The Wolf Den Crypto Newsletter

By Scott Melker aka The Wolf Of All Streets

The Wolf Den - Inaugural Edition!

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November 26 · Issue #1 · View online
The Wolf Den Crypto Newsletter
Welcome to the inaugural edition of my weekly newsletter, “The Wolf Den.” My goal is to expand upon the thoughts that I discuss on my Twitter account and to share my ideas about the market, technical analysis, education, trader psychology and emotional control. This newsletter is intended to have something for everyone, from the technical analysis junkies who strictly trade charts to the casual investors who are superficially interested in the space. My hope is to help my subscribers avoid the common mistakes responsible for the failures of most traders and investors, most of which I have made myself. These mistakes are largely a result of emotional decision making and poor risk management.
Here’s what you will find in this issue:
  1. Bitcoin thoughts and technical analysis
  2. A piece on longterm sentiment
  3. Altcoin trades, including two current trades (FTM and FET), a setup for a potential new one (TRX) and a completed one (ONE)
  4. Thoughts on going short vs. going long
  5. My interview with BBOD
  6. How to compound interest on Bitcoin
  7. A note about TexasWest Capital
  8. A list of my preferred platforms and tools

Bitcoin Thoughts And Technical Analysis
As this is a weekly newsletter, I will attempt to keep my Bitcoin analysis as straightforward and simple as possible, focusing more on the macro picture than quicker trades on smaller time frames. You can follow me on Twitter for more timely updates.
MONTHLY CHART
BTC/USD Monthly Chart. Source: TradingView
BTC/USD Monthly Chart. Source: TradingView
I have had these monthly support and resistance levels drawn on my chart for ages - it’s always essential to look at the bigger picture first before zooming into smaller time frames to look for trades. It is important to note that the present monthly candle has another full week before closing, so it is effectively irrelevant until that time. That said, price bounced almost to the dollar off of the support at $6,540. In a perfect world, I would love to see price closing above the $7,777 line, which I have discussed a number of times in my tweets. I think that this would be a strong signal that price has bottomed and is likely to continue up.
WEEKLY CHART
BTC/USD Weekly Chart. Source: TradingView
BTC/USD Weekly Chart. Source: TradingView
The Weekly Chart shows a clear descending channel, a form of bullish consolidation. Price has just bounced from the bottom, so it is considered likely that price will move to the top of the channel and potentially continue out, assuming the candle closes this way on Sunday. Some would call this a bull flag, although the time that it has taken to form is longer than the definition technically allows.
12 HOUR CHART
The Wolf Of All Streets
$BTC 12 Hour

Beautiful reversal candle. Nice long wick. Oversold bullish divergence. Number went up.

Well in profit on both of my $6,900 area buys. https://t.co/HVKbvojCGV
Yesterday, price printed bullish divergence with RSI (the relative strength index) on basically every time frame 12 hour and under, with RSI massively oversold. This is a major buy signal for traders that use this indicator and has preceded market bottoms and the end of corrections countless times in the history of Bitcoin. Those of you who follow me on Twitter know that this is, by far, my favorite indicator to use, because it indicates that price has dropped while buying pressure has risen. I will be watching to see if recent price action is merely a reset of this oscillator (a reactionary bounce from oversold) or whether other signs of reversal persist.
BTC/USD 12 Hour Chart. Source: TradingView
BTC/USD 12 Hour Chart. Source: TradingView
At present, there is potential hidden BEARISH divergence (red arrows) following the bullish divergence, which would signal that the bull div is finished. This will not confirm until 7 PM EST tonight, so there is plenty of time for it to change. Bulls will be looking for price to be above $7,320 to invalidate this idea.
4 HOUR CHART
BTC/USD 4 Hour Chart. Source: TradingView
BTC/USD 4 Hour Chart. Source: TradingView
The 4 hour chart shows that Bitcoin has been taking the stairs down during this correction, creating new support levels and subsequently flipping them to resistance. Yesterday, the first of these resistance levels was flipped back to support around $7,100. Price continues to hover here. A break down would likely indicate further downside, while breaking the level above would indicate further upside, likely to the high 7000s.
MY NEWEST BITCOIN TRADE
If you are following me, you know that I have reentered the Bitcoin market from my trading portfolio with an average buy-in of $6,900. I do not need to find the bottom to make money and I believe that we are likely to go up sooner than later. If not, my risk is managed.
FEAR AND GREED
The overwhelming negative sentiment in the market and fear expressed in my Twitter feed further validates my idea that price is more likely to go up than down.
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” - Warren Buffett
The crypto “Fear & Greed” index has reached 17, “Extreme Fear.” This does not mean that price cannot continue down further, but it is a strong indicator that price has likely found, or is close to finding, a bottom.
Long Term Sentiment Is Bullish
Yesterday, I ran a poll on Twitter asking my followers for a simple binary decision regarding the price of Bitcoin in one year. After over 4000 votes, as expected, people in the space are overwhelmingly bullish on price long term, voting by a large margin for the price to be higher in a year than it is at present. This sort of sentiment is expected in all markets - psychologically, people tend to generally believe that markets will rise over time. That is why they invest in the first place.
Reading through my Twitter timeline and mentions tells a completely different story.
The Wolf Of All Streets
Twitter is as toxic as I’ve ever seen it. Encouraging for the market.
Twitter is EXCEPTIONALLY toxic at present, with widespread calls for Bitcoin to go to 0, trolls aggressively engaging with every tweet, known traders capitulating and selling all of their holdings and a general sense of panic. The most popular trader on TradingView, “Magic Poop Cannon (this very fact is a sad indictment of the crypto space),” has publicly liquidated his holdings.
MAGIC
I've liquidated all of my crypto holdings until we start to see some improvement. I've been slowly decreasing my exposure, but now I've exited completely. I have long-term concerns that are unlikely to be relieved by short-term price swings. So, I'll be in the safety of cash.
He could be right, but this general toxicity and his capitulation run counter to sentiment on the long term future of cryptocurrency. This is not a statement about price expectation or advice on trading. It’s a simple observation that people believe that price will be higher in a year, but are selling at lower prices and refusing to buy Bitcoin at present. This is PURELY emotional, as people struggle watching their balances go down and start to panic sell to stop the bleeding.
“The stock market is a device for transferring money from the impatient to the patient.” - Warren Buffett
Patience and a long term view are the best ways to approach markets, crypto or otherwise. The simplest solution if you truly believe that a market will rise with time? Dollar cost average slowly into the asset, like investors in legacy markets have been doing for a century. This removes emotion and analysis from the process and allows you to continually and automatically buy each dip. Most wealthy investors do not trade, and they do not look at charts. Investing slowly is a far better strategy for the majority of people.
Altcoin Trades
Trading altcoins is risky and the moments when it is safe are few and far between. That said, there has been a nice window of alt trading for the past few months which will likely continue as long as Bitcoin is stable. If you do choose to trade alts, make sure that your risk is managed impeccably - a big Bitcoin move will likely ruin your setups.
FTM/BTC - CURRENT TRADE
FTM/BTC Daily Chart. Source: TradingView
FTM/BTC Daily Chart. Source: TradingView
This is a straightforward position, which I entered at 159 sats - the current price as I am writing this. I have been watching for a move above this line (pink) for weeks. My alarm went off on the break yesterday and I caught the retest as support (on the 4 hour chart) as an entry. My stop loss is currently below the white line, but I intend to move it up significantly if price rises.
FET/BTC - CURRENT TRADE
FET/BTC Daily Chart. Source: TradingView
FET/BTC Daily Chart. Source: TradingView
I have been watching FET for weeks, as it has ranged between 400 and 616. Price formed a clear bull flag after visiting the top of the range on dramatically increased volume. My first entry was at 520, when it broke and retested the descending resistance shown towards the right of the chart. I wrote this trade up yesterday when price was still below 616, looking for a break of this area and an entry on a retest of that line as support. Price broke the line on significant volume, so I set my orders and they filled over night. I assumed that there would be more time before this would happen! If Bitcoin remains stable, I believe that this could appreciate another 50%, but it may need to cool down and consolidate a bit first.
TRX/BTC - POTENTIAL TRADE
TRX/BTC Daily Chart. Source: TradingView
TRX/BTC Daily Chart. Source: TradingView
TRX has been one of the most profitable assets that I have ever traded, as I caught much of the now-famous move from under 20 sats to 2000 sats. I am always looking for entries and recently had a great 8% gain on this pair, which was detailed in my fully transparent trade journal, published weekly on CoinTelegraph.
At present, price is printing a descending wedge (blue lines), a pattern that is statistically likely to break to the upside. Further, price bounced nicely off of ascending support (the red line). To add confluence to the idea that price may continue up, there is hidden bullish divergence (higher low on price, lower low on RSI, shown with black arrows) with RSI, which is a signal of likely continuation to the upside.
My approach for this trade would be to enter on a break and/or retest of the upper resistance line. The target, based on the depth of the wedge at the widest point, would be 39 sats above wherever the breakout occurs. This is a simple setup that I will be watching. To be clear, I am NOT in this trade yet, and see no reason to enter. The trade will have to fulfill the criteria listed above for me to consider an entry.
ONE/BTC - 75% COMPLETED
ONE/BTC Daily Chart. Source: TradingView
ONE/BTC Daily Chart. Source: TradingView
This was a simple trade that took weeks to develop, proving that patience pays off when trading this market. I entered at 65 sats when price broke the descending pink line, indicative of a likely break in the downtrend. This was a slightly risky entry - a safer entry would have been a break above 68 (horizontal resistance) and retest as support. However, with proper position size and a reasonable stop loss (below 60 sats), I was feeling confident. Yesterday, price reached my target of 83 sats and 75% of my position closed on a limit order. Price actually wicked well beyond 83, hitting 96. This trade could easily continue to higher prices, so I have kept a bit running. However, I had a plan and executed it and am thrilled with 27.6% profit in a few weeks on the majority of the position.
ONE/BTC Daily Chart. Source: TradingView
ONE/BTC Daily Chart. Source: TradingView
A case could be made for an entry on a new trade at my exit - 83 sats. That would look something like the image below and has already happened on the current daily candle. If you are watching this pair, this could be a great entry in advance of further price appreciation.
ONE/BTC Daily Chart. Source: TradingView
ONE/BTC Daily Chart. Source: TradingView
Is Going Short Comparable To Going Long?
The Wolf Of All Streets
A short from the top of the bitcoin market to the bottom, roughly $20,000 to $3,200, was less profitable than a long with equal capital from $3,200 to $6,400. Think about that. Going short and long are not the same thing. At 8K, the upside potential is far greater than the down.
I recently posted the above tweet, which many people seemed to find difficult to understand. Here is a simple example to clarify the concept.
Asset X costs $10. A trader shorts Asset X at its current price with a $10 position. This trader is thrilled when he sees the price drop to $1, and covers (closes the trade), making a profit of $9. Profit on a short is calculated by subtracting the buy price ($1) from the sell price ($10). Simple.
Now let’s say that the trader wants to rebuy $10 worth of the same asset at $1. Price moves to $2 and the trader sells the entire position - for a profit of $10. The price has doubled and so has the value of his investment. He made more on the move from $1 - $2 than he did on the move from $10 - $1. 
Going short and going long are not the same thing! Markets tend to trend up with time, so when you zoom out, a short is almost always a trade against the macro trend. Further, the profit potential of a short with no leverage is capped at 100%. To double your money, the asset has to literally go to 0. The profit potential of a long is theoretically infinite. The value of the $1 position described can increase exponentially. If that simply asset returns to $10, the trader will have made $90 (total value of $100 minus $10 investment).  
Most importantly, going short is a tool meant for professional traders who are immersed in the markets and have a deep understanding of price action. Beginning and intermediate traders are far better off buying dips and enjoying larger movement to the upside. If you are new to trading, don’t even think about shorting.
Interview With BBOD
Tips, strategies and risk management in crypto derivatives trading - Scott Melker
I had the opportunity to sit down with the team at BBOD for nearly an hour and discuss my views on the market, trader psychology and risk management - themes that will become very familiar to you as you continue to receive my emails. I touch on nearly every element of trading in this whirlwind interview, so give it a listen!
How To Compound Interest On Bitcoin
BlockFi - Loans backed by your cryptoassets
As I always say, compounding interest and gains is the key to long term wealth. This has been difficult in crypto, as reliable places to park your Bitcoin and receive interest have been few and far between. Further, the few services that do offer interest often do not offer COMPOUNDING interest (meaning you get interest on your interest). BlockFI is where I personally store part of my long holdings. They offer up to 8.6% annually, compounding, depending on the asset (BTC, ETH or GUSD), which is much better than any legacy savings account or investment. You can get $30 in FREE Bitcoin using my code, once you deposit $100. Quite literally free money.
Code: melker30
TexasWest Capital
There is a famous saying - if you are the smartest person in the room, then you are in the wrong room. I work with one of the most talented traders that I have ever met, Christopher Inks (@txwestcapital on Twitter). I encouraged him well over two years ago to start an educational service to combat all of the bad information being spread in the crypto community. To that end, he started a Discord group in support of his trading course, which I run for him. It includes a full college-level course in trading, from risk management and basic patterns to more advanced concepts and methods. It further includes all of Chris’s trades and setups, which have been insanely profitable for members. Last but not least, there are channels for almost every facet of trading and markets, from crypto to equities and forex.
He is offering a Black Friday discount for new subscribers - $100 for the first month.
Code: R588KD3Y at checkout
He is also offering a 40% discount on the course.
Code: 8N44J5N7 at checkout
You can also join the free side of the group HERE and then sign up for 2 weeks read-only access to all of our channels, including trade setups - for $9.99.
Join the Texas West Capital Discord Server!
My Preferred Platforms And Tools
This is where I invest, commission-free. They now let you earn 3% interest on your Bitcoin held in Voyager, so you can compound while trading. Not only that, you’ll get $25 in free BTC when you download & fund.
Rewards Code: WOLF25
I use RoundlyX to buy small amounts of Bitcoin every single day. They automatically round up my credit card purchases (with 10x multiplier) and invest them in crypto. Absolutely brilliant. Passively invest money you don’t need without a thought. Further, they have integrated with Voyager (see above) to offer commission-free purchases.
I use this platform more than any other and have the top tier account (yes, I paid). This is where I do all of my charting and TA and set my alarms to let me know when to check a chart. If you are not using TV, you are not a trader!
They are running their Black Friday Sale, which is when I renew each year. 60% off.
Uncensorable .crypto domains (like scottmelker.crypto) that cannot be removed by hostile actors.
Gives us the ability to simply send Bitcoin & alts directly to a .crypto extension. Eliminates the confusion of long addresses.
ESSENTIAL platform for doing taxes. I execute thousands of trades a year and they calculate what I owe accurately within a few minutes. It’s amazing and cheap ($29.95). They were kind enough to offer 10% off to my followers.
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.
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