IN THIS ISSUE
- Bitcoin tags $40,000 after daily RSI breaks 7-month downtrend
- Regulations loom large for major Exchange Binance
- Fear & Greed Index returns to neutral
- Options whale loads up on more Calls
Bitcoin has been on a rampage since last week’s blast back into the range to reclaim the lows! Anyone who took the week off, would be hard pressed to believe that BTC price has tagged $40,000 more than once since it’s recent July low of ~$29,500. As I’ve said many times before, this market is not for the feint of heart. It always seems to have a surprise up its sleeve and with this rise, we’ve seen a climb out of the depths of fear on the Crypto Fear & Greed Index.
The news cycle is beginning to turn back to bullish this week, right on queue. Suddenly, we’ll start to see commentary from “Big Wig XYZ” making bold price predictions for Bitcoin and other cryptocurrencies. Greg Foss, the Executive Director of Validus Power Corp. predicts that within 10 years Oil and Natural Gas will be priced vs. Bitcoin and that Bitcoin will hit $2,000,000 per coin.
As with all price predictions, there is no real value to this comment for me as a trader. What’s interesting here is the timing of the “news”. It reminds me of 2017, when I was first getting started in Crypto and the aggressive shifts in news cycle sentiment that we saw. One week it was “BCH fork = Bitcoin could die” or “China Bans Bitcoin”, price would dip, people would panic and rush the exits, then within a few weeks it was “RBC analyst predicts Bitcoin could reach a price of $400,000 by the end of 2023”, or something of the like.
It was incredible to watch, and now that I’ve spent some more time trading this market, I can see it for what it is. A controlled narrative that serves up the sentiment that “they” think will benefit them the most. The whales. The big players. The smart money. Entities that have enough capital and clout to shift the narrative with strategically placed news stories.
Seeing this headline today put a smile on my face, because it added to the mid (and long) term thesis that I’ve been positioning myself for through this dip. That is, that the drawdown we just endured was a mid-bull re-accumulation phase, and that it appears to have ended. It could be nothing, or it could be yet another breadcrumb that suggests we’ve seen the end of this years “bear market” and it’s time to hunt for more long exposure.
Along the same lines, @Sicarious_ on twitter spotted another huge buy from the Options whale that created a buzz last week after buying up a tonne of calls, just before price took off again. A Bitcoin call option gives the purchaser the right but not the obligation to buy Bitcoin at a set price and a set time in the future. Buying a lot of them says “I’m very bullish on Bitcoin in the future, and I’d like to lock in the option to buy it at price X”. Seeing, presumably the same whale, buy up an additional basket of call options last night was yet another breadcrumb for this mid-term bullish continuation narrative.
Big daddy options bull says "buy," I don't even ask how much because I know the answer is "all of it." pic.twitter.com/gNH53ycXiV— Sicarious (@Sicarious_) July 27, 2021
Also in the news this week, was Binance Exchange and CEO Changpeng Zhao announcing new changes to how the exchange will handle leverage, withdrawals and tax reporting. This coming in the wake of banking restrictions that were placed on Binance in recent weeks. It’s not a bad thing in my opinion. Regulatory bodies aren’t here to ruin the party as much as to ensure that proper KYC and AML practices are being put in place.
As we’ve discussed many times before on Delta-Fi, the future marriage of regulation and crypto is unavoidable. Implementing “forced KYC” may hurt some exchanges in the short term as traders move to exchanges that are still operating freely, outside of regulations. But there is a tremendous amount of capital that has yet to enter the crypto space, and likely won’t, until such regulations are put in place. If we want the big gains, we need the big capital, and the majority of the BIG capital will wait for regulations.
Over time, as the biggest exchanges switch over to a fully compliant operation, my guess is we’ll see their volumes grow enormously and eventually, it will be so profitable to “play ball” that most if not all CEX’s will cave, and head down the same path.
This opens the doors to DEX’s in the short term, and I’d expect to see a relative uptick in volume on things like Uniswap, Pancakeswap & Sushiswap through the latter half of this year while the dust settles, and some traders move off of the newly forced KYC exchanges.
Bitcoin has been very volatile today, perhaps in response to the FOMC statement that was set to release today at 2:00PM EST. Indeed, price dropped almost $3,000 from the morning test of range highs, bottoming right into the event and has since recovered almost the entire move at time of writing. Currently trading back up at $40,500 USD.
The daily chart shows more than just a 1-week rally. It shows a momentum breakout on the RSI from a 7-month downtrend. The volume indicates that the bulls are back in control so while I could expect to see continued volatility in the upper portion of the range we’ve been trading in for the last couple months. I’m going to maintain my bullish conviction in the event of a pullback as that’s what I’d expect to see here, following such a strong breakout. A retest of the RSI downtrend line, or range EQ ($35,000) would be par for the course.
Of course, I don’t know if we’ll get that, which is a big part of why my plan this month was to load up my BTC spot exposure around the range lows, and more recently to add to that if the RSI broke through the downtrend line which it did last week. There was so much pressure built up, that I didn’t want to risk having to decide “Where should I buy back” as price came up to test range highs.
So far, everything is going to plan, and for now, unless we see a breakout of the range, my target area for adding is range EQ. Whatever comes next, as always, there will be another opportunity to gain exposure that fits my plan. I don’t need to change my plan to tack on extra exposure just because I’m feeling excited about a very good week.
After the RSI breakout alert fired last week, I added to my bag around $34,000. For next add-on to exposure for my swing long position, a test of the 50-day MA from above, could be an interesting level to keep an eye on in August. Or a retest of the $40,000 range highs if we break above them.
As if by some form of poetic justice, the USD index has shown a nearly perfect inverse correlation to Bitcoin over the last week. Rising into key resistance on bearish divergence and breaking down from this rising wedge structure.
Another mid-term signal that adds to my conviction that we’ve seen the worst of this down move for now and are headed into a bullish continuation this year. If the HTF downtrend line is lost, we can expect to see the DXY trade back down to the 90.5 area that marks previous breakout level and the local RLZ.
Ethereum is trading back up at daily resistance and the bulls have taken control on volume once again. EIP-1559 is just around the corner so we could see ETH catch up here relative to Bitcoin leading up to that event, but my view of the ETH/BTC chart is that it’s headed lower in the coming weeks, so I’m more comfortable focusing on Bitcoin for the time being.
ETH/BTC is approaching key support and the 20-Week MA to end out the month. From a HTF perspective this is an area where bulls will likely have some resting bids. The Pump Chaser Zone rests just below. But the weekly trend is down still, and I’m not rushing to counter trade that. Especially with the immense strength we’ve just seen from Bitcoin off the recent lows. More patience from me here.
With its recent price surge, Bitcoin dominance has stormed back, confirming yet again, what appears to be a HTF reversal on this chart. That aligns with previous analysis from June that suggested we’d seen the end of the move to the downside for now on Bitcoin Dominance. That means risk off for me with regards to altcoins. I still hold a number of them, and am now around 50% BTC / 50% altcoins.
Given the recent developments, I’d like to get that split closer to 75% Bitcoin / 25% Altcoins so that I can capture as much of this move as possible and be ready to reap the gains of a well timed rotation later this year. As with all previous liquidity cycles, they start with the highest cap crypto, Bitcoin. Eventually, it will be great for everyone if we see Bitcoin lead us into a new liquidity cycle, but it will sting short term for anyone who failed to spot the signs, and rotate into position for the swing.
Why would I still hold 25-50% altcoins at this time? Because try as I might, my analysis still falls short of having a crystal ball. We could see Bitcoin continue to trade in this range, or break out then get trapped in another one a little higher up. In that case, I could see Altcoins pull off some very impressive gains. As with my BTC / Cash balance prior to last week, I don’t want all my eggs in one basket.
TOTAL ALTCOIN MARKETCAP
The total Altcoin Marketcap is in its 11th week of this summer slump and has just tagged the underside of the 20-Week MA for the first time since losing it. There isn’t much of a signal here, but I thought I’d include it this week just to put this drawdown in perspective. More out of interest’s sake. Obviously, if we reclaim that 20-week MA, it will be a very exciting event, and would signal the beginning of what could be an incredibly strong continuation upwards!
Be sure to give us a follow on Tradingview. The trade ideas on our profile cannot be deleted, so unlike some of the shenanigans you sometimes see on social media, there is no hiding from a bad trade.
I’ve enjoyed clicking through the last year of ideas that I posted there to see how they’ve aged. I didn’t trade them all, but I did trade most of them and it really speaks to the power of “cutting your losers, and letting your winners run”. In this case, the handful of trades that didn’t go as planned, were grossly outweighed by the bangers that ran throughout the bull last summer and earlier this year.
If nothing else, it will provide you with a little more insight into the specific things I look for in a trade, and guide you on your journey to grow as a trader & investor. None of the ideas should be considered financial advice of course. Manage risk!
I’ll continue to keep you updated on the state of the market each week! Until next time, have a great week, and whatever you do, always play from a position of strength!
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