people are buying gold and that he can profit on the mining without actually buying the underlying asset. There is little indication that Buffett has changed his mind or that buying Barrick represents a sea of change. Barrick is a mere 0.3% of Berkshire's holdings, not exactly a meaningful position or something to get riled up about.
Further, Buffett's announcement nailed the top. We do not know what price he paid, and he could have bought at anytime during the quarter. But when he announced the position - that was the highest price that gold has traded at.
A year ago, Buffett could have bought Barrick for $11.50. In April, Barrick was on sale for $12.61.
Buffett was a huge contrarian indicator on gold in 1998 and 2009. Perhaps Buffett provides another one now, but that's a dubious assumption at best. We will have to wait and see, but let's not get carried away assuming that Buffett has fundamentally changed his views.
The DeFi Craze Continues
Astounding. If ever you needed a clear metric to display how dominant the DeFi market has been of late, then here it is. DeFi is adding billions in a matter of days now and is unlikely to see a significant slowdown in the near future. This is where much of the money is in crypto until further notice.
BitMex Adds KYC
BitMEX announced that it would require users to verify their identity by February 12, 2021. It plans to launch a User Verification Program, which it said will promote a “more trusted and secure trading environment for all BitMEX users.” There is obviously considerable pushback here from the crypto community, but it seems BitMEX has given in to the pressures from regulators and policymakers to improve verification processes. Stay tuned for more as this continues to develop. This is likely the end of Bitmex's dominant market share, which was already slipping.
Portney Is Here - Is That A Good Thing?
"Davey Day Trader" has taken the markets by storm, with some believing that he has singlehandedly propped up bankrupt companies with his army of Robinhood acolytes. Now he's in crypto. After an embarrassing meeting with the Winklevii Twins (for them), he is now "all in" on crypto, shilling altcoins like an anonymous crypto twitter influencer. He's even goading the SEC, claiming that pump and dumps are encouraged in the crypto space. I hope they allow him to bring his green hammer to prison for protection.
Read the article linked above for our take on his entrance into our space. The video is below.
Portnoy ended up responding to my tweet about his foray intro crypto. He had one word - jackhammer. It seems he is not scared of the law!
Cointelegraph Livestream
Last week I participated in a Cointelegraph livestream event with fellow trader Michael van de Poppe discussing Bitcoin’s correlation with traditional assets. A few key insights from the event are summarized below.
Key Takeaways:
Let the market dictate your trading, not your inherent bias
Bitcoin is in an obviously bullish trend on the monthly, this is a dip-buying time
If the value of the dollar goes down, the Bitcoin chart is likely to go up
Correlation isn't necessary as a short time frame trader, only levels matter
Portfolio construction is entirely individual, it depends on age, wealth, and risk tolerance
Don't plan for your Lambo, plan for losses and protect capital, this is the number one rule
Get To Know Me! CryptoPotato Interview
I was also featured in an interview with CryptoPotatoe, I covered my life as a DJ and how I transitioned from a career in music to trading cryptocurrencies. I went on to give my top trading advice to those in the crypto market and revealed some of my favorite long-term coins. This interview really touched on my background and career, so if you don't know where I came from, it's a good read!
The Wolf Of All Streets Podcast Ft. Ray Youssef
Ray Youssef is the CEO of Paxful, a people-powered marketplace allowing people to send, receive and transact in Bitcoin all around the world. After Ray failed 11 times to build a successful startup, he noticed the one thing in common among his attempts was worldwide payment walls that were impossible to avoid. He set out to design a Bitcoin solution, opening world markets regardless of location, government, oppression or education.
Ray and I further discuss starting life as a 1st generation Egyptian immigrant, being an activist in the Egyptian Revolution and Occupy Wallstreet, the walled gardens blocked by payments, failing at 11 different startups before Paxful, Nigerian Princes and overcoming scams, building 100 schools in Africa, teaching Bitcoin to the people of Africa, an imminent golden age of humanity and more.
Huge thanks to Voyager and RoundlyX for sponsoring.
Bitcoin Thoughts And Analysis
Bitcoin has a tendency to move when I am writing my analysis, making sure that the newsletter is as difficult to compose as possible. I am presently long and will share why below - I took this trade while doing this analysis. I view it as a scalp for now.
FEAR AND GREED INDEX
It is worth noting that the crypto fear and greed index has reached "extreme greed." This is a time to be a bit cautious, although this can be utterly meaningless if FOMO really kicks in. We can stay extremely greedy for months.
MONTHLY CHART
This remains bullish. No other way to view it, in my mind. That said, this candle is only halfway through, so that can change and FAST. Last month had a mega bullish candle, smashing through key levels. So it would be a bit surprising to see it fail on a macro level now. Key levels are marked, as always. Anything above $10,540 remains very bullish.
DAILY CHART
The daily has me feeling cautious. Clear rejection for now at $12,320, with 2 wicks above - bearish SFPs. That said, today's candle is NOT CLOSED, so the second one is unconfirmed. Regardless, there was clearly a lot of selling interest above that line, so we need to watch that area. That's my immediate target for this scalp long. I want to see it flipped to support before getting really excited about more movement up before a retrace.
Remember, retraces are HEALTHY. A drop here is not a bad thing on a larger scale.
You can also see that price is clearly in an ascending wedge, which statistically is more likely to break down than up. That would target the bottom of the pattern, around the $10,500 area that I have mentioned before. I circled the potential SFPs (swing failure patterns) which indicate potential liquidity engineered for whale short selling.
Bitcoin has a tendency to wreck these wedges to the upside.
This is the greater concern for me at the moment. We had a clear bear div (smaller red arrow) in overbought territory on RSI. That was replaced by a hidden bull div (first blue arrow), which invalidated it. Now we have another POTENTIAL bear div with RSI that is larger (bigger red arrow). That said, we could have a small hidden bull div to replace that. Neither of these are confirmed yet.
4-HOUR CHART
This was my long, at $11,850. Simple. This was a clear demand structure, left over from the last major move up. The logic is that there are left over buy orders that were left behind when price pumped. So I put bids there. Easy. I really want to see price back above $12,134 on this time frame. If we struggle there, I will exit and wait for area discussed above to flip to support
BOTTOM LINE - If Bitcoin drops to $10,540, I will be going in heavily!
Altcoin Charts
Altcoins are very risky right now with Bitcoin making moves. These are a few that I am watching, but not aggressively trading for the moment. I want to see if these find bottoms. I also took a few trades out of the newsletter, which I will be watching for Thursday. This could be a better time to remain on the sidelines. Before we get into the trades, let's look at Dominance.
BTC DOMINANCE
I always like to take a quick look at dominance to determine what is likely to happen with alts. I said this on Twitter yesterday...
You can see that Dominance did, in fact, pump a bit, almost up to resistance but not quite. It is presently fading once again - not sure if that is it or if it will continue up to test the purple line. There's no reason to be scared of alts in the grand scheme of things for the moment. As I have said countless times, there are always moments when alts drop and look bad, but with Dominance continuing to trend down, we remain safe for now.
ALGO/BTC
I entered this yesterday with a small position and bought more on the drop today. I tweeted that I was doing this, and that I would not take a large buy because I wanted to be able to average down. I am watching to see if this beautiful long legged doji confirms on the 4 hour - this super long wick down with the real body being small or larger and green. That's a great reversal signal when followed by another bullish candle. It is also holding the wedge support, even though the wick went below. First target is simply the black line (50 MA could be an issue), but ultimately I want to see this exit the blue wedge. Stops are below the low of this long candle.
ENG/BTC
I have been in this for months, and assume that many of you have as well. That said, I am looking for a retest of the 4074 area on the weekly to add to my position. Simple. All targets are still intact. This was a major macro breakout on a weekly chart, so I expect this to rise long term.
ERD/BTC
Elrond was one of the first major movers this alt season, so it is no big surprised that we have seen a retracement since the mainnet. The chart is giving mixed messages, but I am watching closely to add to my position. What I like at the moment is the clear bullish divergence printing on the 4 hour. That is usually good for at least some movement up. I would like to see price back above the horizontal resistance zone that I drew before reentering, to give some confirmation that the down trend is over.
I want to offer an opposing view, since I like to look at things objectively. There is a pretty clear head and shoulders here, with a breakdown of the red neckline and retest as resistance, almost to the sat. That said, there was no real volume on the breakout, which is required to confirm this pattern. You want to see heavy selling through the red line, which we clearly did not have. That's why I am not so concerned, but I am keeping this pattern in mind if we continue down any further, and fail to break back above the resistance area I drew.
ETH/BTC
This is not really a trade, more of an analysis to gauge the alt market, since it often follows ETH. You all know by now that I have been dollar cost averaging into ETH all year, I am very bullish on it.
It is presently struggling with a key level that just failed as support, but could easily be flipped back here. Also, we had bearish divergence with overbought RSI... but may have hidden bullish divergence brewing. If that hidden bull div confirms, I would look for this to the end of the drop and for this to continue up. I want to see it above 3534092 first, and it is close.
XRT/USDT
Uniswap coin, rose on polkadot hype. I cannot share an active link, as this was charted on uniswap.vision. For now, we have a clear resistance to support flip and a potential breakout from the descending resistance. Simple. Not much to project, no price history and risky. Remember, small positions, can go to 0.
Phemex Update
My friends at Phemex have a LOT to be excited about. All of the following updates are coming in the next 2 weeks, so keep your eye out for new pairs and advancements.
Friend Invite Promotion: Inviter and friend both get 10% off Taker Fees (3 months max).
Trading View docking: Phemex charts will soon be available on Trading View.
Simplex integration: New payment gateway.
Bracket Order: New contract trading order type with expanded capabilities for more flexibility.
New Contracts (To be Confirmed): ADA/USD, BCH/USD, COMP/USD, LEND/USD, YFI/USD, ALGO/USD
Personal Info Page restructure: New user guide, Fees for trading, Premium membership gateway and Bonus gateway will be added.
Website Font Modification: Better user experience
Marketing Updates:
September campaign - 4 BTC Puzzle: Riddles and Puzzles will be published every two days through all social media platforms. First one to solve all of them will gain access to a wallet (4BTC total prize).
Voyager
If you follow me, you know Voyager is my favorite place to buy crypto on the go. Voyager lets you trade 40+ coins commission-free from one easy-to-use app. You can also earn up to 6% interest on tops coins with no lock ups or limits!Download the Voyager appand use code “SCOTT25" to get $25 in free Bitcoin when you create your account.”
My Recommended Platforms And Tools
I use RoundlyX to buy small amounts of Bitcoin every single day. They automatically round up my credit card purchases (with 10x multiplier) and invest them in crypto. Absolutely brilliant. Passively invest money you don’t need without a thought. Further, they have integrated with Voyager (see above) to offer commission-free purchases.
Rewards Code: WOLF
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.
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.
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. I use both the virtual card online and the physical black card at actual retail (I will do this more after COVID!). They offer 6.38% cash back in crypto, which is really astounding.
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.
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.