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The Wolf Den #527 - TA Is A Risk Management Tool

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June 22 · Issue #527 · View online
The Wolf Den Crypto Newsletter
Welcome to The Wolf Den! This is where I share my ideas about the market, technical analysis, education and advice regarding trader psychology and emotional control. The newsletter is released every weekday and is completely FREE.
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In This Issue:
  1. TA Is A Risk Management Tool
  2. Bitcoin Giga-Whales Accumulate - IntoTheBlock
  3. Bitcoin Thoughts And Analysis
  4. Legacy Markets
  5. Drama On Solana
  6. Crypto Mom Speaks Up
  7. Louisiana Allows Banks To Custody Crypto
  8. My Recommended Platforms And Tools
NOTE: THERE WILL BE NO NEWSLETTER OR LIVESTREAM TOMORROW!
TA Is A Risk Management Tool
Far too many traders view technical analysis as a predictor of future events. They believe that they can see what is going to happen based on a few lines and candles on a chart. If this was the case, all technical analysts would agree on every chart pattern and all traders would be extremely wealthy with a strike rate of 100%. The reality is, that you can show a chart to 100 traders and get 100 different interpretations of where the price is headed. In that regard, it is pseudo-science at best and you should be wary of any trader who speaks in absolutes about what is going to happen. They’re trying to sell you something or are emotionally attached to their idea.
A chart is merely an illustration of the emotions of the market’s participants. Are they fearful? Are they greedy? At what point is the pendulum likely to swing between these two poles? That’s what we are looking to identify.
So what is the purpose of looking at a chart at all? For me, a chart is a risk management tool and a way to approach a trade with a definitive plan. This includes where to enter a trade, where to exit in profit, and where to set a stop loss at the invalidation point of my idea. Without a chart, managing risk becomes far more difficult, even if all of the lines, patterns, and indicators are completely meaningless. At least the chart gives us actionable information. This is why I always say that your method of identifying trades is unimportant - it’s the way you use that method to manage your risk that matters, which is where the chart comes into play.
CHARTS CANNOT TELL YOU WHAT IS GOING TO HAPPEN IN THE FUTURE!
Bitcoin Giga-Whales Accumulate - IntoTheBlock
In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.
This section is written in conjunction with IntoTheBlock (ITB).  ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data. 
The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.
Bitcoin Giga-Whales Accumulate
Giga-whales Bitcoin holdings hit new record - The amount of Bitcoin held by entities with over 100,000 BTC reached a new high on Thursday
  • Over 776,000 BTC is held by a grand total of 5 addresses with over 100k BTC, growing over 16% in the past 30 days
  • Three of these addresses have been labelled as belonging to exchanges and those have largely recorded declines while the other two unidentified entities have grown their balances aggressively in the recent down-turn
On the other hand, whales holding between 10k and 100k BTC saw the largest decrease in their aggregate holdings likely due to the aforementioned institutions having liquidity problems.
The biggest whales are buying at these levels.
Bitcoin Thoughts And Analysis
WEEKLY CHART
There’s very little to see her. Bitcoin is testing the 2017 all time high as support, so we need to wait until the end of the week to see if it holds.
Almost every lower time frame had bullish divergence a few days ago but now is printing hidden bearish divergence.
This is a hard market to trade for the moment, and avoidable for anyone but dollar cost averaging investors. No reason to aggressively push charts.
Legacy Markets
Stock Market Today: Dow, S&P Live Updates for Jun. 22, 2022 - Bloomberg
What to watch this week:
  • Fed Chair Jerome Powell semi-annual Senate testimony, Wednesday
  • Powell US House testimony, Thursday
  • US initial jobless claims, Thursday
  • PMIs for euro zone, France, Germany, UK, Australia, Thursday
  • ECB economic bulletin, Thursday
  • US University of Michigan consumer sentiment, Friday
  • RBA’s Lowe speaks on panel, Friday
Some of the main moves in markets:
Stocks
  • The Stoxx Europe 600 fell 1.6% as of 10:40 a.m. London time
  • Futures on the S&P 500 fell 1.6%
  • Futures on the Nasdaq 100 fell 1.8%
  • Futures on the Dow Jones Industrial Average fell 1.4%
  • The MSCI Asia Pacific Index fell 1.7%
  • The MSCI Emerging Markets Index fell 2.3%
Currencies
  • The Bloomberg Dollar Spot Index rose 0.2%
  • The euro fell 0.2% to $1.0507
  • The Japanese yen rose 0.3% to 136.15 per dollar
  • The offshore yuan fell 0.4% to 6.7206 per dollar
  • The British pound fell 0.5% to $1.2220
Bonds
  • The yield on 10-year Treasuries declined six basis points to 3.21%
  • Germany’s 10-year yield declined 11 basis points to 1.66%
  • Britain’s 10-year yield declined 12 basis points to 2.53%
Commodities
  • Brent crude fell 4.1% to $109.94 a barrel
  • Spot gold fell 0.3% to $1,827.34 an ounce
Drama On Solana
A crypto lending app tried to take over a 'whale' account to stop it from collapsing the system
So here’s the scoop. Solend is a lending platform built on the Solana blockchain that has a serious problem. There is large whale that has an open loan on the platform. This whale accounts for more than 95% of deposits and if $SOL drops below $22.30, the position is at risk of liquidation. If the liquidation were to occur, it would happen on a decentralized exchange and cause serious issues far beyond Solend. To hit the liquidation price would require roughly a 40% drop from current levels, which we all know is normal in crypto.
Here’s the controversial part. After unsuccessful outreach to discuss with the whale, the Solend team decided to take matters into their own hands. In an attempt to protect themselves and the Solana market, Solend presented its community with a vote, offering the option of an emergency takeover of the wallet. Voters rallied in favor of their own self-interest and overwhelmingly supported the hostile takeover.
The backlash was immediate, challenging the decision to take over the whale’s wallet. Critics pointed out that the decision completely derails the ethos of DeFi and sets a bad precedent. Plus, it’s likely illegal. Immediately following the bad press and community reaction, a new vote was set forth to veto the previous decision. Luckily the lesson was learned and the community voted against the emergency takeover.
Now Solend is back at square one, hoping $SOL does not dip low enough to cause more havoc.
I’ll end this segment with an interesting excerpt from one of the Solend community members who voted “YES” on the takeover. The perspective is interesting and might constitute more of a majority than we would expect. It speaks to the core of DeFi’s dilemma. The user was a large whale and constituted a large portion of the votes.
What we should avoid at all costs is selling SOL into a liquidation cascade, accumulating a ton of bad debt, price rebounds quickly after that, and some sharks scoop up all the SOL making a quick 50%+ while Solend users are left with bad debt. I don’t care about Crypto Twitter hate if that means salvaging $120m of retail dollars instead of holding up DeFi ethos for some whale degenerately gambling away 9-figure positions. With power comes responsibility, and the whale is showing none. 
Crypto Mom Speaks Up
Crypto Mom Hester Peirce Does Not Support Bailouts for Collapsing Digital Asset Companies
A recent article in Forbes captured “Crypto Mom’s” thoughts on yield and systemic risk. Remember, she’s crypto mom because of her honest and tough love, not because she loves the crypto industry. I’ll never forget what she said in our interview 6 months ago. “I am no one’s mom and I’m no industry’s advocate, I am an advocate of technologies, products, and services that benefit people, that improves lives.
Let’s see what she is saying today about the market.
When you have an attractive return, you need to be asking questions about its associated risks? And if you’re not getting answers, then you need to think about whether you want to make that investment.
Crypto does not have a bailout mechanism. And that’s been perceived as one of the strengths of that marketplace. I don’t want to come in and say that we’re going to try to figure out a way to bail you out if we don’t have the authority to do it. But even if we did, I would not want to use that authority, we really need to let these things play out.
Louisiana Allows Banks To Custody Crypto
U.S. Governor signs bill allowing Louisiana banks to custody Bitcoin and crypto for customers
Crypto adoption in the United States is happening largely at the state level, rather than in the halls of Congress. The state of Louisiana has adopted a bill allowing banks to custody crypto assets for their customers. Another step towards adoption.
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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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