The Wolf Den Crypto Newsletter

By Scott Melker aka The Wolf Of All Streets

The Wolf Den #398 - Tax Loss Harvesting 101


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December 23 · Issue #398 · 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 $3600 worth. PHEMEX is also celebrating their two year anniversary by sharing 2 BTC with 10 lucky winners to help them realize their dreams:
As much as we want answers around crypto regulation, there is a loophole in our space due to a lack of clarity that we can legally take advantage of to stick it to the man. It’s called tax-loss harvesting. Wealthy crypto investors have secretly been doing it for a long time and you can too (for now).
This is a hidden advantage only available to our space that is seriously worth considering depending on your current investment strategies and positions. In traditional finance, there are parameters in place to prevent traders and investors from selling losing positions and instantly buying them back. It’s called triggering a wash sale.
Wash selling a losing position is bad because you can no longer write off that loss. But what’s great about crypto currently is that there are no wash sales. The concept simply doesn’t exist.
Let’s look at a clear definition from Investopedia:
The wash-sale rule is an Internal Revenue Service (IRS) regulation established to prevent a taxpayer from taking a tax deduction for a security sold in a wash sale. The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss and, within 30 days before or after this sale, buys a “substantially identical” stock or security, or acquires a contract or option to do so. A wash sale also results if an individual sells a security, and the individual’s spouse or a company controlled by the individual buys a substantially equivalent security.
What this means is that if you have positions that are underwater, you can exit them and potentially improve your tax situation. If you are not particularly married to the position, you can sell today, take the write-off, and move on to better investments or trades. If you do still like the position, you can also buy it right back. No harm, no foul. You take the tax write off for the loss, lower your cost basis and start again with the same coins.
I am not a tax expert, so nothing I write should be taken as advice. If you do plan on doing anything, you should only take advice from an expert. The one thing I can advise is that if you do this, you need to keep perfect records of your transactions if you plan to report the loss to the IRS - they will not do this for you.
What is great about these losses is that they can be accrued and carried over the years to offset future gains. Keep in mind that if you opt in to this strategy, you forfeit long-term capital gains advantages. Before you decide on this, you need to understand what type of investor you are so that your tax strategy best matches what you do on a day-to-day basis. This loophole won’t last forever and it may be the last year investors have this opportunity. If you want to read more about this topic, I found a good article HERE that you can refer to.
Also, people constantly ask me what service I use for my taxes. I have gone through almost every single platform in the space, which all have pros and cons. I have settled on ZenLedger. The platform is amazing and they helped me tremendously in getting my taxes squared away last year.
In This Issue:
  1. Tax Loss Harvesting 101
  2. Bitcoin Thoughts And Analysis
  3. Altcoin Charts
  4. Bitcoin’s Institutionalization - IntoTheBlock
  5. Donald Trump Despises Crypto
  6. Twitter Drama Is Boiling
  7. SBF Discusses Regulation
  8. The Wolf Of All Streets Podcast Ft. Matthew Hougan
  9. My Recommended Platforms And Tools

Bitcoin Thoughts And Analysis
Bitcoin is ranging! This is sideways chop. When price dropped a few weeks ago, I stated that I believe we would be down here for a while. That has been the case, and I see no reason for that to change as of yet. Below 53K and above 42K is simply a range that will drive people nuts. Very little that happens within that range is meaningful. Above 53K and we can start discussing bullish cases again.
Decent candle forming, but too early to tell with three days left. We will have bullish market structure, with a series of higher highs and higher lows. This would be invalidated by a break below $39,600. Price is trading around the 50 MA on the weekly, a line that was slightly broken but held in July before the massive move up. Watch that blue line.
The black descending line is the first key resistance that I want to see broken before I get at all excited. Not so close yet. Nice to see the 200 MA holding as support, for now.
Daily MACD looks great. Bullish divergence formed as I discussed a couple of days ago. We now have a clear bullish cross of the shorter moving average above the longer, and the histogram in the middle has flipped north of 0. This is very encouraging for people who use this indicator.
Now for the less exciting news. We have potential hidden bearish divergence forming, which would be confirmed with a more definitive elbow down on RSI. This is there from the daily down, which would effectively cancel the bullish divergences that we have been playing. Hidden bear divs are weak continuation signals, but do signify the end of the bull divs, if confirmed. I will be watching for a clearer signal if RSI heads more aggressively down.
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.
I also do not push many charts when the market is looking shaky, which is how I would describe it today. Paid subscribers have continued to enjoy the LUNA trade from the past few weeks, but great setups have been a bit harder to come by. I am still cautious at the moment, since there is the potential for further correction.
Also, you can check out the ELON setup from the newsletter a week ago here - it appears to be preparing for a breakout. It’s a meme coin, be very careful, as I say in the description of the setup.
I had an alarm set on the descending black resistance which went off. As you can see, price is still in a range, after deviating below slightly. Now we have a clear hold of the range lows as support, which should target the middle of the range, the EQ (equilibrium, dashed line). This is at roughly $335. That said - I would not personally buy this right here if you already missed the breakout. $252 is a key resistance, so a flip of that level to support would give more confirmation that this is a true reversal. The 50 MA and 200 MA are both above and will likely add resistance.
Either way, this is a confirmed breakout on increasing volume, which is what you are looking for to consider a trade.
If price hits the $335 target and flips it to support, the range highs are in play.
Again, this is BELOW RESISTANCE now, so you missed the first move. Better to wait for further confirmation.
Bitcoin’s Institutionalization - IntoTheBlock
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB).  ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data. 
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.
Bitcoin’s Institutionalization
For years, the crypto crowd shouted “institutions are coming.” During this bull market it has become evident that they have arrived.
Not only did public companies like Tesla, MicroStrategy and Square invest in Bitcoin, but even a nation-state acquired BTC and made it legal tender. Square went as far as rebranding to Block and is currently working on a decentralized exchange on top of Bitcoin.
Interest in Bitcoin has grown within Wall Street, with renowned figures like George Soros and Paul Tudor Jones investing and publicly backing the asset. Many more legacy institutions have indirectly gained exposure to Bitcoin by owning stocks that have BTC on their balance sheet. This is the case with Blackrock and JPMorgan owning a substantial share of MicroStrategy and Coinbase, respectively.
The growth in Bitcoin’s institutional interest is also evident in on-chain data.
Large transactions volume 4x — the aggregate volume transferred in transactions of over $100k increased by a factor of 4 from an average of $450B per week in January to $1.9T in November.
  • Large transactions volume acts as a proxy to institutional and “whale” activity, given that $100,000 minimum transactions filter out retail traders
  • The growth in large transactions volume outpaced Bitcoin’s price, suggesting that these institutions have been both large buyers and sellers
Put into context of the total volume processed by the Bitcoin blockchain, the institutionalization of Bitcoin becomes even more apparent.
99% large transaction volume share — The percentage of total volume being managed by institutions and whales reached record levels of 99.3% in the fourth quarter of 2021. This is up from 97.5% in the first quarter of the year and 58% the first quarter of 2017, arguably when Bitcoin’s institutionalization started.
Bottom-line — Bitcoin has matured as an asset, now routinely processing hundreds of billions per week. This transition did not happen overnight, but it is likely to last. As a wide range of institutions and a few nation-states continue to look into the space, institutions have indeed arrived for Bitcoin in 2021.
Donald Trump Despises Crypto
Trump warns crypto a 'very dangerous thing' | On Air Videos | Fox Business
Interviewer: I saw that Melania has an NFT.
Trump: She is going to do great, she has a great imagination.
Interviewer: What do you think about crypto?”
Trump: I never loved it because I like to have the dollar. I think the currency should be the dollar. I was never a big fan. It’s building up bigger and bigger and nobody is doing anything about it. I know it so well. I don’t want to have all these others and that could be an explosion someday the likes of which we have never seen. It’ll make the big tech explosion look like baby stuff. I think it’s a very dangerous thing.
Whether you are a Trump fan or not, it’s hard to take these comments seriously. Melania launched NFTs on the Solana blockchain, which ironically require payment in crypto to obtain. The contradicting views in just a few sentences are astounding, showing a clear lack of understanding of crypto.
I don’t blame him - most people his age will never understand or care to do the work on crypto. That’s why we need younger politicians.
That said, we are at an inflection point with crypto and politics. Our community is large enough to impact policy and elections, as seen clearly with the infrastructure bill. There are plenty of politicians on both sides of the aisle that have shown their support - we should show them ours. Crypto will become an important topic of conversation in the next presidential election.
Twitter Drama Is Boiling
Elon Musk and Jack Dorsey are talking about 'Web3' – here’s what it is and why it matters
Twitter is ablaze with an ongoing feud around Web 3.0. The concept of a third iteration of the web is still being developed, but it revolves around the idea of blockchains powering the internet in a decentralized manner. Many of referred to it as an “internet of value,” with the core idea being that money and value can be exchanged directly, just like information is with Web 2.0. Elon Musk and Jack Dorsey, the main critics of this concept, don’t seem to think that Web 3.0 is all that it’s hyped up to be. In fact, they think it’s a money grab for powerful entities, as Jack describes. The market conditions are ripe for drama, but I think their gripes are worth considering.
I have not thought deeply enough about this topic to offer a well considered opinion. I constantly discuss the institutional money that is pouring into the space via venture capital - the picks and shovels approach of investing in the companies rather than the coins. I have always viewed this as a positive - more money coming in, more development, more price appreciation. But perhaps there is a darker side that I have failed to consider, which I intend to dive deeply into. Stay tuned.
SBF Discusses Regulation
Here’s the Ideal Regulatory Framework for Crypto, According to FTX Chief Sam Bankman-Fried - The Daily Hodl
We can always count on Sam Bankman-Fried to make a complicated topic seem simple, and to propose no nonsense ideas for crypto to move forward. Here’s what he said:
“How do we get from where we are today to a truly mainstream global industry that has the consumer protection and the trust that people [are] used to?
I think that you have people going back and forth on like ‘this is a security, this isn’t a security and it has really great regulatory implications right now.
Where we need to get to I think is a world in which we say look some of these things have properties that are like traditional equities or securities. Some of them have properties, they’re like commodities.
Instead of arguing about exactly what classification they should have, let’s make sure that the sort of regulatory oversight that needs to be there is there.
And that oversight that doesn’t make sense isn’t gumming up the industry.”
According to the FTX founder, implementing regulations that normally apply to traditional assets to some aspects of the crypto industry makes “sense” but requiring decentralized projects to demand user information does not.
“Having the kind of standard controls that you see with equities around the supply, the issuance, the burning of tokens would make a ton of sense.
But you know not mandating that they fill out forms that one couldn’t fill out as a decentralized token project.”
Bankman-Fried says that in the case of stablecoins, requiring transparency on the holdings would be a reasonable step to take.
“I think with stablecoins having a website that shows they have what they say they have makes a lot of sense.”
The Wolf Of All Streets Podcast Ft. Matthew Hougan
Matthew Hougan is an expert on ETFs. As the CIO of Bitwise Asset Management, Matthew and his team bring to the table decades of experience building and promoting new financial products. As Matthew describes in the episode, ETFs are the mother’s milk of the investment world, meaning their role and importance can’t be understated. Matthew is able to explain why ETFs are the pinnacle of gateway investments that will unlock the world’s money.
In this episode, Matthew Hougan and I discussed:
  • The Bitcoin Futures ETF Rug Pull
  • Picks And Shovels Over Bitcoin
  • The Bitwise Investment Thesis
  • Security Laws In Crypto
  • ETFs Weren’t Always Trusted
  • Is Inflation Transitory?
  • Crypto Will Change The World
  • Crypto Is Growing Exponentially
  • Common Crypto Criticisms
  • What Comes Next For Bitwise?
  • The History Of Bubbles
This episode is sponsored by ARCULUS and KAVA.
Podcast - The Wolf of All Streets
My Recommended Platforms And Tools
This is where I trade with leverage and can also trade spot with no fees.
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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