IN THIS ISSUE
- Bitcoin closes out its second worst month in history
- Ranging/Consolidation continues across the board for Crypto
- Coinbase announces debit card integration with Apple/Google Pay
- WisdomTree lists Bitcoin & Ethereum ETP’s on Euronext
A new month begins today, Bitcoin just endured its second largest drawdown in percentage terms since… Ever… Putting up a -35.39% monthly stat in the first full month since the COIN listing on the NASDAQ has been anything but fun to watch for the bulls. From a beginner’s perspective, this doesn’t make any sense.
Price was bullish, major players around the world were taking up positions, talking about 100k+ price targets for 2021, adoption slowly chugging along week after week. So how did this happen? Why does it “feel” like there is suddenly no energy left in the market?
To better understand the price action from May 2021 one needs to grasp the nature of the market itself. It’s driven by supply and demand. Buyers and sellers. No matter how promising an asset looks, there will come a time when the buyers run out, and the sellers take over. Price will move down in response to this shift and continue moving down until the sellers run out and the buyers take over once again.
That’s the simple way to put it, and there’s likely no need to delve any deeper into it right now. It’s simply the zig-zag nature that we see in all markets. So, the big question now is, what comes next? What should we do?
Markets spend 70-80% of the time ranging and only 20-30% of the time trending. When it comes to trading, having the patience to wait for optimal market conditions can make the difference between being a profitable trader and a losing trader. Trend trading strategies get crushed in a ranging market and vice-a-versa. Understanding the market state you’re trading is a critical part of long term success.
In times like this, I’ve learned time and again that doing less is more. Hodling some, “tethering” others and limiting my risk on new trades sets me up for minimized downside while the market finds a new trend.
Coming off the highs of the aggressive bull we just witnessed makes this particularly challenging. Sometimes it takes a few busted trades for me to remind myself that there will be more favourable opportunities in the future.
I moved my % risk on a trade from 1-2% which is where I’ve been averaging my risk, down to .25%-.5%. This is of course, if I feel compelled to trade at all. Since I usually trade altcoins, and am currently holding off on that altogether, I don’t actually have much to do but watch and wait.
That’s not the same as doing nothing though. This is a great time to practice self-care. Learn new things, exercise, rest, re-connect with family and friends who didn’t see much of me through 2020-2021 and prepare myself for the next phase of the market. For now, we’re just ranging and consolidating and that could take weeks or months.
My favourite book for personal growth is “Atomic Habits” By James Clear. I’m listening to it for a second time right now, and doing so while out for a walk. A simple, but effective way to act on self care, while still leaving myself plenty of time to analyse the market and hunt for opportunities.
Through all this market noise, there are little breadcrumbs being dropped that tell me we’re still on the path to global cryptocurrency adoption and integration, whether price reacts to each piece of news or not.
Coinbase announced that their debit card now works with Apply & Google pay and will offer users 4% back in Crypto rewards. Another small, but notable step towards broader utility and adoption of cryptocurrency
In Europe, WisdomTree (An Exchange Traded Fund or ETF) announced Bitcoin & Ethereum ETP listings on Euronext. They were already listed on the German and Swiss stock exchanges so this isn’t massive news, but rather another small step in the right direction. The “Big” Bitcoin ETF news that was the cause of so much speculation in recent years seems to just be a matter of when, not if.
The Bitcoin monthly just closed its second worst month (in % terms) since inception. Drawing down 35.30% from open to close, May 2021 will take its place on the losing podium right next to the ominous “drop from 6k” in October 2018. It’s not a great look, and if we do continue trending down for a time this year, it will be easy to look back and say “ah yea, we should have seen this coming”.
The weekly chart remains above the support it found at $35,000 in May and has just moved sideways in a tight range this week. No real changes. The next major support on this timeframe would be previous all-time highs down around $20,000.
Getting a squeeze up to test the underside of the 20-week Moving Average (MA), confluent with the short RLZ and the key breakdown level would make a lot of sense. This is something I’ll be watching for this month.
The daily chart can be simplified with a 50-day MA & a 200-day MA. Right now, price is trading below the 200 MA as well as a key resistance level. For these two reasons, it’s very easy to simply say “this is bearish, bulls need to cool their jets”.
Sometimes the simplest view is the best one to take. Reclaiming that level, would be a much more bullish look, but it may take some time.
The hourly chart shows a series of lower highs and higher lows, confirming the lower-timeframe consolidation that I suspected we’d see this week. A break above $40,000 or a break below $30,000 (Early warning sign would be a 4-hour close below $33,000) are the next key levels to watch. That’s a huge range, and another reason why I’ve reduced my % risk per trade and number of trades taken, significantly.
We should have a break one way or the other sometime in the next 7-14 days.
Ethereum continues to look the stronger of the two and bounced nicely off of the 20-week MA so far. It makes technical sense to see it re-visit the short RLZ in the coming weeks before making a new low (if it does at all), so it’s in a bit of a “no trade zone” for me right now from this perspective.
The 4-hour chart is presenting a lower timeframe opportunity for an AB=CD harmonic long setup that could potentially see price push up to the low-mid $3,000’s in the coming weeks. But again, this is tricky trading, and likely best to just paper trade for anyone not familiar with this type of setup.
ETH/BTC is coming into a key level this week, tagging the short Reload Zone for a second time. This will be a critical area to pay attention to because if price fails here, we’ll likely see the ETH/USD chart start to roll-over a bit more aggressively, like we’re seeing with Bitcoin.
If price pushes up into this short RLZ and higher, the decoupling narrative is going to heat up in a big way through the summer! You’ll hear the word “flippening” a lot.
It looks like we’ve got our consolidation range carved out for Bitcoin Dominance now between 39.5%-48.5%. A few weeks or more in this range is the most likely path, while the rest of the market shakes out, chops up amateur traders and bores us all to death.
ALTCOIN & DEFI PERP
The Altcoin perp closed back above the 20-week MA and has started off the week in the green. Continued strength would takes us up to the same short RLZ throwback that I’m watching on just about every chart right now. That’s where the real decision gets made!
The DeFi perp is decidedly a much weaker look right now, despite what the DeFi bulls would have you think. It’s hard to be bullish on this one while its trading below the 20-week MA. If that changes through this consolidation, there will be plenty of opportunity to start hunting bullish setups on top DeFi projects. There’s no rush for me to dive in at this time.
TOTAL ALTCOIN MARKETCAP
The total Altcoin marketcap continues to trade above the 20-week MA, showing now real change this week. Overall, still in a bullish uptrend having just endured its first significant drawdown since the bull began back in 2020. Painful yes, but an expected part of a larger bull market if that’s what we’re looking for.
Boredom! That might be the most apt description of what I expect to see in the market for the month of June. If not boredom, the more likely path to volatility is down, so I’m hoping for the former, naturally.
This is not a time for me to completely ignore the market however, because sometime through all the boredom, I expect to find some of the best opportunities of the year.
Just when everyone else has fallen asleep at the wheel or given up hope, the tough gets going and the juiciest setups for the coming year will present themselves.
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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