Bloodgang, Welcome to the fourth issue of Bloodgood’s notes. The idea of this newsletter is to give you an overview of the previous week’s fundamentals and what happened on charts as well as to remind you of this week’s articles, secret TA tips, and trading calls. Basically, it’s about giving you all the key info in one place.
Table of contents
- Fundamental overview
- Bitcoin and Ethereum chart
- Blood’s content recap
- Concluding notes
As this community grows, I have a duty to give back to all of you that helped me and supported me to become what I am. This free newsletter is just another way to share my experiences and prepare you for the journey that’s ahead of you.Love,Blood
Among everything that’s been going on this week, there are two pieces of information that I think are especially interesting for crypto: Biden picking Jerome Powell to serve another four years as the Federal Reserve chair and the new Covid variant that sent markets tumbling. Starting with the first, I don’t think anyone was particularly surprised to see Powell getting another term, and the impact of this for crypto is not that clear. On the one hand, it’s not like Powell wants to ban crypto, but on the other hand, he does want more regulation for stablecoins. Overall though, I’m cautiously optimistic about this, as long as he doesn’t pursue too aggressive regulation for exchanges and other services. The thing is, if stablecoins do become regulated, but not in an oppressive way (and something like USDC is already prepared for this in my opinion), that means it will be much easier for the biggest investors out there to start using them. And once they do start using them, it’s easier for them to do the one thing that stablecoins are mostly used for: buy crypto!
As far as the new Covid scare is concerned, we’re seeing quite the sell-off on both stocks and crypto. Basically, there’s a new variant that spreads extremely fast, and it might be resistant to immunity from existing variants. The key word here is might: nothing is known for certain, but it seems just the possibility of that is causing panic in the markets. It’s hard to say where this will go, since more will be known in the coming days, but definitely keep an eye on the stock market as well.
At the time of writing Bitcoin is trading at $54632 and it has bounced of a support at ~ $52k, a support that everyone called since we lost $60k. Until the Friday sell-off (see the fundamental overview) Bitcoin traded in a range from $55.8k to $60k and we argued that a weekly close below $55.8k should shift our bias to bearish.
Currently we are at the levels where we want to see buyers step in order to remain bullish in the short term. It’s not the stupidest idea to stay on the sidelines and let this play out and wait Bitcoin to reclaim $60k and then look to enter. The ideal weekend situation would be that we get a strong bounce of the 52k support and reclaim the $55.8k level.
On Thursday’s push we saw an increase in open interest which led Bitcoin to $59000 and during the dip we noticed that funding rates have finally reset/dropped and open interest has fallen by 5%. If anything, it seems that we don’t have too many overleveraged traders that could fuel a cascade.
In the previous newsletter we discussed that Ethereum’s perfect staircase has broken and that there are two ways to trade it. Either long the $4k support or short after getting rejected by the trend. We can see that we had both long and short opportunities as well as a fakeout above the trend (EMA21).
After this dip we are once again looking to maintain the $4k support level in order to remain bullish, so far every entry around $4k was a good decision unless we get a daily close below. In order to see continuation we need a daily close above the $4500-$4600 level.
However, this all depends on the current Bitcoin movement, although $ETH looks better than Bitcoin lately, it had it worse in this dip (as is often the case). My point is that even though Ethereum might look like a good entry we need to keep a close eye on Bitcoin – as well as stocks and how they’re reacting to the new Covid scare – and wait for a clearer setup.
Blood’s content recap
“All TA is useless until you find a way to make it work.
Check the chart on how to use descending trend lines.
It’s one of the basics that you need to nail down.
Use this to form a bias and then do a top-down analysis.
Remember, simplicity wins the game.”
“Confused about Low time frame confirmation?
Use this insider liquidity trick.
Use the 4H 20EMA to add confluence and improve lower time frame entries.
If price is starting a bullish trend, then it will reclaim the EMA before moving up.
Buy at those levels.”
GEM Research Manual
My process & thinking behind investing in small caps.
-why it can make you 100x
-how to find and analyze them
-why market-making matters
The dump this Friday was definitely scary, but if you were down a lot, it’s probably a good idea to reconsider your risk management. These sorts of things happen in crypto – they happen in all markets, in fact, but dips tend to be quicker and deeper in crypto than stocks. That’s why I always talk about having a stop loss and never risking too much.
Of course, you’re probably going to be down a few percent on a dip like this no matter what, but the important thing is that you won’t lose 20+% of your portfolio. If you’ve got a consistent strategy, these kind of dips are part of the plan, and you’ll more than make up for them. That’s it for now and stay safe out there!