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The Wolf Den #510 - Market Jitters

May 30 · Issue #510 · View online
The Wolf Den Crypto Newsletter
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In This Issue:
  1. Market Jitters
  2. Bitcoin Thoughts And Analysis
  3. Altcoin Charts
  4. The Luna Situation
  5. Ethereum FUD Piles In
  6. Gas Is Cheap!
  7. The Wolf Of All Streets Podcast Ft. Bill Barhydt
  8. My Recommended Platforms And Tools
Today is a holiday in the United States, so I did not intend to write a newsletter. Instead, my internal clock woke me up at 4:30 AM and I decided to quickly discuss what’s happening today. I feel like this guy, every morning.
Time to make the Donuts
The stock market is closed today, so there’s less to talk about than normal. We can’t blame or credit the movement of stocks for what is happening with Bitcoin, and most Americans will be at the beach or having a BBQ.
Still, the beauty of the crypto market is that it never sleeps. Good thing I am the same way. So let’s talk about uncertainty in markets and jitters, two topics that I have brought up before.
Market Jitters
Markets Hate Uncertainty.
There is an old saying on Wall Street that bad certainty is better than uncertainty. I find it very interesting that so many people are so certain about things that I simply am not. Trying to predict with any degree of certainty that which has no certainty, basis, or track record to go by is a dangerous game. Yet so many retail investors engage in this regularly. You constantly see traders telling what is definitively going to happen in the future with assets price or the economy, as if they have a crystal ball. We all know by now that predictions about price, news, how the market will react to said news (Fed raising or lowering rate, for example) can never be made with any degree of certainty.
There is another phenomenon called “market jitters” which is often a result of uncertainty. “Market jitters” is a colloquial term for an elevated state of anxiety and perceived uncertainty about the economy or a specific asset market.
Market jitters often involve not only risk (known or estimable factors that can be priced in) but true uncertainty (unknown factors whose risk or probability cannot reliably estimated). Efficient markets may be able to handle risk well and adjust well to changing risk across various asset classes, but uncertainty is more difficult or impossible to accurately price. 
Though uncertainty by its nature cannot be factored into prices, economists have devised ways to estimate the general perception of uncertainty in an economy. They use measures of asset price volatility, the dispersion of forecasts of economic performance among major forecasters, and the frequency of media mentions of terms related to uncertainty. Time periods when these measures are elevated can be considered episodes of market jitters. 
Psychological factors often end up playing a role during periods of heightened uncertainty, which can lead to high volatility, dramatic price swings, and market instability. Keynesian economics refers to these types of factors as “animal spirits” due to their perceived irrationality. In a worst case scenario, a market may experience a setback purely as a result of market jitters, if the sentiment devolves into general pessimism.  
Markets are presently uncertain. All markets.
What does that mean for us?
That it is likely a good time to remain on the sidelines as traders, watching and waiting for more clarity.
We have endless news that is driving the uncertainty, from a hawkish Fed and impending interest rates increases to inflation and war. We are currently waiting with bated breath for regulatory clarity surrounding crypto. We have an election this year as well, a time when markets are historically uncertain and difficult to predict. Nobody can confidently predict what is coming in the next few weeks and beyond.
My goal with this newsletter is to help you become a better trader (if you must) and investor. The first rule of trading is to preserve your capital. The second rule is to grow it. I take the first rule very seriously, and try very hard to avoid posting trades in an uncertain market.
Patience is a virtue. Let’s see what happens.
Bitcoin Thoughts And Analysis
The Dow Jones broke it’s 8 week losing streak on Friday.
Bitcoin said hold my beer.
9 straight red weeks for Bitcoin, something that has obviously never happened before. 8 had never happened. Or 7. Or 6.
At this point, I am not really sure if this is good or bad news. Relief is imminent, but that is something that we have all been saying every week.
Still, the last 3 weeks have been largely uneventful, with price chopping sideways. Each of those candles have a wick down, showing that bears have been unable to advance price further down. That said, bulls have also not been able to push the issue, but have been content to buy dips and send price right back to the 30K area. Rinse and repeat.
All 3 candles have tested the key support area around $28,600, closing above. Very, very strong support for now.
I continue to buy this area for the long term.
The daily chart offers a bit more hope. As you can see, we have volume increasing slightly today (even on a holiday), with price breaking out and making a higher local high. Why does this matter? Because it invalidates the idea of a bear pennant that many have been watching by breaking the descending resistance.
Still, it is VERY clear that price is still just ranging sideways. This could be a start, but we are on low volume weekend and holiday price action which is always suspect.
This move was preceded by… bullish divergence with oversold RSI, as discussed.
RSI is already overbought on the 4-hour and below on this move, which does not give great confidence that it can continue without some consolidation. Anything can happen, but for now we have to view this as more sideways price action and a nice relief bounce. If we can break above 33K, we can start talking about reversals.
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.
Before we get started on the altcoin section, here is some Grade A Hopium.
Every time RSI (which is a meme on dominance, really) has been this overbought on Bitcoin Dominance, we have a massive altcoin run.
Not saying it will happen, just showing you what has happened in the same situation. In a vacuum, we currently have a setup for alt season, but it’s harder to imagine that happening in the current environment than in previous markets where thing were more bullish.
Moving on…
Last week I shared quite a few charts that were showing bullish divergences with oversold RSI at key levels of support. This strategy has a high hit rate for at least a bounce, which is what we are currently seeing across the board. This does NOT mean that the bottom is in, but simply that relief was long overdue. Now we will be watching the same charts for somewhat inevitable potential hidden bearish divergence, meaning that RSI pushes harder than price and makes a higher high, while price make a higher low. For these to be meaningful moves, we still need to see a lot more bullish price action.
The time to trade these was last week, if you were looking to play the bounce. They may continue up, but there is no clear entry at this point.
Here are the charts I shared last week, for educational purposes.
As you can see, the bullish divergence at support played out beautifully, with price up almost 30% from support. We now have potential hidden bearish divergence, as expected. Bulls want to really see price above $37 to invalidate it entirely, which is asking a lot.
This needs to get above $2,159 to invalidate all potential hidden bearish divergence. I drew the entire red line, but really you can also measure smaller potential hidden bear divs from the more local peaks. ETH is up over 10% from support.
Same idea as AVAX and ETH.
Same idea as AVAX and ETH.
The Luna Situation
Terra gets second life as new blockchain goes live with LUNA 2.0 airdrop
If you want more options for taking unnecessary risk, you now have two Luna-related coins to pick from, Luna 2.0 and Luna Classic. Luna Classic is the old chain with over 6.5 trillion tokens and Luna 2.0 is the new chain, with a supply of 1B tokens.
When in doubt, just print some more money, right?
Is it just me, or is naming a coin “classic” a death wish?
Holders of Luna Classic are currently receiving the airdrop, made possible by major exchanges like Binance, Huobi, Kraken, Bitfinex, and more.
As expected, the airdrop, which is supposed to be the fix, has already gotten off to a rocky start. On its first day of trading, Luna 2.0 started at $0.30, hit $30, and then fell to $5.30, which is where it has settled for now. All of this while most people were still waiting for their tokens to arrive.
Luna is the embodiment of Murphy’s Law - If anything can go wrong, it will.  
I am gutted for those who lost their money in the debacle, but also believe in the free market and that it is time to let Luna die.
Ethereum FUD Piles In
Ethereum’s ‘reorg’ issue and other factors led to $237 million in liquidations amid 13% slump in one week
Did you happen to notice that the price of Ethereum unexpectedly dumped last week? On Friday morning, an unexpected mishap took place on the Beacon Chain, (the chain designed to introduce POS) causing a “block reorganization event.” Essentially, the Beacon Chain underwent a temporary fork for 7 blocks, meaning some transactions were processed in parallel. 
You can read more about the technicals behind how and why this happened here:
Visualising the 7-block reorg on the Ethereum beacon chain
Gas Is Cheap!
Ethereum Gas Fees Dropping to Extremely Low Levels, According to Analytics Firm – Here’s What It Means - The Daily Hodl
Showing up to use the Ethereum blockchain right now is like the rare time you go to Disney and there are no lines. You’re getting a lot more bang for your buck and wait times are non-existent. Enjoy the bear market while it lasts, as gas prices will eventually rise. If there’s something you have been putting off, do it now.
The Wolf Of All Streets Podcast Ft. Bill Barhydt
Podcast - The Wolf of All Streets
A lesson for Bitcoin entrepreneurs: There’s a big difference between Bitcoin evangelists and the people who are using your product. Bill Barhydt, the CEO of Abra, learned this lesson firsthand. He has big dreams for Bitcoin’s future and joined us at Bitcoin Miami to discuss institutional growth, denomination of accounts, and the biggest Web3 misnomer.
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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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