The Wolf Den Crypto Newsletter

By Scott Melker aka The Wolf Of All Streets

The Wolf Den #492 - Timing The Market





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May 4 · Issue #492 · View online
The Wolf Den Crypto Newsletter
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One might expect institutions to be nearly perfect in timing their crypto purchases. After all, they are whales with access to endless resources.
The past year has shown that not even major institutions can time a Bitcoin top or bottom. CEOs appear to be geniuses when they publicly announce their purchases and price skyrockets, but they are not immune to the corrective nature of Bitcoin. During the current Bitcoin corrections, MicroStrategy, Tesla, and Square have all seen at least some of their trades in the red. Let’s take a closer look.
MicroStrategy owns the most Bitcoin of the corporate giants and has executed the most trades to accumulate their stack. By my count, Michael Saylor has publicly bought Bitcoin roughly 15 times. Of these 15 times, I would guess that at least ¾ths of them have gone straight into the red just within days. It’s pretty much become a meme at this point that MicroStrategy buys the top, although it’s untrue. Remember, Saylor has endless resources and advisors, yet he still timed the market “poorly” most of the time. Some argue that Saylor is a fool for continuing to buy Bitcoin regardless of price. Couldn’t have just waited until now when the price is dropping?
The above perspective is an incredibly foolish way to view trades and investments. Saylor was not trying to time the bottom, he was merely adding to his stack as his resources allowed. That’s a sound investing strategy - dollar cost averaging on a grand scale, even if he is forced to average up.
Square made its second Bitcoin purchase for an aggregate price of about $50,000 per coin. By the above logic, Jack Dorsey had worse market timing than Saylor. And Tesla saw a negative return for a short amount of time from the previous correction. Perhaps worst of all in the eyes of naysayers? Tesla’s “late” arrival to the game. Elon could have bought much sooner and for far less.
The excuses and terrible takes are endless, but given enough time, all three of these men and their companies will likely be viewed as geniuses by even their staunchest critics. As traders and investors, we are no different than the corporations above - we are merely operating on a smaller scale. Hindsight is 20/20 and we can all look back with regret for “not buying earlier” or for poorly timed purchases. Things change. Through time we may have access to more cash, similar to how MicroStrategy sold bonds to raise money, or our conviction may grow, similar to how Square doubled down on their position after Q4 interest affirmed their thesis on Bitcoin.
If you have accepted that the path to wealth is rocky on the way up, then do yourself a favor and acknowledge that it is equally unstable on the way down. Corporations, you, and I will all be tempted to question how and when we bought and sold our crypto, and look back with regret at the additional profit that we could have made had we done it differently. Don’t beat yourself up - we have the pleasure of watching the greats publicly buy-in, proving that they too are not perfect. They provide real-time proof that we are all just human.
In This Issue:
  1. Timing The Market
  2. Bitcoin Thoughts And Analysis
  3. Making Sense Of The FED
  4. Craig Wright Sues Coinbase
  5. MicroStrategy’s Liquidation Price
  6. My Recommended Platforms And Tools
Bitcoin Thoughts And Analysis
Bitcoin is attempting to breakout from the descending wedge that we have been watching for the past few days, but is finding predictable resistance at $39,218. The daily close should be quite telling. Today is the FOMC rate hike, so major volatility would be no surprise.
No breakout yet on the line chart, but bullish divergence is still valid. If price rises a bit further and stops, we could start to see hidden bearish divergence forming.
For reference I have not share my div cheat sheet in a while!
Here is an old primer I wrote on how to trade and identify them.
RSI and Divergences 101 - The Basics - The Wolf of All Streets
Making Sense Of The Fed
Tarek Mansour
The Federal Reserve is about to make a decision that may determine the future of the economy.

But why does the Fed have such significant power?

Let’s dive into how the Fed works and why we need it:
A single decision made by 7 FED board members later today is going to have a massive impact on markets. Investors read so far between the lines that any sudden movement or tone inflection could influence how we perceive the FED may or may not act in the future.
It is a dog and pony show of the highest order.
The one announcement everyone is waiting for is the what the bps hike will be. The market is currently expecting a 50bps hike, which would be the first time in 22 years that we have seen two increases (.25 being 1) in a meeting. Markets are already betting on the result and every word will be heavily scrutinized. It’s NUTS.
Stepping back from tomorrow’s fund rate decision, I think it’s important to understand what is actually going on and what the FED actually does. I picked this thread out because it will bring you up to speed if you are lost. This stuff is not simple.
Craig Wright Is Suing Coinbase
Craig Wright accuses Coinbase, Kraken of ‘passing off’ fake Bitcoin in lawsuit worth hundreds of billions of pounds - CoinGeek
This story is certified insane. The self-proclaimed creator of Bitcoin is suing both Coinbase and Kraken for misrepresenting the “true Bitcoin.” To catch everyone up to speed, Craig Wright is the creator of BSV (Bitcoin Satoshi’s Vision) and believes that this is the real Bitcoin. His argument is that Bitcoin today, shortened to BTC, isn’t a representation of the white paper. This is also the man that believes he is Satoshi Nakamoto. LUNACY. The official details of the claims made aren’t public yet, but regardless, I don’t expect this to go anywhere.
MicroStrategy's Liquidation Price
MicroStrategy Incorporated (MSTR) CEO Michael Saylor on Q1 2022 Results - Earnings Call Transcript | Seeking Alpha
During a MicroStrategy earnings call yesterday, it was revealed to the public that MicroStrategy’s BTC liquidation price is $21,000. There is a lot of conjecture about what would happen if Bitcoin came to this price, let’s not hope this happens. The good news is that MicroStrategy can save themselves, to an extent, which is also now publicly known. Worst comes to worst, they could post the Bitcoin they hold as collateral. It’s also a possibility that another entity steps in to post their collateral if need be. This could be an epic battle of whales if it came down to it. Below is the transcript of the earnings call, from the CFO.
So essentially, Bitcoin needs to cut in half or around $21,000 before we’d have a margin call. That said, before it gets to 50%, we could contribute more Bitcoin to the collateral package, so it never gets there, so we don’t ever get into a situation of March call also.
As you can see, we mentioned previously, we have quite a bit of uncollateralized bitcoin. So we have 95,643 encumbered bitcoin. So we have more that we could contribute in the case that we have a lot of downward volatility. But again, we’re talking about $21,000 before we get to a point where there needs to be more margin or more collateral contributors. So I think we’re in a pretty comfortable place where we are right now.
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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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