IN THIS ISSUE
- Bitcoin Confirms Bullish Market Structure On The Daily!
- Microstrategy unveils $1b stock offering to raise MORE cash
- Hedge Funds signal bullish on Crypto in the 2020s
- Goldman Sachs to offer Ethereum Futures & Options
Bitcoin is enjoying a green week after 4 weeks of down and sideways that felt like an eternity for those of us who’d come to enjoy the constant thrill of the “Up Only” bull market. My hunch was that late bears who piled into cash or shorts in the last few weeks would be in for a squeeze sometime soon, and the Empire fractal that fired 5 days ago was enough to get me back into BTC for the mid-term.
An empire fractal is a 3-candle formation that signals reversal and, in this case, provided a perfect early signal that BTC was likely headed up to test, at least, the 40k resistance.
The positive news cycle continues to heat up in the wake of the $500m “add-on” that Microstrategy announced would be ready to go on Monday. Michael Saylor’s recent raise was oversubscribed by $1.1b and just one day following, news emerged that his company has signaled that it may sell as much as $1b worth of stock “over time, for a variety of reasons, including the acquisition of more Bitcoin”. You’ve got to hand it to him, he has a thesis and he’s pounding the table in what should be the first year of a decade-long coming out party for digital currencies as an emerging asset class.
In a survey of 100 hedge funds, the Financial Times concluded that CFO’s expect to increase their crypto holdings to 7% over the next 5 years. This is an incredible mark of confidence from a group that, just 2 years ago was still writing off crypto completely (at least publicly).
It speaks to the shift in global sentiment that we’ve been seeing over the last year since the March 2020 lows came in. While 7% may not sound like much to us degens, many of whom are likely over 90% exposed to cryptocurrency right now, it’s the biggest number that’s yet been tied to crypto exposure by anyone who could be considered “smart money”.
We started off with headlines like “Financial magnate recommends 1% exposure to Bitcoin”. Billionaire Paul Tudor Jones recently indicated that he’s got 5% allocated to Bitcoin. Now we’re seeing 7% getting thrown around. Cryptocurrency is so small in the grand scheme of things that these numbers, would still have an incredibly powerful effect on the price of Bitcoin. It reminds me of a presentation by Fundstrat’s Thomas Lee who said in 2018 that if just 1% of the global store of value moved into Bitcoin, each “coin” would be worth ~$150,000 USD.
The timing of this video wasn’t ideal, given that it was published at the beginning of the previous bear market in 2018, but in his defense, it was meant as a macro, long-term outlook based over an entire generation. For now, it looks like things are playing out much as he predicted they would.
As a footnote to this week’s early news cycle, Goldman Sachs also just announced their plans to offer Ethereum Futures and Options to their clients.
This marks yet another move by a historically “bearish on crypto” investment bank, towards the adoption and facilitation of crypto financial products. There isn’t enough popcorn in the world to meet the coming demand! This is going to be a fun decade for those of us who manage risk and stick around for the climax of this movie.
The short squeeze on Bitcoin has begun in earnest this week with price now trading back above $40,000 at time of writing. On the weekly chart this is exactly what I would expect to see after a few Doji’s print at weekly support after a 50% drawdown. That doesn’t mean it was easy to trade, I managed to get stopped out twice in the process of finally securing my long position in the wake of the Empire Fractal that fired on the 10th.
The jury is still out on what the rest of the year will look like. Depending on who you ask, you’ll get equally wild predictions about where the price could be headed. One thing my analysis has taught me is that “the debate” between bulls and bears that takes place on the chart, will almost always occur at or within a Reload Zone or RLZ.
In this case, that means the price needs to trade back up to the key breakdown level, confluent with the .618 fib that markets the beginning of the short RLZ (~$48,000+). If we’re to head into a prolonged bearish phase, THAT is where I expect the bears to make their stand.
That also happens to be where the 20-week MA is parked right now, and as you can see on this chart, when price loses that MA, it always comes back to test it from the underside eventually. I will watch price action around that level if we get there, and consider moving back to cash if I sense weakness, while the bulls and bears engage in the most important battle of the bull market to date.
The Bitcoin daily looks beautiful from this view. Price just pushed up through the $40k resistance, tested it from above and is now trading between the 200 EMA and freshly minted $40k support. I’m still waiting on a burst of volume from the bulls to cement this breakout but likely the most promising thing on this chart is the VPVR.
The volume bars to the right side of the chart indicate how much volume has been traded at a given price. The profile currently reads as a “double distribution” which is an “unhealthy profile”. A full profile or “single distribution” would be marked by a parabola with only one peak. That would indicate a “healthy profile” and suggest that price has full explored this area and is ready to move on.
As if by some magical market physics, this double distribution is calling to price, begging for it to get filled in, make it whole and complete the single distribution before moving on (either up or down).
In that sense, when I see the VPVR looking like this, it gives a strong signal that price needs to explore higher from here, prior to making new lows. It worked at the highs, when the VPVR suggested price needed to range lower, and it appears to be doing the trick again this month.
I won’t be taking on any long exposure at current prices after this multi-day push upwards. Price could still trade down as low as $35,500 while putting in a “higher low” and remain bullish.
If I’m going to add more exposure to the long side, I’ll need to see a pullback. The $36,000-$37,500 area is of particular interest to me because it marks the Pump Chaser Zone off the lows, confluent with throwback levels on the 4hr. If I don’t get that, I’ll simply stay put in my spot exposure and perhaps hunt for some lower timeframe setups along the way.
ETH/USD is now lagging behind BTC after a week-long breakdown on the ETH/BTC chart showed us the first hint that it was time for bulls to move out of alts and back into a heavily weighted BTC portfolio. The trend is still bullish on the weekly, trading above the 20-week MA after a bullish throwback to previous highs.
On the whole this chart looks healthier than BTC’s weekly chart, but ETH bulls will want to keep a close eye on the ETH/BTC ratio that is coming into a key level on the weekly.
We got the complacency rally on ETH/BTC into the key breakdown level and short RLZ and the price is now at risk of confirming a bearish market structure on a weekly timeframe. If price closes the week below 0.060483 that will mark a “lower low” and signal a multi-week correction is likely to follow. If that happens, I don’t expect any Altcoins to fare well vs. Bitcoin.
If we get the HTF continuation that I expect to eventually see on Bitcoin, that could spell new lows for many of those pairs. In the event that we see a fail on Bitcoin after this squeeze up, well… The outcome could be even darker for Altcoins…
For now, there is no major cause for concern on ETH/BTC until there is a weekly CLOSE below the 0.060483 neckline. That is an alert I would recommend setting up if you’re going to keep an eye on this one. Alternatively, albeit less likely in my opinion, we could see the momentum on BTC price cool down and ETH/BTC bounce here to extend the fib pong consolidation and eventually continue higher.
I’ve got a strong enough lean to position myself in BTC now and made that trade last week, but if I was still “stuck” in an Altcoin that was way down vs. BTC, I’d probably hold onto it until I got confirmation of the weekly bearish structure on ETH/BTC. There could be a counter-trend rally around the corner that would let me out of my position at reduced harm.
Along with ETH/BTC, the most important chart in crypto for me when considering what “season” we’re heading into is Bitcoin Dominance. From Dec. 27th to May 17th BTC dominance dropped like a stone. It’s been fun, the altcoin gains were incredible through Q1 and the beginning of Q2. But as previous bull markets have shown us, the party can’t go on forever, and eventually, Bitcoin always comes roaring back with a vengeance.
I think the time has come for a new liquidity cycle and that likely the best case for the bulls here is a Bitcoin vs. USD rally that will play itself out on the Bitcoin Dominance chart with a violent counter-trend rally. These will often go on much longer, and go much further than initially expected, so until I see weakness on this chart, I’m not moving any of my BTC back into alts, save for perhaps, an LTF scalp trade.
ALTCOIN PERP & DEFI PERP
To illustrate this further I’ve included the Altcoin and DeFi perps in this issue of the Weekly to highlight the “lag” I’m seeing in the market when it comes to Altcoins vs. Bitcoin. Neither has enjoyed the strong reversal that we’re seeing in BTC and both will continue to lag until ETH/BTC finishes its consolidation/correction and BTC dominance resumes its downtrend.
TOTAL ALTCOIN MARKETCAP
Possibly the most bullish-looking chart in crypto is the Total Altcoin Marketcap. This of course excludes, BTC but shows that even in their lagging state, the total value of altcoins remains in a bullish uptrend and when compared to 2017’s epic rally, hasn’t strayed too far from the model.
In mid-2017 we saw a multi-week correction through the BCH fork drama that dragged the market down for 7 weeks during the summer. When it was all said and done, the market resumed its strong uptrend, but even then, Altcoins didn’t really take off until the end of the cycle in December 2017 when they went absolutely parabolic.
I spent a lot of the time prior to the Dec. 7th ETH/BTC lows watching the BTC value of my port bleed out while Bitcoin exploded into price discovery. This time around, I will be much better prepared to play the HTF swings on BTC dominance to maximize my upside when altcoins come back into play (hopefully later this year).
Outside of a few of my longer-term holdings, I see no reason right now to be stepping in on most alts. To summarize, if I’m a bear, USD. If I’m a bull, BTC. I’m keeping it simple, and will mostly ignore altcoin charts until I get new information from ETH/BTC, BTC Dominance, and BTC/USD.
I’ll continue to keep you updated on all the hottest opportunities I can find in the space, until next time, have a great week, and whatever you do, always play from a position of strength!
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The following commentary is provided for informational purposes only and may not represent the views of Hxro Games Ltd. or its affiliates, and should not be viewed as legal, tax, investment, financial or other advice. Digital asset transactions are inherently risky, and you are fully and solely responsible for evaluating your purchasing decisions at your own risk. Past performance is not indicative of future results.
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