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The Wolf Den #500 - Crossing The Chasm

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May 16 · Issue #500 · View online
The Wolf Den Crypto Newsletter
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This is the 500th issue of The Wolf Den Newsletter.
Every time I write this letter, I imagine a private dialogue between myself and each reader. We are seated, somewhere relaxed, having a conversation about crypto, no different than the ones that I have with friends and family on a day-to-day basis.
Actually, that’s not true - our conversation is far more pleasant because you are already heading down the rabbit hole, and many of my friends still refuse to buy Bitcoin and think that I am absolutely nuts.
But I digress.
My direction in writing each newsletter stems from a question I imagine you asking or a point that I feel is worth sharing. We are having a good time.
Some days, when the inspiration is really flowing, the scene changes. It’s no longer just the two of us, but rather a crowd has formed. I’m talking a little louder with a little more passion. My ramblings about FUD or forgotten stop losses draw in more listeners, further fueling my efforts. The depths of the bear market tend to draw an audience, especially when you remain calm and measured in the face of mass panic and stress.
Today is not like either of the days described, or any day before. Today is different.
Today feels biblical. Not because it is the 500th newsletter, but because I am writing it at a time when crypto is arguably at its most important crossroads yet. 
The scene has changed.
Don’t look down. We are standing atop a wooden bridge, slowly crossing to the other side. Some of the planks are missing, and the wind is picking up. There are probably crocodiles in the water. Maybe some sharks for good measure. It’s uncomfortable at best, terrifying at worse.
We are finally crossing the chasm.
What does that mean?
We are making the transition from early believers and innovators to the beginning stages of mainstream adoption. Every technology reaches this pivotal moment, one that is amplified by the fact that we are dealing with money and that this superior form threatens almost every existing system.
Nobody expected this to be easy.
“First they ignore you. Then they ridicule you. And then they attack you and want to burn you. And then they build monuments to you.” - Nicholas Klein
The path we are on and the bridge we are crossing seems familiar. Those that have been here before will recognize the scent of fear, uncertainty, doubt, criticism, and condemnation. The first time we crossed a similar bridge, nobody was paying attention. The second time they pointed and laughed.
This is the time when they attack us and is the reason that crossing this particular bridge is so precarious.
The threats are organized and coming from the highest levels of government and society. They can no longer ignore us. They have to fight or risk the death of their entire system.
This is the essence of cataclysmic change.
When the smoke clears, we will be standing on the other side, but it won’t be without casualties. There will never be a reason to cross this bridge again.
The monuments come next.
How far we have left to walk is impossible to guess. I have no idea how far this bridge stretches. But I do know that we are here, on the cusp of major change. Few believe it can happen. Many believe that we have already seen the death of Bitcoin. We have suffered wounds both external and internal.
These are the times that we live for, and the moment when we need to push the hardest.
Thanks so much for taking this journey with me. I wouldn’t be here if it wasn’t for all of you walking alongside me, reaching the very spot where your path crosses mine and crypto finally crosses this chasm. It’s epic and perfect.
Seriously, thank you.
As I mentioned last week, to celebrate this occasion, I have decided to give 10 random subscribers $500 each. We will choose 2 random emails each day and message you directly from thewolfdennews@protonmail.com. Every subscriber, new or old is eligible and I will be giving away crypto through Friday. 
In This Issue:
  1. Crossing The Chasm
  2. Bitcoin Thoughts And Analysis
  3. Altcoin Charts
  4. Legacy Markets
  5. RSI And Divergences 101
  6. Twitter Takeover In Limbo
  7. A Dissenting Opinion On Celsius
  8. UK To Legalize Fully-Backed Stablecoins
  9. 44 Countries Meeting In El Salvador To Discuss Bitcoin
  10. My Recommended Platforms And Tools
Bitcoin Thoughts And Analysis
WEEKLY CHART
Bulls got the candle close they wanted.
We saw massive weekly volume, the biggest in a year. The candle had a huge wick down, indicating major demand and that bulls have finally stepped in. We also have a weekly bullish SFP through the 2021 summer lows, something I discussed at length last week.
The 200 EMA was tested for the third time ever. The previous 2 times were both bottoms and candles never closed below.
Now we wait a week to see if there’s follow through. A bullish candle only matters if it is confirmed by a green candle the next week, something we saw on the daily.
That’s a bottoming candle, no doubt. Doesn’t mean it works out.
Important to note, this is the first 7 week losing streak in history… after already seeing the first 6 week losing streak in history. This is historic selling and should see at least a nice bounce as a result.
We are already seeing downside to start the week. Why? Probably because stock futures are red. Very lame.
DAILY CHART
The daily had a beautiful reversal candle last week, heading into a predictably low volume weekend. Now we are seeing some retracement, but price is still trading above the key level at $28,600, which was the low of the 2021 summer bear market. For now, that is the most important level on the chart, as there’s minimal support from there down to the 2017 highs around $20,000.
The daily bullish divergence from oversold RSI is still in play. We avoided a hidden bearish divergence on this time frame. There are some on lower time frames, but over longer periods than truly makes them valid.
4-HOUR CHART
This is for fun. I would not trade this. It’s not even particularly valid.
That said, I showed the idea of an inverse head and shoulders forming on many coins on my livestream last week. As you can see, we had one (sort of) here and are currently getting a retest of the neckline resistance as support.
Why do I not view this as valid?
Volume. A true head and shoulders should have a volume spike on the breakout, which we did not have here. So, just some fancy lines.
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.
Today, there will be no altcoin charts. Why? Because I do not share charts when the market is shaky, and shaky would be an understatement for what we are currently experiencing. We had some nice reactionary bounces, relief after a historic period of relentless downside. But it is still far too early to tell if we have a reversal or simply a small bounce.
Legacy Markets
Stocks, Futures Waver After Big China Data Miss: Markets Wrap
We all know by now that when global markets go risk off, all assets effectively become correlated to the downside until the dust settles. Unfortunately, that means that crypto is currently trading like a tech stock, closely correlated in the short term to the Nasdaq. I have always beat the drum that Bitcoin offers idiosyncratic risk in a portfolio, as an asset that is largely uncorrelated and can behave differently than other assets. That theory is being put to the test, although it is still clearly true when you zoom out.
Right now, risk assets are highly correlated.
If we operate under the assumption that global markets are determining Bitcoin moves at the moment, then here is what to watch this week, from Yahoo:
  • New York Fed President John Williams speaks Monday
  • Fed Chair Jerome Powell among slate of Fed speakers. Tuesday
  • Reserve Bank of Australia releases minutes of its May policy meeting. Tuesday
  • G-7 finance ministers and central bankers meeting. Wednesday
  • Eurozone, UK CPI. Wednesday
  • Philadelphia Fed President Patrick Harker speaks. Wednesday
  • China loan prime rates. Friday
Here is what is happening at the moment in global markets.
Stocks
  • The Stoxx Europe 600 was little changed as of 9:36 a.m. London time
  • Futures on the S&P 500 fell 0.3%
  • Futures on the Nasdaq 100 fell 0.5%
  • Futures on the Dow Jones Industrial Average fell 0.1%
  • The MSCI Asia Pacific Index rose 0.2%
  • The MSCI Emerging Markets Index rose 0.2%
Currencies
  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.1% to $1.0424
  • The Japanese yen was little changed at 129.30 per dollar
  • The offshore yuan fell 0.2% to 6.8137 per dollar
  • The British pound fell 0.3% to $1.2226
Bonds
  • The yield on 10-year Treasuries was little changed at 2.92%
  • Germany’s 10-year yield advanced three basis points to 0.98%
  • Britain’s 10-year yield advanced three basis points to 1.77%
Commodities
  • Brent crude fell 1.3% to $110.11 a barrel
  • Spot gold fell 0.8% to $1,796.40 an ounce
We likely need to see a stock market bottom before we can call a Bitcoin bottom, or at least be close. If you recall March 12th, 2020, Bitcoin dropped below $4,000 before bouncing back quickly to $6,000. Stocks bottomed about 10 days later.
What happened next? Bitcoin went up 17x while stocks doubled. What happens after this period is what matters, and will likely melt faces. It’s just a matter of how long this bear market persists.
DXY (DOLLAR INDEX)
When the market goes into a panic, people seek a safe haven asset.
Bitcoin, right?
Wrong. People all over the world sell their assets in a panic into dollars.
Whether it is inflating or not, the dollar is THE safe haven asset for most people in the world. And to that end, dollar strength is usually inversely correlated to other asset classes, crypto now included. Dollar up, everything else down. Dollar down, everything else up.
And the dollar is looking particularly strong at the moment, relative to the basket of currencies to which it is being compared in the DXY.
103.82 was the high for the last 20 YEARS. It appears to be breaking as resistance. Let’s hope it gets rejected. A flip to support would technically send the dollar flying.
Also, this is a chart… take it with a grain of salt. There are much more important factors into determining dollar strength then some silly lines.
RSI And Divergences 101
RSI and Divergences 101 - The Basics - The Wolf of All Streets RSI and Divergences 101 - The Basics - The Wolf of All Streets
Since we are on the 500th issue, I thought this was the perfect moment to once again share this quick primer that I wrote on RSI and Divergences. The same principals can be applied to any indicator or oscillator. After navigating through every strategy and system available, I have always come back to this as the most simple way to find likely tops and bottoms, with a relatively high hit rate for bounces.
Reading through this will offer quite a bit of context for future and past newsletters.
Twitter Takeover In Limbo
Dogecoin Enthusiast Elon Musk's Twitter Deal Is in Danger as 90% of Platform's Daily Users Are Potentially Bots
One of Elon’s goals in fixing Twitter was to remove the bots. What we didn’t expect is that the bots might remove his bid for Twitter. The deal currently hinges on less than 5% of the accounts being “fake.” According to Musk, “there is some chance it might be over 90% of daily active users, which is the metric that matters to advertisers.” If the deal falls through for this reason, I expect this to be very bad for Twitter stock and the company as a whole. The expectation for a Musk takeover is set.
A Dissenting Opinion On Celsius
The Celsius Network: It’s a Fake It, Until You Make It Ponzi
This article is unsubstantiated and I am hesitant to share it. As you likely know, I am a Celsius user (I spread risk across multiple platforms) and have had Alex Mashinksy on my channels a number of times. In the spirit of honest reporting, I wanted to share this article here. Take a look for yourself.
On one hand you can interpret the optics as a classic tech startup that burns through billions of dollars to grow. On the other hand, since they are taking investor money and paying out more than they are earning it’s a Ponzi scheme for the time being. Take your pick of how you feel about it.
It is up to you to decide which platforms you feel comfortable with, if any. We all know that to earn yield, that platform has to be actively taking some sort of risk with your deposits. The money does not appear from thin air.
Tech startups have been raising capital since the beginning of time and often operate at a loss. This could simply be another case of the same, and the numbers could be misleading in the first place.
UK To Legalize Fully-Backed Stablecoins
UK Treasury en route to legalizing stablecoins amid Terra's UST crash
I love the UK. We get news about crypto regulation from a speech by The Queen and her son Prince Charles.
“Legislation to regulate stablecoins, where used as a means of payment, will be part of the Financial Services and Markets Bill which was announced in the Queen’s Speech.”
The UK is looking to lead in adoption and innovation by taking steps to adopt fully-backed stablecoins like USDC and USDT. Algorithmic stablecoins like UST will obviously not be on the list…
Another major move for adoption.
44 Countries Meeting In El Salvador To Discuss Bitcoin
Nayib Bukele says 44 countries to meet in El Salvador to discuss bitcoin
“Tomorrow, 32 central banks and 12 financial authorities (44 countries) will meet in El Salvador to discuss financial inclusion, digital economy, banking the unbanked, the #Bitcoin rollout and its benefits in our country,” wrote Bukele.
The countries are seemingly all from developing parts of the world, and include Nigeria, Egypt, Nepal, Pakistan, Bangladesh, Kenya, Uganda, Rwanda, Paraguay, Angola, Guinea and Madagascar.
Let’s hope some of them follow in the footsteps of El Salvador.
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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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