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In This Issue:
A Sneeze Away
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Ordinals are on Fire
MSTR is Really on FIRE!
Is There Really a Supply Shock?
DeFi is Back
A Sneeze Away
WOW.
The Fear & Greed Index is in ‘extreme greed,’ every coin is up, and all-time highs are just a sneeze away. Bitcoin “missed” making a new ATH by about $200 last night before correcting a bit. I can feel the tingle in my bones!
While the chaos continues in the background, I want to ask all of you a question that feels important given our current circumstances.
What do you prefer: outperforming during a rising or falling market?
Just a heads-up as you are contemplating: this is NOT a trick question. The correct answer is simply the one that aligns best with your skillset, while the incorrect answer is the one that doesn't suit your approach. Let’s see how this plays out…
Imagine two investors with different portfolios worth $10,000.
Investor A prefers to outperform in rising market.
Investor B prefers to outperform in a falling market.
Investor A has a 60% return in a rising market.
Investor B has a 50% return in a rising market.
Investor A’s portfolio climbs to $16,000.
Investor B’s portfolio climbs to $15,000.
Some time passes, and the market structure changes.
Investor A suffers a 60% decline in a falling market.
Investor B suffers a 50% decline in a falling market.
Investor A’s portfolio falls to $6,400.
Investor B’s portfolio falls to $7,500.
You might be inclined to think that the obvious answer to the question above is to focus on protection from losses rather than maximizing gains, as the former has a larger impact—and you would be correct. However, this doesn't necessarily mean it's the best answer for everyone. But it probably is the best answer for most.
Just to cement this point further.
At their current portfolio evaluations of $6,400 and $7,500, let’s run one more test.
Investor A has a 60% return in a rising market.
Investor B has a 50% return in a rising market.
Investor A’s portfolio now climbs to $10,240.
Investor B’s portfolio now climbs to $11,250.
In this scenario, Investor B experienced a smaller loss in a falling market compared to Investor A. Additionally, even though Investor B had a lower percentage return in a rising market, they still ended up with more than Investor A despite underperforming on percentage gains.
Now to play devil's advocate, some investors are inclined to naturally hold higher beta assets in a bull market, fully aware that they can plummet sharply once the market peaks. They comfortably anticipate significant gains and the subsequent steep declines. This is a viable strategy.
Cathie Wood is the epitome of this.
It's worth noting that if you prefer this method, be aware that it is a more challenging approach. Due to the nature of mathematical laws, you'll consistently face steeper hills to climb than investors opting for a more conservative approach. The key to this method is to avoid holding onto losses as they decline and to generate enough gains during bull markets to offset the larger downturns. This approach isn't suitable for investors without an edge or weak stomach; it's most effective for those equipped with the tools, resources, and conviction to capitalize significantly when the opportunity arises.
Another important point to consider is that sometimes we can't determine whether we fall into the category of Investor A or B. Investing in speculative assets and bubbles may typically lead investors towards Category A than Category B, but ultimately, the market dictates the outcomes of returns and losses.
All in all, the market requires adaptability, and those who can quickly adjust will be better positioned to navigate whatever the market throws at them. Personally, I lean towards being Investor B if given the choice and tend to subconsciously tailor my advice to this approach. However, if you find yourself typically in Category A, it doesn't mean you're doing it wrong; just be aware of the risks involved.
When we reach all-time highs, give yourself credit—you've earned it. Just remember, at some point—whether in 20 minutes or 2 months—the market will attempt to eliminate leverage and wipe out newcomers with weak resolve. If you take every precaution to avoid this flush, then $100k awaits you.
My crystal ball told me.
Macro Monday is today (Tuesday), so tune in for an awesome show. I'm excited to be back with new ideas; Japan was epic, but now it's time to focus on crypto. Let’s GOOOOO.
ATH —> Soon.
Bitcoin Thoughts And Analysis
Bitcoin came within a hair’s breadth of a fresh all time high something that unthinkable a few months (weeks?) ago. Absolutely astounding price action.
When you zoom out to the monthly chart, it looks even more insane, like a v shaped correction.
There will be bumps in the road, it could take a while to hit a new all time high or it could happen today. I have no idea. What I do know is that I wouldn’t short this think with my worst enemy’s money.
Pat yourselves on the back. No matter what happens now, we made it back to the the highs.
I am not particularly worried here, but always feel compelled to be balanced and she you what I see on the chart.
As you can see, we have potential bearish divergence with overbought on the daily chart, which is confirmed on the 6-hour and below. This could simply mean we are cooling off, and fundamentals are driving the market.
Either way, this is always worth noting.
For confirmation, we will need to see the day CLOSE with a higher high on price and lower high on RSI, with a very clear elbow down.
Altcoin Charts
For those who are new here, I share SETUPS and not SIGNALS. These are ideas that I am watching - if a certain thing happens, then the trade triggers. I am not telling you what to buy or when. I am showing you how I am watching certain charts and what has to happen for me to take a trade.
I will be taking a better look at altcoins over the coming days as I settle back in and catch up… as usual, the moment Bitcoin stopped for a breather, altcoins began to once again outperform.
Interesting, right?
Once again, Ethereum made a quick move to the upside when Bitcoin started to correct. While Bitcoin dropped from almost $69,000 down to $65,000, Ethereum used the opportunity to catch up and continue.
To me, this means the market is just waiting for any excuse to pour liquidity into altcoins.
I continue to be a huge ETH bull and think it will outperform massively at some point.
The next real large time frame resistance is the all time high…
Legacy Markets
Stock markets experienced a slight downturn following hawkish remarks from a Federal Reserve official, emphasizing the central bank's hesitation to reduce interest rates soon. Europe's Stoxx 600 index fell slightly, particularly impacting the automotive and mining sectors, despite China's attempts to support its market. Notably, Thales SA and Spirent Communications Plc saw shares rise due to strong financial results and acquisition news, respectively.
In the U.S., the Nasdaq 100 futures saw a decrease, influenced by losses in tech giants like Advanced Micro Devices Inc., due to a regulatory hurdle in China, and Apple Inc., which faced a significant drop in iPhone sales in China.
The focus shifts to Fed Chair Jerome Powell's upcoming congressional testimony, which is expected to reiterate a cautious approach to rate cuts. This stance is supported by recent comments from Atlanta Fed President Raphael Bostic, who anticipates a single rate cut followed by a pause, reflecting a reconsideration of the expected rate cuts amid strong economic data.
In the bond market, Treasury yields decreased after a recent increase, reflecting investor uncertainty ahead of Powell's testimony. Asian stock markets showed mixed responses to China's economic announcements, with Hong Kong shares dropping and Chinese benchmarks closing slightly higher. Investors expressed disappointment over China's fiscal measures to stimulate the economy.
Gold prices hovered near record highs, while Bitcoin experienced a slight decline after nearing its record peak.
Key Events This Week:
China kicks off its 14th National People’s Congress, Tuesday
Eurozone S&P Global Services PMI, PPI, Tuesday
US factory orders, ISM services, S&P Global Services PMI, Tuesday
Super Tuesday in the US, with North Carolina, California, Texas and Oklahoma among more than a dozen states holding Republican and Democratic primaries
Canada rate decision, Wednesday
Eurozone retail sales, Wednesday
US ADP employment, JOLTS job openings, Wednesday
Fed Chair Jerome Powell testifies before the House Financial Services Committee, Wednesday
Fed issues Beige Book, Wednesday
Fed’s Neel Kashkari (Minneapolis) and Mary Daly (San Francisco) speak, Wednesday
China trade, forex reserves, Thursday
European Central Bank’s rate decision, Thursday
US initial jobless claims, trade, Thursday
President Joe Biden delivers the State of the Union address, Thursday
Fed Chair Jerome Powell testifies before the Senate Banking Committee, Thursday
Cleveland Fed President Loretta Mester speaks, Thursday
Eurozone GDP, Friday
US nonfarm payrolls, unemployment, Friday
New York Fed President John Williams speaks, Friday
ECB Governing Council member Robert Holzmann speaks, Friday
Ordinals are on Fire
NodeMonkes took a page out of Ethereum's playbook by releasing a 10,000 NFT collection of monkeys, propelling it to the #3 largest NFT collection by market cap in just 3 months. The project's brilliance lies in its creators' approach of blending the best elements from popular Ethereum collections and implementing them on Bitcoin, along with some unique additions to give it a fresh feel. The NodeMonke inscriptions are pixelated, reminiscent of Punks, and the NodeMonkes themselves are designed to mimic Bored Apes. Personally, I find the NodeMonkes frustrating to look at, but their uniqueness certainly adds to their appeal. Since their launch on December 29th of last year, initially priced at .03BTC each, the floor price is now approaching 1BTC, hovering just below .8BTC at the time of writing. NFTs are here to stay on both Bitcoin and Ethereum. Anyone suggesting that one will replace the other is missing the big idea.
MSTR is Really on FIRE
MicroStrategy made a significant announcement yesterday regarding their plans to offer $600 million of convertible senior notes due 2030 to, as you might have guessed, buy more Bitcoin. For those unfamiliar, senior convertible notes are debt securities that can be converted into equity at a later date, in this case, 2030, and have priority in the event of bankruptcy. This strategy is truly remarkable to witness, and as long as Bitcoin maintains or increases its value, or if MSTR locks in profits from its position, this move will be beneficial for both investors and Michael Saylor. Clearly, Saylor sees an opportunity to leverage his company for the potential reward of acquiring more Bitcoin, and that's the path he's chosen. In this scenario, both parties can benefit if the market conditions align. Personally, I think MSTR’s chart is a glimpse of where BTC is likely headed in the short-term. Fingers crossed I am right.
Is There Really a Supply Shock?
Rumors are circulating that exchanges are running out of Bitcoin, but I am not convinced. While it's possible that liquidity could dry up if demand surges, there will always be sellers willing to part ways with their Bitcoin at the right price. If there ever comes a point where Bitcoin is unavailable for purchase on exchanges, the price will likely increase until it becomes available again, resolving the issue. The claims that CashApp ran out of Bitcoin were community-corrected by X. It would be interesting to see temporary shortages of Bitcoin, but we are not at that point yet. If anything, exchanges would probably crash or experience issues before such a scenario occurs. Lastly, it's also important to consider that exchanges play a crucial role in maintaining liquidity, and it's in their best interest to ensure that they have sufficient reserves to meet demand.
On a different note, investors aren't fazed by Coinbase's struggle to keep up with user demand; in fact, they probably view it as a positive sign, as evidenced by the stock price. I have faith that Coinbase is doing everything possible to address this issue. If it's causing you concern, simply download a couple of other exchanges, and the problem will likely be resolved.
DeFi is Back
For the third time in Ethereum's history, Layer 2s have hosted more than 3 million active users, setting a new all-time high record of 3.12 million. Between February 26 and March 3, there were a total of 3.5 million active users, marking a 788% growth in Layer 2 users since the beginning of 2023. To highlight the effectiveness of Layer 2s, their combined throughput ranges between 107.5 TPS and 125.6 TPS, compared to Ethereum mainnet's throughput of between 13.7 TPS and 14.3 TPS. Additionally, in just 8 days, Dencun will go live, significantly reducing the entire ecosystem's costs and likely attracting newer developers and users who were previously deterred by higher fees. While Solana will remain cheaper, the gap in prices will narrow substantially.
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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. 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.