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The Wolf Den #276 - All Losses Are Not Created Equal

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July 1 · Issue #276 · View online
The Wolf Den Crypto Newsletter
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All losses are not created equal. There is a vast difference between recovering the value of an asset that has dropped 90% vs. one that has shed 99% of its price. Recovering from both is a long road, but the journey back from 99% is 10x harder than from 90%. Let’s take a $100 stock for example. If the $100 stock fell to the respective amounts above, it would be worth $10, $5, and $1. The positions of their bottoms may not seem far apart, but their roads to recovery are vastly different, with each subsequent one being exponentially harder. 
For the stock that dropped to $10 to recover its lost value, it needs a 1,000% gain. For the $5 and $1 they need a 2,000% and 10,000% gain respectively. Bitcoin’s drop from ≈$64,600 to ≈$29,300 constituted about a 55% drop. But a 55% move upwards won’t bring Bitcoin right back to its all-time high - it actually needs about a 120% increase from the low. From Ethereum’s high of about $4,330 to its low of $1,730, it experienced a 60% drop, needing a 150% increase from its low. Ethereum only dropped 5% more from its high than Bitcoin but needs 30% more growth to recover from low to high. Using this formula, you can now sees how some of the alts that recently lost 60%, 70%, or +80% of their value have a much steeper hill to climb. 
To counteract this there are a couple of measures you can take. One is obviously just holding Bitcoin because it tends to be less volatile than other altcoins on the market and has historically always recovered. If you are into altcoins, keep cash on hand to buy the bottoms, although knowing where that bottom is is impossible. Cash is king in a portfolio during a correction. If you believe the coin will return to its all-time high, then now could be a chance to capitalize on some stronger gains on its way back up.
Keep in mind again that the deeper the drop, the more difficult the climb back up, because there is more distance to cover. Ethereum’s climb has 1.25x the distance to cover vs. Bitcoin’s. This “difficulty” measure only considers the extra distance in recovering, so it’s limited in its application and is not a holistic understanding.
Regardless how far any asset has dropped, assuming the price is not zero, it can always drop further. Keep this in mind when buying dips or considering exits.
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In This Issue:
  1. All Losses Are Not Created Equal
  2. Bitcoin Thoughts And Analysis
  3. Altcoin Charts
  4. Legacy Markets
  5. Chart Requests
  6. Stock Splits 101
  7. How Bitcoin Can Help The Poor
  8. Bitcoin For The People
  9. Robinhood Pays The Price For Cheating
  10. Soros’ Fund Trading Bitcoin
  11. The Wolf Of All Streets Podcast Ft. Lyn Alden
  12. My Recommended Platforms And Tools

Bitcoin Thoughts And Analysis
Bitcoin has been ranging for over 6 weeks. Anything inside the range is sideways chop and very difficult to trade or predict. I provide charts and insight, but everything in this range should be taken with a grain of salt. This is the kind of market where most traders should sit on their hands and wait for clear direction. Otherwise, they end up giving away months or years of gains trying to trade the chop. It is hard to separate signal from noise in a range.
DAILY CHART
Price appears to be retesting the EQ of this descending blue channel as support. We want to see it hold and for price to continue trading in the top half of the blue channel. This will not confirm until tonight, so too early to tell.
As I have been mentioning for over a month, we want to see Bitcoin above 42K to truly start talking about a bullish case. Below that we have ranging after a drop, which is more bearish than bullish. There are positive signs, like Wyckoff accumulation, but none of those are confirmed below that area. They are all just ideas. MA traders will certainly be looking to the 50 MA (that blue line) which is pushing down hard towards price as a likely strong resistance.
4-HOUR CHART
The red range is the story, as discussed above. Nothing worth discussing on any major level while price is in this range. Sideways chop, with 36K acting as a magnet in the middle.
We have confirmed hidden bullish divergence with RSI, which is technically a signal of continuation. We also had the bull div, oversold, at the bottom, which I shared a number of times. RSI has not made the trade from oversold to overbought yet, which is statistically more likely to happen than not, although not certain. Eventually it will get there.
HOURLY CHART
I rarely spend much time on the hourly chart, but it can be fun to look at.
We have a local head and shoulders on the hourly chart, but these very rarely play out and hit their targets. Also, one could argue that the volume profile is lacking on this pattern - you want to see very clear spikes in the left should and head, and then a spike on the breakdown of the neck line in the right shoulder. Volume did increase on the breakdown, but there was really more buying volume after the drop than selling volume on the drop. Also, the head does not have a clear spike. To me, the volume here says buyers stepped in on the drop.
If you do believe in this pattern, the target is shown, based on the depth.
I would not trade this, but fun to look at, as I said. If you are trading it and missed the break down, you would be looking for a retest of the neckline as resistance to enter.
Altcoin Charts
Altcoins are once again in a tough spot after a few days of price appreciation. The best trade has been ETH from the range lows, on both the ETH/BTC and ETH/USD pairs, which I posted from the bottom. As much as I want to post new setups, small Bitcoin moves are still seemingly hurting altcoins.
ETH/USD
I posted ETH at the $1,725 lows, bouncing off the bottom of the range with clear bullish divergence coming from oversold RSI. That was a hell of a trade, with the same setup on the BTC pair.
That said, this hit its target almost to the dollar at the EQ of the blue range. If you don’t know, the EQ of the equilibrium, the dashed line that is at the 50% level of any range or channel. These should act as strong support and resistance, so a move from the range lows or highs usually stop at the EQ before choosing a direction. In this case, we had bearish divergence with RSI at resistance and a drop. Now we have potential hidden bullish divergence (blue arrows) that could signal continuation back up, but we know that depends largely on BTC. Either way, a confirmed hidden bull div “cancels” the bear div. We need to see a more definitive “elbow up” on RSI to confirm.
If price continues down, the first area of interest is $2042.5, which was broken as resistance but not retested as support.
If the EQ is flipped to support, the top of the range is the target, near $3,000.
Legacy Markets
AAPL (APPLE)
Apple tagged the first target yesterday in a beautiful move off of ascending support and the 200 MA, which is where the trade was posted. Now I am watching for a potential flip of $137.07 from resistance to support to signal that the higher target at the recent high is in play - $145.09. This is currently AT RESISTANCE, so it is not a trade until that is flipped, and most of us were in from lower.
TSLA (TESLA)
Consolidating against resistance and appears to be attempting a flip to support. We want to see price push hard off of the descending blue line to signal likely continuation to the recent highs. This trade started around $620, so it technically hit the first target at descending resistance.
Watching this closely.
Chart Requests
Every Wednesday I take chart requests from paid newsletter subscribers and look at them live on YouTube. I took a look at almost 30 charts yesterday, all in the video below. Enjoy!
Bitcoin, Ethereum & Altcoins |Technical Analysis | Crypto Charts & Prices
Stock Splits 101
Written by Sahil Bloom.
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 last year. 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.
How Bitcoin Can Help The Poor
How Bitcoin Can Help The Poor | Bradley Rettler
I recently sat down with Bradley Rettler, a philosophy professor at the University of Wyoming and an author of an essay “The Rich Get Rich, The Poor Get Bitcoin.” I love his essay so much that I invited him on my channel to discuss it. It is always important to reiterate the true purpose of Bitcoin, which is to help normal people escape the system that is holding them down.
Bitcoin For The People
‍BITCOIN’S HISTORY, DESIGN, AND DEVELOPMENT
NYDIG, a major financial firm dedicated to Bitcoin, took over the front page of the Wall Street Journal yesterday and said the following:
In the coming months, we will be making Bitcoin easy to access through America’s financial institutions. From community banks to global firms, hundreds of millions of customers will gain access to this new and powerful network. 
As the technology leaders that bring innovation to the financial ecosystem, we are proud to come together to help make Bitcoin accessible to all.
In their push for mainstream adoption, NYDIG and NCR are now reported to be working with “650 banks to offer bitcoin purchases to an estimated 24 million total customers.” Included in the list are popular institutions “North Carolina-based First Citizens Bank, and credit unions, including Bay Federal Credit Union.” 
NYDIGs research shows that of the 22% of Americans that hold Bitcoin, 80% of those want to access and custody their Bitcoin through their own banking relationship. The numbers may be slightly up for debate, but the general idea is right here. Most people in the U.S. and in other countries with reliable banking systems have a deep-rooted trust in these entities. Bitcoin’s libertarian foundation comes with slogans about replacing the banks, shorting the bankers, etc. but for mainstream adoption, the two are going to have to work together. Done right, the marriage of Bitcoin and banks can be a win-win for every day people who do not want to “be their own bank.” Having those people on board will help us all.
Robinhood Pays The Price For Cheating
Robinhood to pay $70 million for outages and misleading customers, the largest-ever FINRA penalty
It looks like the Robinhood saga is about to conclude, with a sizable fine. FINRA, the major US agency tasked with the responsibility of penalizing Robinhood for locking out traders, liquidating positions, shutting down, and destroying the free market, has fined the exchange $70m. At first this sounds reasonable… until you read that only $13m of the $70m is restitution for the victims, with the rest going into the pockets of FINRA. 
In 2020, Robinhood reported having 13m users, which certainly grew significantly when meme stocks and crypto took off in early 2021. So, the customers on average are receiving about $1 back each after the entire fiasco.
This was the largest fine ever levied by FINRA. It is hard to feel like justice was served when the regulators get a payday and the victims are left high and dry. Amidst all of this, Robinhood has genuinely recognized the problem and actively worked to correct the issue on their end.
Soros' Fund Trading Bitcoin
George Soros’ investment fund is reportedly trading Bitcoin
“Soros Fund Management, the private investment firm of billionaire George Soros, is reportedly trading Bitcoin (BTC) as part of a broader exploration of digital assets, according to financial news website TheStreet. 
People familiar with the matter told author Michael Bodley that Dawn Fitzpatrick, the chief investment officer for Soros Fund Management, gave the green light to trade Bitcoin and possibly other cryptocurrencies in the last few weeks. Speaking on condition of anonymity, the sources said Fitzpatrick and her team have been exploring cryptocurrencies for some time and that the latest venture is “more than just kicking the tires” on digital assets.”
This could be good news… or bad. It depends on which direction the fund chooses to trade. Soros is notorious for shrewd market moves, often shorting assets for profit. He broke the Bank of England by betting against the pound. Here’s that story, if you missed it.
How Did George Soros Break the Bank of England?
The Wolf Of All Streets Podcast Ft. Lyn Alden
Podcast - The Wolf of All Streets
The Long-Term Bitcoin Strategy | Lyn Alden
Only a few guests at Bitcoin Miami brought the crowd to their feet, and Lyn Alden was rightfully one of them. The Lyn Alden Investment Strategy is relied upon by fundamental investors around the world who are looking to better understand the complicated facets of a dynamic and rapidly evolving market. In this episode, Lyn Alden gives a detailed overview of all of the fundamental forces at play with regards to Bitcoin and how they relate to other sectors, including equities, bonds, commodities, and more. This episode is a must listen.
In this episode, Lyn Alden and Scott Melker explore:
  • Grayscale’s arbitrage trade
  • Profiting from Grayscale’s premium
  • The Chinese hash rate migration
  • Volcanoes in El Salvador
  • Bitcoin’s energy consumption
  • What if El Salvador fails?
  • Bitcoin for billions not billionaires
  • What is happening in global markets?
  • What does inflation mean for Bitcoin?
  • The long-term Bitcoin strategy
  • Is a black swan event coming?
  • Retail speculation
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My Recommended Platforms And Tools
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Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
On-chain and fundamental analysis, research, predictions and indicators, all in one place. Highly recommend.
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.
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