The Wolf Den #488 - DeFi Under Fire

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DeFi has been under heavy fire.

During bear markets and sideways chop, it is a common trend for the mainstream media to cycle through different FUD (fear, uncertainty, doubt) narratives. Every few months, there is a new rotation of attacks, and now it seems like DeFi is in the crosshairs. About a year ago, the narrative was the environmental impact of Bitcoin mining and 6 months ago it was KYC and reporting.

The good news is that these narratives tend to die out until the next cycle.

China bans, energy, Bitcoin is “only for criminals” - these are all narratives that have repeated through each cycle.

Have you noticed that many of the popular aspects of DeFi have come into question the past month or so? I’ve seen staking being labeled as a “scam,” yield farming a “ponzi,” and algorithmic stablecoins a “house of cards.” From the outside looking in, it seems like DeFi is hanging on by a thread.

DeFi exploded in the beginning, being viewed as a potential new global financial system that would crush legacy competition. The mainstream caught on and DeFi summer of 2020 was the result. Anything labeled DeFi exploded to the upside, regardless of quality or longevity.

Sentiment cannot stay that strong indefinitely.

Like a pendulum, sentiment swings in both directions. Credible investors and analysts much smarter than myself are now raising legitimate (and illegitimate) concerns around DeFi. Sentiment is well past neutral - in the wrong direction.

When enough FUD has piled on, we will likely have hit the opposite side of the pendulum swing. Along the way, a lot of the actual scams, ponzis, and grifts will die, but the strong will survive. There are some truly innovative and world changing projects out there, and the original promise of DeFi is unchanged. If there ends up being a great culling, quality projects will emerge from the ashes. If there is no culling, the weak will slowly bleed out over time. The strong will still prevail. Given enough time, good projects will win either way.

First, I am not saying that the claims are unfounded. I am simply saying that sentiment is in the dumps. Second, the truth usually lies somewhere in the middle. It’s not as bad as the bears want you to fear and it’s not as good as the bulls want you to believe.

If you invest in quality, you will almost always be okay. When it rains, it pours, so quality companies are being dragged down as the “bear market” persists.

When the raging bull market returns, all FUD will be quickly forgotten.

Bitcoin bounced yesterday as predicted by bullish divergences across multiple time frames.

Now price is back at the key $39,600 level, so it will be interesting to see what comes next. Not much has changed from the chart yesterday - key levels remain the same.

Bullish divergence confirmed. Now we need to make sure we don’t get hidden bearish divergence, with a higher high on RSI and a lower high on price. In other words, we need to see strong follow through.

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.

Yesterday, I shared a number of coins that were testing support, many oversold and showing bullish divergences on various time frames. For now, they have all bounced and are showing promise. If you bought any of them, you are likely in profit for the moment.

SOL/USDT

DOT is another coin that is bouncing from a key level of support. It also has clear bullish divergence with RSI on the daily, which was confirmed yesterday when RSI closed with a clear “elbow up.”

If you are looking for further confirmation, you can wait for a break of the descending blue line and potentially even a retest as support.

This should be the bottom for now, or close.

I shared this yesterday as price was bouncing from support. As you can see, three candles in a row basically tested $94.55 successfully.

If you are looking for confirmation, it is often helpful to draw a descending line from the top of the move, as I showed with DOT above as well. SOL appears to be trying to breakout now. Traders who don’t mind a bit of risk will often buy the breakout. More conservative traders generally wait until a candle closes above the line.

Almost every coin looks the same. Happy hunting for now.

I was featured in a CoinDesk article ages ago on how to “Stay Sane While Trading Crypto.” I wanted to share it again, because I believe that these 15 tips are essential. It’s always good review the basics and tweak your system.

Trading is both demanding and draining, especially if you have been grinding through a choppy market.

The New York State Assembly has officially passed a sweeping two-year ban on mining operations using fossil fuels in the state. I’ve talked ad nauseam about the impact that mining has on our environment, so it’s sad that regulators have decided to target mining over the laundry list of commonly accepted environmental blunders. 

I can understand regulators caring about the environment, but it feels like they are unfairly targeting Bitcoin. NY already has a chokehold on the crypto industry with the Bitlicense. They are notoriously the most difficult state for crypto enthusiasts.

Last year, El Salvador shocked the world and made Bitcoin legal tender. We finally have a second domino - the Central African Republic. After a unanimous vote in parliament, President Faustin Archange Touadera signed the bill into law.

By no means is the Central African Republic a superpower. According to recent data polls, the country has just shy of 5M people, and only 11% have access to the internet.

The small countries that adopt Bitcoin early will have an edge in the world to come.

We’re joined today by the third richest man in Mexico, Ricardo Salinas , who shares his story on how Bitcoin helped him rise from the ashes of a devalued company and a family of gold bugs. We cover a lot in just 10 minutes, including what Ricardo does for fun, where Bitcoin is falling short, and the fiat fraudsters.

In this episode with Ricardo, we discussed:

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