IN THIS ISSUE
- This year’s negative news cycle is in full swing
- Bitcoin sweeps daily range lows, looks for buyers
- $AAVE leads as DeFi heats up across the board
- Total Altcoin Marketcap makes another all-time high!
Bitcoin has endured a 35% drawdown from its April highs of $64,895 USD. There is a negative news cycle that’s heating up in the market right now as if by some magic at just the right time. Except its not magic. It’s part of the game.
There is no clear indication of who is behind such news cycles, but like clockwork, sometimes during a bullish cycle, we get these multi-week periods where it seems every day there is more “bad news”. It plays on emotions, drives weak hands from the market, and helps push the much-needed correction that is underway.
This happened many times in 2017 and throughout the bear market and yet, here we are. Bitcoin is trading at $43,000 USD, more than 2x higher than the 2017 highs, and is far from dead. Furthermore, Altcoins and specifically DeFi tokens are catching an incredible bid on rising volume this week.
So, while I am human, and can still feel the sting that comes with portfolio drawdowns associated with Bitcoin’s recent decline. Logic tells me that this won’t last, and I suspect that sometime in the near future, we’ll be seeing a renewed news cycle filled with bullish catalysts and sky-high price forecasts.
I continue to analyze the charts and manage risk in my portfolio with position sizing and a partial cash balance so that I can make it through whatever the market throws at me this month. I think there is a decent chance that the range lows will hold and this will mark local bottom, and failing that, I will be looking at the next leg down as a capitulation bottom and will be backing up the truck, full stop.
There are no two ways about it though, the weekly chart on Bitcoin looks like shit. The MACD has rolled over confirming that the HTF momentum has been sucked out of this asset. I’ve put myself in a position to be able to buy this dip and not worry if I’m “right” or not. Following my approach may not be in your best interest, it’s extremely important to measure and manage your overall risk for so many reasons!
There is no rule that says you must catch the bottom. Dollar-cost averaging for those with dry powder remains the most effective method here. For others who are comfortable with their current exposure, simply waiting it out and not adding any risk until there is a clear sign of reversal on the daily timeframe is another option. This is what I tell my friends when they ask anyways…
We’re at a bullish throwback that market the highs back in February, confluent with the local .618 fib level and there are some signs of reversal on the hourly. Rising volume at lows, bullish divergence on MACD etc. Also, the RSI on the daily just hit oversold for the first time since March 2020 (not shown in chart).
Ethereum has been outperforming Bitcoin for the better part of two weeks but was stopped short of the HTF targets I have on the chart for now. The rotation into DeFi has begun and many DeFi/ETH pairs are showing signs of bullish reversal.
This could bring about a corrective phase in Ethereum as traders opt for the shiny new toys that the market has to offer. But with EIP-1559 and ETH2 to look forward to, I’m not all that concerned with Ethereum’s price this month.
The ETH/BTC is enjoying its 8th consecutive green candle on the weekly. Having wicked into an 8.77 Chaos PRZ last week, it’s likely closer to the end of this leg than the beginning now which is why we’re probably seeing a lot of action in the top DeFi names, marking the beginning of the next liquidity rotation.
I for one am looking forward to this pair taking its foot off the gas so we can look forward to a major rally across the board for Ethereum based DeFi and other hot altcoins including projects built on DOT, ATOM, SOL & Polygon (MATIC).
Bitcoin dominance has dropped straight down week after week since losing the 2020 lows in April. It has arrived at the last significant level before testing the all-time lows. I keep thinking we’ll see a bounce of some kind but the market has shown a strong preference for DeFi and altcoins it seems. With ETH/BTC tagging chaos and BTC tagging its HTF bullish throwback, there is certainly a case to be made for this to be a local low.
I’m not planning to step in front of this train however, and aside from the sweaty long I’m in this week on BTC, my focus as a trader is entirely elsewhere for now.
ALTCOIN & DEFI PERP
The altcoin perp chose consolidation this week vs. USD which makes sense given what we saw with Bitcoin. Alts held up better than the king overall though and I’m seeing a ton of strength in BTC pairs that speak to a strong finish to Q2 for alts in general.
If the index price closes a weekly above the 4.669 chaos PRZ, I expect to see an accelerated move up to the 8.77 in the month that follows.
The DeFi perp lead the way this week, barely flinching amidst the volatility and appears to be headed back towards ATH’s, ready to resume price discovery. The trickle-down effects we could see after a strong breakout from names like AAVE, YFI & COMP is something to get excited about.
We still haven’t had any mainstream media coverage on DeFi yet either. My guess is that’s something we’ll enjoy later this year.
TOTAL ALTCOIN MARKETCAP
Yet another ATH in total altcoin marketcap last week, nearly hitting $1.5T in total. Looking back, the volatility we’re experiencing right now will barely register as a blip on this chart.
You may someday muse over how worried you let yourself get after seeing BTC drawdown 35%. That is of course, only IF we see a strong continuation of this bull market (which I think is highly probable, but not guaranteed of course).
HEATMAP #1 – AAVE
Simply put, AAVE is one of the best-looking charts in crypto right now. Amidst a big drawdown in Bitcoin over the last 10 days, AAVE has managed to break into price discovery after a 3.5-month consolidation. Volume is rising substantially on FTX’s USD pair and while the price is a little bit out of a buy area for me locally, I included it this week because I think we should all be paying attention to this chart.
A strong move into price discovery would signal all ETH-based DeFi that the rotation is ON and would give us the green light to lay risk on other tier 1 and some tier 2 DeFi coins.
HEATMAP #2 – DOT
Keep an eye on DOT and DOT-related projects this week. Polkadot decoded kicks off tomorrow and is a two-day event that will feature a number of speakers and likely some major news drops. With DOT looking ready to break into price discovery, this could be the beginning of a multi-week rally for all things Polkadot!
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!
If you’d like to get The Weekly delivered straight to your email (FREE), you can sign up here.
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.
©2021 by Hxro Labs