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The Wolf Den #494 - The Sky Is Falling

May 6 · Issue #494 · View online
The Wolf Den Crypto Newsletter
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Markets are designed to transfer wealth from the impatient to the patient. You could also make the argument that they transfer wealth from the uninformed to the well researched. There are currently a few tell-tale signs that the market is in a panic. The situation is almost the same each time, whether Bitcoin drops to $1, $100, $3,000, or $30,000. OGs can attest to this.
By recognizing these patterns, you can find some comfort.
We all know that bulls are unabashedly optimistic, myself included. But the deeper price goes, the quieter they become. When Bitcoin went below $4,000 during COVID, bulls were nearly non-existent (I actually bought quite publicly at $4,000 and woke up to price being $6,000). It was as if nobody showed up to work except trolls and sh*t talkers. If Bitcoin hits $30,000 or even $20,000 this year because of inflation fears or monetary tightening, we can once again expect bulls not to show up to the office.
Without bulls, the bears become popular.
And what do bears love to do? Here is a list.
  • Continue to call for more pain, only to be caught in a massive trap.
  • Make sure we know valid targets are the lowest on the chart.
  • Ignore fundamentals.
  • Magnify superficial concerns by a factor of 10.
Bulls also have their own similar bad habits in a bull market, but that’s news for another day.
The market is designed to trick you into believing there is a sense of “permanency” in its current state of being. Bears want you to believe that nothing can change for the better, and things can only get worse. If you fall into this trap, you will be inclined to sell at some of the worst points, leaving someone on the other side of the trade thrilled to have bought your blood.
So what can we do? First and foremost, we must avoid emotional traps. The market always reverts to the other side of the spectrum of emotions, as it is a constant pendulum swinging between fear and greed. Every high that has ever been printed on a chart has been revisited and broken. When enough retail is convinced the bear market is permanent, the trend will begin to flip and leave behind the doubters. 
If you zoom out, the market has ALWAYS gone up. Even if you have only bought the “highs,” according to history, you will eventually be in the green. The temporary struggles Bitcoin and the larger crypto market are going through are not enough to break the model. The model always reverts to the mean and then swings the other way.
Remain calm, remember why you are here, understand that this is not a scheme to get rich quick, turn off the charts and close your portfolio. Things always get better eventually.
In This Issue:
  1. The Sky Is Falling
  2. Bitcoin Thoughts And Analysis
  3. Altcoin Charts
  4. Legacy Markets
  5. Analyze NFTs Here
  6. California Embraces Crypto Adoption
  7. Coinbase NFTs Off To A Slow Start
  8. My Recommended Platforms And Tools
Bitcoin Thoughts And Analysis
Bitcoin closed 5 red weeks in a row last Sunday for the first time in the history of Bitstamp. Ever. 6 in a row seems inevitable. 2014 did have similar runs, apparently, but they are not on Bitstamp. Relief should come.
I will once again remind you that charts are simply a risk management tool, and most analysis will be “wrong.” We are all guessing, using the systems that we are familiar with to predict what is likely to happen.
Nobody has a crystal ball and patterns that are statistically predicted to go one way can always go another… like the descending wedge that I have been sharing…
Wrong. The wedge broke up… then broke down in dramatic fashion, with the hidden bearish divergence that I was concerned about yesterday confirming. That said, we STILL have potential bullish divergence on the daily , especially if we can see a rally today to get RSI heading back up. More importantly, as scary as this price action is, we are still basically just…. ranging sideways. Nothing really new here over the past few months.
Bitcoin made a lower low finally in the sequence, although still far from the lows from January. At the moment we have tweezer bottoms with yesterday, which would be a bottom signal temporarily if confirmed. Today’s candle is meaningful.
Not much to do here but hold on and wait.
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.
We are living in the upside down, but I am concerned that things will correct. At the moment, Bitcoin Dominance has been dumping alongside Bitcoin, a rare occurrence. Usually when we see Bitcoin take a major hit, altcoins do worse against Bitcoin and dominance rises. Here is the Bitcoin Dominance chart:
As you can see, altcoin as a whole have been outperforming Bitcoin for the past 6 days. Strange, considering what is going on in the world. However, this is largely a result of Ethereum and larger caps - low caps are still getting slaughtered today, from what I saw on a quick glance across the market.
Let’s take a quick peak at Ethereum
Ethereum has one of its bigger days against Bitcoin yesterday, while Bitcoin had one of its worst days in recent memory. In fact, Ethereum broke out of the descending wedge that I have shared and is currently retesting the top as support. Sort of. The breakout is not that clean, and a rejection here would not be a surprise. That’s what concerns me. Since it is an aberration to see alts performing “well” against Bitcoin, we may see them revert to the mean and drop further once the dust settles.
Bottom line, I have zero interest in the market right now, beyond dollar cost averaging into Bitcoin as Ethereum as I always do as an investor. These dips are worth buying long term, in my opinion, no matter what happens.
Legacy Markets
Yesterday was one of the worst days in recent history for the stock market, after seeing a massive rally on the FOMC rate hike news and dovish Fed tone the day before.
Go figure.
The Dow dropped 1,120 points, or 3.3%, the S&P 500 fell 3.7%. The Nasdaq Composite tumbled 5.2%, its worst day since 2020.
This is not bullish price action. Even the huge moves up in the past few months have generally been classic dead cat bounces and bear market rallies.
Here is a quick read on why pundits believe we are seeing such volatility.
Why the Dow plunged more than 1,000 points? Should I wait for stocks to sink lower? Here's what some pros think. - MarketWatch
Personally, I think we all know that the economy is weak, even while the market was strong. Unprecedented money printing and stimulus has consequences, which we are seeing play out now.
While Bitcoin has failed to be a hedge against this behavior thus far, I still believe that long term it will decouple further. Right now, it is undeniably trading like a tech stock, which are the worst performing part of the market. I am a huge fan of the argument that Bitcoin is an uncorrelated asset when you zoom out, but for now it is clearly that it’s trading alongside every other risk asset in the world.
Here is another quick look at what to watch in markets today.
5 things to know before the stock market opens Friday, May 6
Analyze NFTs Here
Highest Price NFT Stats - Collections and Individual Sales Listed | CoinMarketCap
Did you know that you can use CoinMarketCap and CoinGecko to look at NFTs the same way you look at cryptocurrencies?
By hovering over “NFT” at the top of the home page, you can select from a few categories based on how you want to view the NFT market. Collections can be displayed by sales volume or market cap and from there you can check on floor price and owner stats.
California Embraces Crypto Adoption
California governor issues executive order on crypto as state embraces blockchain technology
California is the next state in line to move towards crypto adoption. On Wednesday, Governor Gavin Newsome signed an executive order focused on cryptocurrency. California is the largest state in the U.S. in terms of both population, GDP, and blockchain business. Of the 800 blockchain-based businesses in North America, about a quarter of them operate primarily in California. The order is designed to bring transparency to the entrepreneurs that are innovating and speed up the necessary collaboration with regulators.
Coinbase NFTs Off To A Slow Start
Coinbase's NFT Marketplace Trading Gets off to a Slow Start
The highly anticipated Coinbase NFT debut that garnered millions of early signups did not go as planned. In the first 5 hours of live trading, Coinbase reached $60,000 in sales, compared to OpenSea which had $124M in the same time frame. Despite the slow start, Coinbase has plans to grow the platform and manage expectations.Competing against OpenSea will be hard for any new marketplace, but Coinbase will inevitably grow this side of the business slowly as the market turns around.
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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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