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The Wolf Den - The "Iran Pump."

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Bitcoin made a sizable move last night. Instead of formulating a longwinded Twitter thread on my thou
 
January 3 · Issue #8 · View online
The Wolf Den Crypto Newsletter
Bitcoin made a sizable move last night. Instead of formulating a longwinded Twitter thread on my thoughts, I decided to quickly write them up here and send it out to all of you first.
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Now let’s get into it.

The "Iran Pump"
Bitcoin jumped from $6,850 to just above $7,350 in a single 4 hour candle. As a result, a number of narratives have been circulating Twitter, most notably that Bitcoin likely pumped on the news that the United States could potentially be starting a war against Iran. Talking heads posited that Iranians likely rushed out to buy Bitcoin, noting that there were a few transactions on Local Bitcoins in Iran with a significant premium, up to 4x spot price. Further, the “safe haven” asset and digital gold narratives were pushed by a number of publications and pundits.
I find the notion that Iranians, who account for a miniscule portion of Bitcoin volume anyway, ran out immediately to buy Bitcoin to be absurd. Even if they did, this would be highly unlikely to impact price across every exchange simultaneously. A fellow analyst @krugermacro, had similar thoughts.
Alex Krüger
It's happening. People all over talking about bitcoin as a safe haven. Seems they didn't learn from the failed China narrative. Zoom in intraday. $BTC moved up 3.30 hours after the Iran news, after first dropping 1.5%. Gold and crude instead pumped right away. https://t.co/IMJwj7OWt6
As he noted, Bitcoin did not move immediately on the news - in fact it was down 1.5%. The assets that you would expect to be directly impacted, gold and oil, both moved the second the news broke. Historically, Bitcoin does not react to macro events or global news. It’s a non-correlated (idiosyncratic) asset, so to assign macro narrative to it’s movement is generally incorrect.
If Iran news did not move the price of Bitcoin, then what did? As my good friend @crypto_iso noted, this was most likely a standard short squeeze. This narrative makes far more sense - this was the first time in weeks that Bitcoin funding went negative, meaning that shorts were finally paying longs. Funding has not gone negative often of late and most times that it has, a significant move up has followed.
CryptoISO
Orchestrated short squeeze.

25x shorts liq’d off mid range zone and s/r zone.

Price retraced with an overshoot of the mid range and 7250 s/r.

The first sight of negative funding triggered the hunters.

The game continues but the real buyers aren’t present.
Combine the Iran situation with the opportunity to squeeze shorts and you have the perfect moment for big players to make a move. It could really be that simple. Using shorts and the Iran story together was a powerful way to start a move up and utilize retail momentum for a continued push - squeeze the shorts first, then push the Iran narrative to get other parties interested.
As he mentions below, funding has already reset and longs are once again paying shorts for the right to trade.
CryptoISO
Funding turned.

Gamblers hunted.

Cumulative long/short delta is positive now.

Funding back to positive.

Still room to run but something to note as long squeezes can become part of picture.

Takes time and something I'll be watching. https://t.co/PNjlUH9uyw
Bitcoin is an easily manipulated asset - that is a fact, and happens to be a tremendous benefit to traders who manage to be on the right side of that manipulation. A single actor can take advantage of certain situations and easily move price at their will, compelling retail to follow.
Logically, which narrative do you think is more likely? Do you believe that this move up was driven by the news, or do you think that a single actor or group took advantage of the combination of news and negative funding to make a ton of money? I choose the latter.
Let’s take a quick look at similar recent moves. The red circle is the “China Pump.”
As you can see price moved massively (also on negative funding), fueled after the fact by the news that China was purportedly changing their stance on crypto. Like most big moves up of late, it went up fast and slowly bled back down, going even lower than where it started. These are classic signs of a short squeeze, and that price was moved by a few parties with very little “real” buying activity. You can see that almost every circled move retraced. These are cases where the situation allowed big accounts to move price and make a ton of quick money. That’s it.
As a result, little has changed from a technical perspective.
Bitcoin continues to range. It is unimportant to me how price makes it’s move, whether it rises $500 on a single candle or takes 5 days to go up. Price still remains locked in the same range.
At this moment, price is retesting a key support as resistance - the purple line that we have looked at a number of times. I would venture that many experienced traders are opening shorts at this level, expecting yet another slow bleed back down after a short squeeze. The trend overeall remains down while the range is intact, so many savvy traders short any move up, rather than looking for long positions.
If you are looking for some short term bullish signs, there are a few. Today’s candle is presently big and green(has NOT CLOSED) and fully engulfing the previous down candle. Follow through with a green candle tomorrow would be a signal that further price appreciation is likely. Price also recaptured the EQ (dashed line) of the trading range after losing it yesterday - this is a signal that price could visit the top of the range. Perhaps most significantly, volume is far larger on the move up today than it was on the move down yesterday. $7800-$8000 could be in the cards on these signs - but that still would not fundamentally change much on larger time frames.
There is also a potential inverse head and shoulders starting to form. But as with any pattern, this is completely irrelevant until it is confirmed, which would require a break of the pink line, known as the “neckline.” This is a far fetched idea and a meme until that happens.
That is the gist. It is important to keep a level head and consider the news after a significant move. Narrative is most often assigned after the fact to try to explain what was likely already priced into the chart.
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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