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The Wolf Den #335 - Saving. Stacking. Spending. Trading.

September 23 · Issue #335 · View online
The Wolf Den Crypto Newsletter
This newsletter is sponsored by PHEMEX, the world’s best crypto exchange for both spot and leverage. Sign up with the link above and get some free Bitcoin - up to $1200 worth. I really encourage you to check them out.
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I hear it all the time, “Bitcoin is only for ____”
Saving. Stacking. Spending. Trading. Collateral. Balancing. Privacy. Collecting. Interest. Hedging.
Everyone has a different idea of what Bitcoin is for - that’s the beauty of Bitcoin. It’s versatile and multifunctional, a digital swiss army knife benefiting people around the world in unimaginable ways. Bitcoin is intended to revolutionize our global financial system - no single purpose listed above is sufficient. It may seem trivial to make this point, but there are two issues with the statement “Bitcoin is only for.” 
The first issue is that it’s limiting and minimizes the potential for mass adoption. It should be a common goal for all Bitcoiners to champion the many purposes it serves in every corner of the globe. I can’t help but think back to my interview with Ray Youssef from Paxful. He described first-hand accounts of mothers in Africa using Bitcoin to buy goods for their newborn babies. For them, Bitcoin holds its value better than the native currency of their country and is a superior form of money. This is one small example, but you get the point - it’s time to celebrate Bitcoin in the many ways it’s used around the world. The second issue I take with the statement “Bitcoin is only for” is more relevant to readers and traders.
As Bitcoin appreciates in value and maximalists are growing in their conviction, there are more and more people saying, “Bitcoin is only for saving - never spend your Bitcoin.” This idea may be financially sound for that person, but it does not make sense for many. Taking profits should be celebrated rather than criticized. Not everyone has the privilege to never sell their stack or to take loans against it for the rest of their lives. This rhetoric is dangerous because it negates the very reason Bitcoin grew in the first place – freedom. Governments have always controlled the money. Some members of the Bitcoin community want to influence how we use our Bitcoin and limit its freedom. 
Furthermore, inexperienced bag holders that look up to people that say, “never spend or sell your Bitcoin” now run the risk of holding a bag through the next bear market rather than taking profit and securing themselves financially. Don’t fall victim to believing Bitcoin has one purpose. Do yourself and Bitcoin a favor by celebrating its versatility.
You make sure YOU stay true to the reason YOU bought Bitcoin - Bitcoin is only for YOU.
To my free members (I love you!) - paid members receive emails like this at 5 times a week - Monday through Friday. Every Wednesday I chart any request sent by my paid members, often over 30 or 40 charts. It’s a ridiculous amount of work, but I do my best to add real value to anyone who subscribes. If you would like to join the paid side, you can do so for $15 a month here.
In This Issue:
  1. Bitcoin Is Only For You
  2. Bitcoin Thoughts And Analysis
  3. Altcoin Charts
  4. Legacy Markets
  5. Chart Requests
  6. Evergrande 101
  7. Robinhood Crypto Wallet - Exclusive Interview
  8. Tom Brady Is Not A Top Signal
  9. Dutch Football Team Adds Bitcoin To Balance Sheet
  10. JP Morgan Says Institutions Want Ether
  11. The Wolf Of All Streets Podcast Ft. Paolo Ardoino
  12. My Recommended Platforms And Tools

Bitcoin Thoughts And Analysis
September has historically been a down month, which could be the case once again in 2021. That said, for now price is still holding the EQ (equilibrium, center dashed line) of the channel as support, which gives targets of 6 figures at the top of the channel. We want to continue to see that EQ hold as support, regardless of the color of the candle. This would likely set us up for a hell of a Q4.
As I mentioned before, we temporarily lost 42K on the daily chart, but it is far more important that it holds on the weekly. For now that is happening, and you have to love the bounce for the moment. This does not mean we have a reversal yet - the weekly still has 3 more days before the close. Nothing is remotely confirmed. The higher this candle closes and the longer the wick, the more bullish it would be. If it closes below the 42K level, I will be looking for more downside.
At this moment, we have a clear lower high at 53K from the 65K all time high, so we are looking for a higher low.
Crazy price action. As you can see, the daily closed below 42K and back in the 3 month trading range (red), before pumping and closing back above. There was less volume on the rise than the drop, so we want to see increasing volume and price continuing further to confirm this reversal. If you want to play it safe, consider the descending blue line as the key resistance that would confirm that downside is complete. Wait for a break of that line.
For now we have a clear reactionary bounce to price dropping hard into an area of interest, but no confirmation of a full reversal.
The daily Bollinger Bands are widening, indicating more volatility to come. People interpret this different ways. We have a bounce off of the lower band, which means it found support. But historically, when you see price choose a side and the bands widen, you expect continuation. At this point, that would be to the downside, so proceed with caution. The centerline of the bands is now curving down, which should be strong resistance if price continues up.
I have shared this idea a number of times because it is important. On ANY impulsive move up or down, you expect a reactionary bounce of around 50%, which does not indicate a reversal, but rather that standing orders are being filled and that traders are covering their positions in profit. As you can see, price has bounce almost exactly 50% back after the drop from around $48,800 to $39,500. This indicates, once again, that we have a normal reactionary bounce and not necessarily a reversal. We need to see follow through here on volume, not weakness.
Altcoin Charts
For new members, I do NOT SHARE SIGNALS, I share SETUPS. That means that I am looking for “if, then” situations. If a coin does a certain thing, then you can consider an entry if it fits your personal system. NEVER just buy a coin that is listed here or shared by someone anywhere else. Many setups never trigger, which is fine - no confirmation, no trade, no loss.
Also, Bitcoin is not out of the woods. If it drops again, that will likely be bad for altcoins. BE CAREFUL. Part of risk management is knowing when to sit on your hands.
If FTT breaks the descending blue line on increasing volume and closes above, then you can consider an entry. This is AT RESISTANCE at the moment, and is not a buy. We want to see a break of the blue line and ideally a retest as support for an entry. If this happens, the target is the top of the blue line at .0018203.
Zooming out to the daily, you can see that the black line was the previous all time high which is being tested as support - this is generally a bullish signal. The break of the descending blue line on the 4-hour is added confirmation.
A break down of .001980 would be a clear signal this has failed and would also trigger a likely head and shoulders. So there is a clear invalidation on this idea.
If Matic breaks $1.25 and closes above, then you can consider a trade. Right now it is AT RESISTANCE like many coins, which means you have to wait and see what happens. It bounced perfectly off of the support at $1.01, something I discussed was likely if there was a drop. Now we want to see a break of $1.25 and flip to support, which would target the next level at $1.71.
Legacy Markets
I shared this idea a couple of weeks ago, saying that this could be a good potential entry if price dropped down to the ascending support. That’s what happened, so now we have a nice trade idea with good risk/reward. I like buying ascending support, because if you are aggressively trading the asset, you can move up your stop loss below support as price rises. For me, this looks like a likely ascending triangle is forming, which would be confirmed with a break of $40.34. That is a long way away, and is actually the first target of this trade.
This will largely depend on the movement of Bitcoin, but it’s easy to take a small loss on this if things go south. That is what trading is about - accepting small losses and taking trades that allow for it.
Chart Requests
Every Wednesday, I take requests from paid subscribers and look at their charts on a livestream. Below is a link to yesterday’s charts. You will notice that we were seeing quite a few reversal signals, although nothing was set in stone. Today will be important for seeing follow through.
Evergrande 101
Evergrande is the train wreck that the financial world and media can’t help but watch. Here’s breakdown on the story:
The Evergrande Group is a Fortune 500 real-estate developer with headquarters in Shenzhen, Guangdong, China. It was founded by Hui Ka Yan in 1996 in Guangzhou. It’s a big business: as recently as 2020, it had sales of >$100 billion and adjusted core profits of ~$5 billion. At its core, it’s a homebuilder business. Its website states that it has over 1,300 projects across 280+ cities. But it has pushed the boundaries, making investments in EVs, an internet and media production company, a theme park, a soccer club, and a mineral water company.
As a developer, Evergrande had to contend with a highly cash-consumptive growth profile. Building a new project may take many months and requires a lot of cash outflows along the way. Cash collections (from buyers) come later, with the exception of smaller upfront deposits.
So how did Evergrande fund its impressive growth?
Debt - it borrowed aggressively, even by real estate property development standards. It became the world’s most heavily-indebted developer, with a debt load of over $100 billion and over $300 billion in liabilities.
As is pointed out in the brilliant thread below, there is a bit of a moral hazard problem that was created along the way. Evergrande was largely indifferent to pricing on the land it was purchasing, knowing that the risk would be passed off to banks financing the purchases.
Girolamo Pandolfi da Casio ditto Carlo Dossi Erba
One common practice of these construction companies,a game Evergrande excelled at, was to bid land at prices significantly higher than market. It didn’t matter to them, coz the risk got transferred to flat buyers and banks that financed the purchase.
The debt-fueled growth propelled Evergrande (and its now billionaire founder) into an elite class. It entered the Fortune 500 at #496 in 2016 and reached #122 by the latest ranking. But debt is a double-edged sword—and Evergrande was due to catch the other edge. As its debt burden grew, so did the interest payments on that debt.
This is (mostly) fine, so long as revenues and profits—with which you can make these payments—continue to grow. But if the growth or profitability slows (or government restricts borrowing!), it’s…not fine.
Imagine a metaphorical boa constrictor tightening its grip on its prey. You can try to borrow more to make your payments, but that only fuels the snake. Moreover, the knowledge of your precarious position increases risk and makes that borrowing more challenging and costly. In Evergrande’s case, the snake tightened its grip in 2020.
It had its first major liquidity scare—a potential inability to meet its liabilities—sending a letter to the local government warning that upcoming payments could cause a crisis with systemic financial sector risks. As with most de-leveraging spirals, there is a technical side (inability to make payments) and a psychological side (the knowledge of instability impacting your market standing).
The psychological is damning.
Reports of the letter sent Evergrande’s stock and bonds tumbling. The short-term crisis was avoided—an investor group didn’t force a big repayment—but the long-term remained. Dornbusch’s Law says that crises take longer to happen than you expect, but then happen faster than you ever could have imagined. This proved true for Evergrande…
To meet its ever growing obligations, Evergrande began tapping into “creative” financing strategies. It pushed employees to provide short-term loans to the company—which it called “high interest investments”—in order to ensure they received their year-end bonuses.
But the company quickly fell behind, missing payments earlier this month and leaving thousands of employees in a lurch. With over $7.4 billion of bond payments due in 2022, and large interest payments coming up, the crisis appears to be accelerating.
To reiterate, the psychological side is just as impactful as the technical.
It was recently reported that Evergrande was offering to sell properties at a deep discount—indicating a fire sale required to make its payments and sending further panic spiraling into the market.
Protests have broken out at Evergrande offices in China—with up to 1 million homebuyers left in a devastating limbo, having paid deposits upfront for homes that may never be built. The media narrative cycle of demise ramped up in earnest and further fueled the fire.
Importantly, the Evergrande situation poses a systemic risk to the Chinese economy. With deep ties to financial institutions and working class consumers across China, a disorderly collapse would have far-reaching impacts (financially and emotionally).
But China is caught in a very tough spot.
Act quickly with a bailout and be viewed as condoning the financial excess that led to the problem. Fail to act and allow the collapse to ripple through the entire economy that is just recovering from COVID shocks of 2020/21.
The Evergrande situation will undoubtedly continue to play out in public in the days and weeks to come.
Robinhood Crypto Wallet - Exclusive Interview
The Wolf Of All Streets
Going live momentarily with @vladtenev, CEO of @RobinhoodApp to discuss their crypto wallet and plans for the future. Don’t miss this.
Being able to send and receive coins is one of the most essential properties of a good crypto service. Robinhood’s users have been demanding this functionality for a long time, and the wait is finally over. Robinhood asked me to do an exclusive interview with their CEO, Vladimir Tenev, to discuss their plans for crypto in the future. I was ecstatic to take the opportunity. I had the opportunity to the burning questions on everyone’s mind on a live Twitter Spaces late last night. The interview will release soon on YouTube if you missed it, but below are some of my takeaways.
Based on my 30-minute conversation, the future looks bright for Robinhood, a company that has taken more than its fair share of criticism, even from me. The official wallet is ironically dubbed the “Wen Wallet” and should release Q1 of next year. Vladimir went on to hint that Robinhood has no intentions of stopping at just adding a wallet, and they, “anticipate shipping more utilities.” They will likely add features such as staking and lending, which were mentioned in the interview. I also found it interesting that the reason why Robinhood didn’t initially offer this feature was that they wanted to keep it simple for their customers – the intentions were good. This clearly changed as the demand became apparent for the feature, and Robinhood listened to its users.
We also went on to discuss the regulatory environment, cryptos place as an asset in the future and Robinhood’s place in context.
The feedback surrounding the announcement has been overwhelmingly positive and tens of thousands of people have jumped on the waitlist to be the first to have access to the Wen Wallet. Robinhood is poised for redemption and clearly wants to be the best of the best - this is a huge step in the right direction.
Tom Brady Is Not A Top Signal
NFL Legend Tom Brady Looking to Get Paid in Crypto - BeInCrypto
It’s fun to see our favorite athletes and celebrities genuinely enjoying cryptocurrency. We often joke that each time a celebrity adds laser eyes to their profile, tweets about finally buying or crypto or sell and NFT that we are the “top.” I genuinely believe Tom Brady is enjoying his foray into crypto and that he is not a “top signal.” He is simply a leader showing the world the way.
I’d love to request that to get paid in some crypto and, you know, to get paid in some Bitcoin or Ethereum or Solana tokens. I think it’s an amazing thing that’s happening in the world with the way the world is becoming more digital. And these digital currencies, along with a lot of, if you look how the way the world is going, with all these different digital mediums and how they’re impacting currencies.
Tom gets it. Tom is early. A lot of celebrities will want to be like Tom. We should be like Tom.
Dutch Football Team Adds Bitcoin To Balance Sheet
PSV Football Club Holds Bitcoin On Balance Sheet - Bitcoin Magazine: Bitcoin News, Articles, Charts, and Guides
Yes, we all want Apple, Walmart, and Amazon to adopt crypto, but until then, we will have to celebrate the early pioneers that nobody saw coming. PSV, the Dutch football team, announced a partnership with Bitcoin exchange Anycoin Direct, but nobody was sure if the club would be HODLERs. I turns out, “the club has been self-custodying all the Bitcoin received through the sponsorship since August, with no plans to sell it.” It will be an exciting day when the big boys show up, but until then, it’s important to not forget the little guys that took the first step.
JP Morgan Says Institutions Want Ether
JPMorgan Claims Institutions Are Ditching Bitcoin for Ether
“In a recent note, JPMorgan analysts claim that Ethereum is seeing “much healthier” institutional demand compared to archrival Bitcoin.    
The American megabank points to the fact that Bitcoin futures offered by Chicago-based giant CME Group have returned to backwardation.
There has been a steady decline in the number of Bitcoin futures contracts traded on CME since August.
On the other hand, Ether has seen a sharp increase in open interest over the same period of time.”
This is a clear indication that volume and interest are flowing into Ethereum, and that there is an expected gain on futures (contango). As stated above, the futures price is Bitcoin is in backwardation, meaning trading below the current price. This will be interesting to watch.
The Wolf Of All Streets Podcast Ft. Paolo Ardoino
Podcast - The Wolf of All Streets
As the CTO of both Bitfinex and Tether, Paolo Ardoino is solving the greatest challenges of the crypto space. This episode takes a deep look at some of the most important topics regarding stablecoins - how they will scale, whether they are securities, if banks will use them, and the risks associated with their use. This is a master class on everything stablecoin related, valuable for both newcomers and experienced users of this revolutionary financial product.
Paolo Ardoino and I discussed:
  • A CTO’s Life at Bitfinex and Tether
  • Bitfinex and Tether’s relationship
  • Keeping the exchange online at all costs
  • Scaling for mass adoption
  • The beauty of stablecoins
  • Will banks use stablecoins?
  • Risks associated with stablecoins
  • Stablecoins in the real world
  • How noobs can use stablecoins
  • Layer 2’s are built for mainstream adoption
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My Recommended Platforms And Tools
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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
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Subscribe to my YouTube channel for free daily content.
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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