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The Wolf Den #345 - History Doesn't Repeat Itself, But It Often Rhymes

October 7 · Issue #345 · View online
The Wolf Den Crypto Newsletter
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“History doesn’t repeat itself, but it often rhymes” – Mark Twain
There is a strong tendency for markets to behave in similar patterns over time. Crypto markets are no less cyclical - in fact, they are often more predictable than other assets.
It is possible that we are seeing a mini-cycle play out. You have likely heard this story before.
Simply stated, liquidity in the crypto market often flows down hill and we see some variation of the following.
Bitcoin —> Large Caps –> Mid Caps –> Small Caps –> Bitcoin (repeat).
Phase 1 starts with a strong move from the king. When Bitcoin finally begins to break out of a mid to long-term range, we can almost always count on a series of events to play out. The momentum and reliability that follow is a dream for traders of all styles.
After Bitcoin finishes its run and consolidates, there is often an epic spillover of profit-taking and excess liquidity flowing into the majors. The majors are coins like Ethereum, Cardano, Solana, and Polkadot - the large caps at the top of the pecking order by market cap. There is no exact science, but as a general rule of thumb, the top 20 or so coins begin to perform well when Bitcoin cools off. This cycle may be slightly different, as many large caps already had massive moves recently, but I anticipate the general trend of liquidity flowing from Bitcoin to altcoins to be similar.
After the majors take their turn, liquidity flows down the chain into mid caps and then small caps - full-blown alt season tends to commence. The altcoin that you are holding that hasn’t moved in months may finally take its turn as the entire crypto market is lifted by the rising tide. At this point, everyone who has been patient has a chance to win.
Why does this tend to happen?
Bitcoin and Ethereum represent the lion’s share of the total market - BTC is 45% and ETH is 18%. Coins #3 - #10 represent about 16.5% of the total market cap and #11 - +#10,000 represent 20% of the market cap. The weight of the market is extremely skewed to the top few coins. It isn’t even close.
Think about that for a second.
Ethereum is larger by market cap than the next 8 coins combined, and roughly equal to all of the coins from #11 to the bottom of the list. It is easy to forget how large Bitcoin and Ethereum are compared to everything else, because we tend to be wrapped up in our favorite coins. The good news is that the spillover effects from these two are generally HUGE.
If Bitcoin continues to rise, you know what to expect. If it consolidates at this level, then the fun may begin once again for altcoins.
History does not always repeat, and this time can always be different. But it’s good to look at the past to help predict what may happen in the future.
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 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. History Doesn’t Repeat Itself, But It Often Rhymes
  2. Bitcoin Thoughts And Analysis
  3. Altcoin Charts
  4. Legacy Markets
  5. Chart Requests
  6. Make A TradingView Chart Your Own
  7. 110 Countries Are Exploring CBDCs
  8. Ethereum 2.0 Is on Schedule
  9. South Korea Will Tax Crypto, But Not NFTs
  10. Moneygram Customers Will Be Able To Convert Cash To USDC
  11. Elitium Update
  12. The Wolf Of All Streets Podcast Ft. Chris and Charlie Brooks
  13. My Recommended Platforms And Tools

Bitcoin Thoughts And Analysis
The Bitcoin bull run has been epic, with price rising roughly 35% in 7 days. This has put Bitcoin back over a 1 trillion dollar market cap, making it larger than Facebook. The charts look overextended, to say the least, so some consolidation would be expected, but not guaranteed. Bitcoin can run overextended for a long time, but it is worth noting that funding on leverage sites and open interest are rising fast, meaning that people are once again FOMOing into leveraged longs. That usually leads to at least some downside to reset the market before continuing up.
Time to share this chart again, because it is my favorite.
Ascending channel since 2013, flipping the EQ (centerline) to support with 6 candles in a row. Simple target is the top of the channel. This gives us easy targets of 6 figures. The longer it takes, the higher the target.
When in doubt, zoom out.
The “lower high” at $52,944 has been smashed to bits. We ideally want to see the week close above that level, but in my opinion, the wick counts and that lower high is now invalidated.
That was the core of the bearish case, which was valid… until yesterday. “Bearish” market structure is now broken.
If you take a resistance line from the all time high to that lower high around $53,000, you get the blue line shown above. That also has been broken, so we really want to see that breakout hold.
There is strong resistance in the blue zone ahead. This is a supply zone, left behind when price dropped. I will explain that concept below in the DAILY CHART section.
Things are looking good. Really good.
Resistance. I have had this red zone on my charts for months, because it is a key level on the daily. This represents a supply zone, drawn off the last “up candle” before the major drop in May. Why is that resistance? Because tons of orders are always left behind when a coin makes a major move. Traders that were looking to sell a bit higher saw price dump massively. This is the first time price is coming back up to fill their sell orders, after about 4 months. That is what causes supply and demand zones.
I would expect price to consolidate below this level, because it will need to gain strength to push through.
The descending resistance on RSI that I shared a number of times was ultimately the perfect signal for this move. Keep that in mind as a strategy moving forward, because it broke out a day before price.
You can see that RSI tapped overbought on the daily yesterday. Eventually it will make a trip to oversold, but that can literally take a year. For now, we want to see a strong push into overbought with price rising dramatically, avoiding any bearish divergence in the process.
Bitcoin is out over the front of its skis. As you can see (and as I predicted), price is now trading above the upper Bollinger Band after a huge move from the lower band, through the centerline and up. As I mentioned, we expected increased volatility with the expansion of the bands, and since price was in the upper half, that usually means of a test of the top band. Now we are above it, so we expect to revert a bit to the mean before continuing to track the upper band higher. Price can push that upper band for quite a while - look at the far left of the chart.
These are the levels to watch on lower time frames. As you can see, there’s a key support below that has not been retested, which is the level that gave us the higher high on the weekly chart - just below 53K. That is a very likely place to be tested as support. If I was not in and was feeling bullish, I would be placing more bids here. You can see the perfect resistance to support flip around $50,400 yesterday that I put in the newsletter as it was happening.
Altcoin Charts
I do NOT share signals in this section. I share setups and charts that I am watching, in an effort to help show you how I view a chart and what criteria would be necessary for me to consider taking a trade. NEVER blindly buy something because it is listed in a newsletter or posted on twitter. You need to have a plan when you enter a trade. These are just ideas, and are almost always “if, then” scenarios. If a certain set of things happen, then I would consider a trade.
At the moment, the Bitcoin move looks a bit overextended to me in the short term, meaning that altcoins may have an opportunity to shine, albeit temporarily if Bitcoin runs again. This is always hard to predict, as Bitcoin can have a mind of its own.
Remembers, USDT pairs largely depend on Bitcoin either rising or remaining stable.
This trade is actually about to hit it’s target - about a 2x in 2 weeks. Not bad. We had 2 entries - the black circle and the break of the blue descending line.
Now that price is reaching the target at the all time high, we can watch for a flip of that level to support. A break and close above $1.94, would send this into price discovery for a new all time high - one of my favorite trade setups.
To be clear, at this point we are coming into resistance, it is not a buy. The trade would be a break of $1.94 and then a retest of that level as support, if it happens.
If you are already in this trade, you can manage it a few ways. You can exit at resistance completely, but I would rather take some profit there and let the rest run for higher potential targets, moving up my stops on the way.
I have posted this a few times, but it continues to look more bullish in my opinion. You can see that price has had a few macro breakouts through descending resistance, so the all time high is still the ultimate target.
Price continues to hold $1.25 as support, giving us a more immediate target of around $1.79 at the next resistance. Further, price has now formed a bull flag, consolidating above support. The safest entry here at this point is a break of the top of the flag. The $1.25 support has been tested quite a few times, so I prefer playing the flag rather than support. I am already in from FAR below, like many newsletter subscribers (under 6 cents), so this is for people looking for a fresh entry.
This is a recent setup that I shared. My alarms just went off, as resistance is being broken. The safest play is to wait until we have a confirmed closed above the flag, avoiding a potential fake out and close back below resistance. You can either buy there or try to wait for a retest of the flag as support, which may never happen. More aggressive traders may choose to buy now as resistance breaks. Either way, we have been watching this for over a week, and this is the breakout that we were hoping for.
The target is based on the green flagpole, around $1.61. You take the flagpole and pull the same length up to the point of breakout to extrapolate this target. Expect resistance in the blue zone.
Solana had a recent breakout from consolidation when it passed through the blue line and retested it as support. That simple move has a target of $216, the recent all time high. That said, there was also a horizontal resistance to clear at $152.5, which has now been tested as support successfully with yesterday’s daily candle. Today’s candle is also testing this level as support. If this support holds, I expect price to eventually reach that higher target, and then to continue on into price discovery for new highs.
If you are a scalper or trade with tight stops, any close below $152.5 would invalidate the local idea. I would not personally use a stop that tight on an asset I expect to rise massively over time, but that’s the short term trading approach.
Legacy Markets
MicroStrategy stock price is largely dependent on the bullishness of the crypto market. That’s a good thing at the moment. As you can see, MSTR managed to flip both the 50 and 200 MAs back to support, as well as break through descending resistance. Yesterday’s candle leaves a bit to be desired, because of the gaps up and the doji which could form a bit of an “evening star.” I don’t think it’s an issue, as it’s not in a clear uptrend, but some would proceed with caution.
We want to see bullish follow through today. Either way, this should continue to rise after repeated breakouts through descending resistance.
Here is more information the “evening star” pattern.
What Does Evening Star Mean?
Chart Requests
Every Wednesday I take chart requests from my paid newsletter subscribers. My team chooses the most popular 25 and I take a look at the charts, live on YouTube. Enjoy!
Make A TradingView Chart Your Own
How To Make TradingView Charts Your Own - The Wolf of All Streets
Quick life hack! When someone shares an embedded chart like I do in this newsletter, you can save yourself a lot of time and make that chart your own. Of course, you should never share it as yours, but this does allow you to add and subtract from it, track ideas and use it as an educational tool. Instructions are simple and listed in the article above.
110 Countries Are Exploring CBDCs
110 Countries Are Exploring CBDC At Some Stage, Says IMF Managing Director |
The managing director of the IMF recently gave a talk focused on digital currencies and the CBDC research conducted by the institution. In the speech, it was cited that “we did a survey of our membership and it was very impressive how many countries were exploring CBDCs, 110 to be exact. That’s more than half of the central banks in the world are at some stage of exploring Central Bank Digital Currencies (CBDC).” China is already closing in on their own fully operational CBDC, so all it will take to see a flood of CBDCs coming into existence is a few more large countries adopting the concept.
CBDCs will likely be a net negative for individuals, giving Central Banks perfect control of the money supply and removing privacy from our transactions. That said, every person on the planet will learn to transact digitally with a wallet, meaning that the barriers to entry for superior forms of digital money like Bitcoin will be removed. It will be a major positive for crypto.
Ethereum 2.0 Is on Schedule
Critical Bug in Ethereum 2.0 Staking Pools Safely Patched - Crypto Briefing
One of the popular methods used to prepare a protocol for a major upgrade is to offer a bounty to the community for locating bugs. Projects that rush upgrades to market run the risk of a catastrophic, unforeseen event. Just last week, Compound Finance lost over $80m from a bug.
A critical bug was found in an Ethereum 2.0 staking pool that would have allowed a hacker to remove funds freely if they chose to do so. Interestingly, the bug was found and reported by the owner of a rival Ethereum 2.0 staking pool. The developer saved the competition from complete disaster. It is always wonderful to see teams and communities coming together, incentivized to do the right thing for the common good. Things are looking great for Ethereum 2.0.
South Korea Will Tax Crypto, But Not NFTs
South Korea Will Tax Cryptocurrencies But Not NFTs
“At the National Assembly’s annual review on Wednesday, Minister of Economy and Finance Hong Nam-ki said the government plans to start taxing virtual asset gains from the coming year. However, when asked about taxing NFTs, the minister said the issue of whether NFTs are categorized as virtual assets is still under discussion — adding that NFTs are not currently classified as virtual assets in the income tax law.”
Regulation is inevitable in any major country, so any clarity is helpful for advancing the crypto cause. This seems like a reasonable approach for South Korea, which could set precedent for other nations to follow.
Moneygram Customers Will Be Able To Convert Cash To USDC
MoneyGram Partners With Stellar and Circle for Blockchain-Powered Near-Instant Money Transfers | Cryptoglobe
This is huge news.
Moneygram is one of the world’s largest money transfer companies, and in a partnership with Stellar will be allowing customers to use USDC.
“According to the press release, this partnership will “enable cash funding and payout in local currency for consumers using USDC, as well as near-instant backend settlement capabilities.”
Consumers will be to “seamlessly convert USDC to cash, or cash to USDC,” which “increases the utility and liquidity of digital assets while also enabling more consumers to participate in the digital economy.”
Also, this partnership means that “settlement with MoneyGram will occur in near-real-time using Circle’s USDC,” which should allow “an accelerated collection of funds, improving efficiency and reducing risk.”
This is what mainstream adoption looks like. Get used to it.
Elitium Update
Earn Up To 8.1% Per Year On USDT, PAXG, And EUM
Almost a year ago, I announced an investment in a company called Elitium (EUM), when I purchased a masternode (100K coins). I still hold this position and intend to for the long term.
The team has just launched their v2 product, which I have been using and enjoying.
For those that have never heard of Elitium, it’s an easy-to-use platform for investing in DeFi assets and groundbreaking NFTs. It’s similar to BlockFi Nexo or Celsius… but you get a personal key account manager giving you on-demand support, instead of you just being another number in the system. 
Here are the highlights:
  • Instant transactions and 0% fees
  • Three layers of insurance coverage
  • DeFi plans (Earn up to 8.1% a year on USDT, GBP, EUR, & Gold)
  • Min deposit = $25,000 (Elitium is a high-touch service, personalized for each investor)
  • Earn up to 8.1% APY by staking EUM 
One of the reasons that I chose to make the investment in their company in the first place is that they never had an ICO. This means that there is limited downside sell pressure and no investors in at an extreme discount. Furthermore, you can earn a competitive yield on their platform and there are no transaction fees. I also like the fact that, due to Elitium using a native token to power its platform, people deposit funds in the platform, which results in upward buying pressure on EUM. 
If you are interested in joining Elitium, they were kind enough to offer readers of the newsletter the chance to skip the waiting list if use this link here.
The Wolf Of All Streets Podcast Ft. Chris and Charlie Brooks
Podcast - The Wolf of All Streets
Being your own bank comes with a great deal of responsibility. Chris and Charlie Brooks are a father and son duo that teamed up to save investors from themselves. Everyone is prone to making mistakes with crypto, so these two guests became experts at recovering lost funds that many believed they would never see again. Chris and Charlie Brooks shared incredible advice on proper storage techniques. Listen to the episode and learn, instead of having to hire them later to recover your coins.
Check out their company Crypto Asset Recovery here.
In this episode, Chris, Charlie, and I discussed
  • Running a family crypto business
  • Why was Crypto Asset Recovery started
  • How do people lose their funds?
  • What was the largest amount ever recovered?
  • The unknowns of cracking a wallet
  • What is a brute force attack?
  • Common recovery mistakes
  • Are we ready to be our own bank?
  • Why do cryptocurrencies matter?
Episode sponsored by Arculus:
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My Recommended Platforms And Tools
This is where I trade with leverage and can also trade spot with no fees.
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. Code Wolfsden50%off for a 50% discount on the first month.
This is where I invest, commission-free. They now let you earn interest on your Bitcoin held in Voyager, so you can compound while trading. Not only that, you’ll get $25 in free BTC when you download & fund.
Rewards Code: WOLF25
Mining for everyone! You can buy an ASIC and have it set up at a destination of your choice by them, and you only pay the electricity cost. Absolutely awesome.
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
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.
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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