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The Wolf Den #607 - The Miner's Dilemma

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October 26 · Issue #607 · 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. The Miner’s Dilemma
  2. Bitcoin Thoughts And Analysis
  3. Altcoin Charts
  4. Legacy Markets
  5. The UK Is Pushing For A CBDC
  6. The Elrond Ecosystem Is Growing
  7. WhatsApp Went Down
  8. The First Man Who Tried To Buy YouTube And Facebook Is All In On Crypto | Lou Kerner
  9. My Recommended Platforms And Tools
The Miner's Dilemma
Cracks are forming in the foundation of the Bitcoin mining industry.
Bitcoin’s global hash power has been on a tear to the upside since July of 2021, even through the depths of a brutal bear market.
This is oddly impressive.
Bitcoin’s hash rate is currently sitting just below the all-time high at 252.5 Ehash/s and showing no sign of slowing. This is usually a bullish signal. But in the current market, this is unprecedented and bizarre.
A Bitcoin miner’s profit depends on the current difficulty to mine the next block. Blocks become more difficult and expensive to mine when there are more competitors in the market vying for rewards. It has never been this difficult or crowded in the mining business. This is good because the network is more secure, but this destroys the bottom line for weaker miners and favors the larger, more centralized pools. Stronger miners are also losing money, but they can sustain through the down period. Normally when hash rate is hitting all time highs, price is rising as well to compensate for the increase in difficulty.
Not the case now.
Let’s look at a few of the most popular Bitcoin miners and their stock prices.
RIOT - Trading at $7, down 90% from ATH of $71
MARA - Trading at $14.75, down 80% from ATH of $76
HUT - Trading at $3.16, down 83% from ATH of $19.14 (Trades in Canadian dollars)
These are just a few of the major mining companies that are publicly listed, but the trend is the same across the board. These companies are getting absolutely smoked.
I won’t bother speculating on which company will weather the storm, because there are a LOT of factors that go into such analysis, but I will dare to say that this is the type of setup for a black swan and for companies to go out of business.
To add to the pain, energy prices have risen drastically due to inflation, making it much harder for miners to stay afloat. If Bitcoin’s price fails to rise, many of these miners will inevitably go under.
It is exciting that more miners are getting involved… but it makes little financial sense at the moment to start mining.
There are number of theories as to why this happening. The predominant and most logical theory is that mining companies purchased thousands of brand new ASICS during the bull market, which took many months and years to arrive. They have no choice but to get them online, even to mine at a loss.
There are also tin foil hat theories that an unknown major player is extremely well-funded and setting up shop. It’s also possible that a well-funded miner is looking to squeeze other miners out of business. Regardless, conditions are ripe for hostility.
If miners start going out of business, their hash rate will likely be replaced immediately and the trend will continue. Mining, like Bitcoin, is a free market.
The strongest players will survive.
Bitcoin Thoughts And Analysis
WEEKLY CHART
Yesterday we were watching paint dry. That’s the case until it isn’t.
Well, it isn’t.
As you can see here, we had clear bullish divergence with oversold RSI on the weekly chart. As I pointed out previously, RSI had not hit oversold on the weekly chart since 2018, and that was only the third time in history.
I continue to believe that the bottom is in or close, and this is a solid indication.
You can draw trend lines and patterns on indicators as well as price. As you can see, RSI is at resistance here. A break above that line at the close on Sunday would be a sign that price is likely to follow. This is a great technique for seeing potential moves in advance.
We will see what happens on Sunday.
Weekly MACD is also looking very bullish, having crossed up in August with the histogram in the middle growing to the upside.
DAILY CHART
Bitcoin closed above the black descending resistance, the 50 MA, 20K and the 2017 ATH at $19,666 in a single candle.
Well played, sir. Well played.
While nothing is certain in trading, this looks like the real deal, breaking through a number of lines at once on increasing (slightly) volume.
October is ending with a bang, historically the best month for Bitcoin. With elections coming and a historically strong quarter for assets, we could see a nice melt up.
Let’s hope this isn’t a fake out.
The Bollinger Bands were as tight as they have EVER been on Bitcoin, meaning that expansion and a large, volatile move was inevitable. The good news? It is happening to the upside.
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.
ETH/BTC
I have shared VERY few altcoin charts over the past few months, because the market has been suboptimal for trading. That said, the only thing I did share was the relative growing strength of Ethereum Vs. Bitcoin.
As I pointed out, we had bullish divergence with RSI, as well as a breakout of the local descending resistance. I also discussed this on the livestream yesterday with Big Cheds before the big move.
It has taken a few weeks to play out, but now Ethereum has finally made it’s move.
This is not currently actionable, as ETH has already broken out and RSI is once again overbought. This is more of an illustration that patience pays off.
ETH/USD
You can see how Ethereum’s strength vs. Bitcoin is playing out on the ETH/USDT chart. Nothing is better than an altcoin that goes up more than Bitcoin when Bitcoin is also rising.
I bought at $1,284 over a month ago when price dropped, which was also a trade idea that I shared here multiple times. I have sat in the position for 40 days, which is nothing for a patient trader, but ages for most people in crypto.
We are finally seeing the move come to fruition. The most obvious next resistance is the red 200 MA above.
Let’s hope I have more reason to share altcoin charts moving forward!
Legacy Markets
Stock Market Today: Dow, S&P Live Updates for Oct. 26 - Bloomberg
“US equity futures fell as megacap technology shares slumped in pre-market trading, marring a three-day rally on Wall Street and raising new doubts over whether this year’s $5.5 trillion selloff is nearing a bottom.
Contracts on the Nasdaq 100 fell more than 1% after disappointing quarterly updates from Microsoft Corp., Google parent Alphabet Inc. and Texas Instruments Inc. S&P 500 futures were down about 0.5%. Treasuries extended gains, with the 10-year yield falling to around 4.04%, and a gauge of the dollar declined for a second day to its lowest level in three weeks.
Stocks have been buoyed in recent days by mostly solid earnings and speculation the Federal Reserve may curb the pace of rate increases amid evidence its aggressive tightening is starting to weigh on the economy. About a quarter of S&P 500 companies have reported third-quarter results, with more than two-thirds beating analysts’ estimates despite the big-tech setback. But concern is mounting that slowing output will dent corporate profits in coming months.
“Yes we’re seeing earnings beats at the moment,” Mike Ingram, a senior market strategist at ActivTrades, said on Bloomberg TV. “But where I do start to have a bit of a problem at this juncture is that some earnings expectations going into next year are looking still a bit punchy.”
Key events this week:
  • Earnings due this week include: Apple, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Intel, McDonald’s, Merck, Samsung Electronics, Shell, Vale, Visa, Volkswagen
  • Bank of Canada rate decision, Wednesday
  • ECB rate decision, Thursday
  • US GDP, durable goods orders, initial jobless claims, Thursday
  • Bank of Japan policy decision, Friday
  • US personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
  • The Stoxx Europe 600 was little changed as of 10:11 a.m. London time
  • Futures on the S&P 500 fell 0.6%
  • Futures on the Nasdaq 100 fell 1.5%
  • Futures on the Dow Jones Industrial Average were little changed
  • The MSCI Asia Pacific Index rose 1.3%
  • The MSCI Emerging Markets Index rose 0.9%
Currencies
  • The Bloomberg Dollar Spot Index fell 0.7%
  • The euro rose 0.7% to $1.0033
  • The Japanese yen rose 0.7% to 146.90 per dollar
  • The offshore yuan rose 1.7% to 7.1930 per dollar
  • The British pound rose 1.1% to $1.1599
Cryptocurrencies
  • Bitcoin rose 2.2% to $20,624.15
  • Ether rose 4.1% to $1,534.03
Bonds
  • The yield on 10-year Treasuries declined five basis points to 4.05%
  • Germany’s 10-year yield was little changed at 2.16%
  • Britain’s 10-year yield was little changed at 3.64%
Commodities
  • Brent crude rose 0.1% to $93.62 a barrel
  • Spot gold rose 1.2% to $1,673.22 an ounce
DXY (DOLLAR INDEX)
Why are most assets up in price? Because the dollar is down. It is as simple as that, even in the face of a complex global market meltdown.
It is impossible to judge whether the dollar is actually weakening or if this is a temporary pullback, but the DXY continues to be the most important “asset” and chart to watch. A pullback to the 103 area would provide a serious move up in assets across the globe, even if only temporary.
The UK Is Pushing For A CBDC
Bitcoin Magazine
The new UK Prime Minister is pushing heavily to introduce a CBDC

The 🇬🇧 UK needs #Bitcoin
https://t.co/r8yLrPmV3c
Governments largely despise the crypto movement, yet seem excited to co-opt our technology for their own benefit. The UK’s new Prime Minister, Rishi Sunak, announced that the the G7 is “launching a set of public policy principles for retail central bank digital currencies CBDCs.
Let me share one more quote before I commen
Unlike most of the digital money people use daily today, it would be issued directly by a central bank like the Bank of England in the UK, and governments and central banks across the world are working together, looking into what having a digital currency might mean in practice.
Rishi rambles on about how CBDCs are a positive development. In reality, CBDCs are likely to bring centralization, unwanted control, coercion, a complete lack of privacy, and outright discrimination. CBDCs are a means of strengthening the central bank oligopoly.
Critics are citing the obvious similarities between Rishi and the World Economic Forum, an organization largely viewed as an enemy of the people. I have no real insight surrounding those claims. What I do know is that this video is coming at a time when the GPB is falling to record lows against the dollar.
World leaders are concerned that the fiat experiment will fail. What better way for them to regain control than through blockchain technology?
CBDCs are inevitable. It is our job to help guarantee that they are done right.
The Elrond Ecosystem Is Growing
Bringing Itheum’s Exclusive Defi Passport into AshSwap’s Ecosystem | by Itheum | Oct, 2022 | Medium
Anyone who has been following me for the past few years knows that I am a huge fan of Elrond, their inspirational leader Beniamin Mincu, and the ecosystem that they are building. My successful early trades on Elrond are a huge reason for my following and financial success. I have personally invested in nearly every project in their ecosystem, including both AshSwap and Itheum.
The early success of a Layer 1 can be judged by the amount of development being done on the chain, especially when it is independent of the core team. This is beginning to happen on Elrond. Ash Swap and Itheum, two projects incubated by Elrond’s Maiar Launchpad, are forming a strategic partnership.
AshSwap is a DEX built on the Elrond blockchain and Itheum is a Web3 data brokerage platform focusing on DeFi passports. In more simple terms, the partnership provides users power over their financial data in the metaverse. Since both projects are built on Elrond, more value is brought to the ecosystem. A win/win.
WhatsApp Went Down
Meta-owned messaging service WhatsApp back online after global outage
Crypto applications get a bad rap for having outages, but the problem isn’t just a crypto one. It happens regularly with centralized technology as well. In the 1.5 that decades Bitcoin has been in existence, it has never had an outage. Ethereum has been around for 7 years and has never had an outage either.
Do with this information what you may.
The First Man Who Tried To Buy YouTube And Facebook Is All In On Crypto | Lou Kerner
Podcast - The Wolf of All Streets
The First Man Who Tried To Buy YouTube And Facebook Is All In On Crypto | Lou Kerner
Lou Kerner is a man you want to listen to when there is a bear market - he believes Bitcoin will reach $1000,000 and is extremely bullish on crypto in general. Lou is not a typical investor, he operates a fund of funds, and invests in the industry through index investing thus covering all the aspects. Listen to our conversation from Mainnet where we cover why Lou is considered a unicorn whisperer, his attempts to buy YouTube and Facebook, and why and how he went all into crypto.
In this episode with Lou, we discussed:
  • Unicorn whisperer
  • Lou’s way into crypto
  • A fund of funds
  • Attempt to buy YouTube
  • Calling Zuckerberg to buy Facebook
  • Building in web3
  • Fight for the soul of the metaverse
  • Million dollar Bitcoin
  • Index investing
  • Lou’s superpower
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Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
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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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