IN THIS ISSUE
- BTC & ETH lose daily support and head towards local reload zones
- Fear in Chinese real-estate market shakes out crypto traders
- Gensler continues to beat the regulatory drum
- BTC Dominance bounces off weekly support once again
The markets took another hit to open the week with fears out of China that the real-estate company Evergrande could trigger a 2008-esque market crash. It’s tough for me to judge just how big of an impact that could have globally given my analysis is almost entirely focused on crypto, but the charts usually give a hint of where things want to go regardless.
I’m getting Déjà vu of the China FUD from September 2017 when “China banned Bitcoin”. We experienced a sharp decline in prices across the board (recently launched BNB dropped 85% over 3 weeks). It was incredibly stressful for me as a new market participant. I didn’t have a plan, I sold the dips, and bought back higher a week later. The year ended with a parabolic blow-off top. Are we setting the stage for something similar this year? Or is it different this time?
Some are calling this “China’s Lehman Brothers Moment” according to an article I read by Fast Company. I won’t go into detail on the situation here, with what’s happening with Evergrande and why that is having a ripple effect on global markets.
Gary Gensler, Chairman of the SEC, did an interview with The Washington Post today on the topic of regulation. I don’t think it should be considered a catalyst for today’s price action, since he didn’t really say anything new. But it certainly didn’t steady the hands of nervous traders and investors, many of whom are already feeling the squeeze from the recent highs on a lot of their Altcoins.
I’ve expressed my views on the topic of crypto regulation a few times on our livestreams this year. Raoul Pal captured my thinking in this excellent twitter thread he put out this afternoon. I found his comments on the demeanour of regulators to be particularly on point. “Gensler’s hard line is the start of a long negotiation. Classic negotiating tactics – start ultra tough then compromise.” It’s a great thread and worth a read if you’re interested.
Otherwise, you may settle for a more abrupt take, like this one from Crypto Legal Expert, Jake Chervinsky:
The bottom line is, regulation is coming. It’s going to cause volatility along the way, and in the end, it’s not going to be the “end of crypto”. We are indeed very much, just at the beginning. I see this being a multi-year effort on the part of regulators and don’t expect to see any tangible changes in the near term. I do expect headlines to have an impact on price as things progress though. Markets will market…
The Crypto Fear & Greed Index is approaching new lows for the month after yesterday’s double-digit drop in prices. The index updates at the end of each day and given what I’m seeing on the charts at time of writing, my guess is that later tonight, we’ll have hit extreme fear. That sets the stage for fresh long exposure from a sentiment point of view, but it doesn’t mean that I’ll be pulling the trigger tomorrow.
I’ve got a few levels drawn up that I think could see some action in the coming days/weeks and will hunt setups down there when the time comes. For now, I’m spending my time re-assessing my overall exposure and rotating some positions into a few more concentrated bets that I think show the most promise going into Q4.
This is not a time to be a hero and race to buy the dip with all my dry powder. I’ve learned the hard way many times, that in moments like this, “The Dip” is often just a bit further away than I anticipated or, preferably, it never gets there. I’m reminded of this funny, but painful meme that serves as a reminder of this phenomenon.
I’m still of the mindset that the market is setting up for a bullish Q4, so I’m gearing up to add exposure, but I must remind myself that I have no idea what’s going to happen, so managing risk and being “cheap” with my capital is important. There is a high probability that if we do continue higher in the coming months, there will be a period of consolidation following this drawdown, so I expect patience to pay off here once again. It doesn’t hurt to give this China situation a little time to develop also. I don’t know enough about it to say for sure how real that FUD is. All I can control is the decisions I make about how much, when, and where to deploy my capital. In my experience, slow and steady is usually the best way.
Bitcoin has broken through daily support and appears to be headed down to the local Reload Zone (RLZ). Why not trade the Pump Chaser Zone (PCZ) here you ask? This is one of the more difficult questions to answer. The PCZ can be a very powerful tool, but only in the right conditions. Namely, rising buy volume after a breakout from a consolidation. Right now, there is rising sell volume and confirmation of bearish market structure above. So, it is certainly NOT the time for me to be “chasing the pump”.
In this case, the RLZ makes for an interesting location on the chart for me to hunt my next long setup. This same level is playing out across the board, and is the most logical area in my mind, for us to see a reversal back to the upside. I’m still more interested in Altcoins, but will look to add some more Bitcoin exposure down there as well if we get it.
There are some bullish divergences forming on the hourly tonight, so it could be that we’ve already seen the worst of the sell-off and are gearing up for a reversal at current levels. In that case, I’ll be hunting setups more locally later this week. It’s really tough to “call it” with price action like this, so I’ll be leaning on a DCA strategy for the most part which worked out really well back in July for the SBF/SOL ecosystem bags that I built up. I’d like to do something similar here with a focus on AVAX, DeFi, SBF and @danielesesta bags.
Ethereum also confirmed bearish market structure on the daily yesterday, signalling that a multi-week downtrend could follow. Just like the Bitcoin chart above, this may take price down into the local RLZ where I’d expect to see a lot of whale bids lurking. A retest of the daily resistance above should be expected along the way. This is where markets can drive you crazy.
Just when things breakdown, confirmed bearish reversals, we get this squeeze back up to that level and anyone without a plan in place, will be compelled to buy that resistance, when, if anything, they should be shoring up their exposure to prepare for a more favourable entry further down on the chart.
I’ve said it before, I’ll say it again…
Trading is not easy! It’s incredibly difficult and even a profitable trader will lose nearly half of their trades. The key to success is lies in the planning and risk management. Establish what actions you will take when a certain set of criteria is met. Risk a dollar to make 3 or more. Know your exit plan before you enter the trade. Be willing to take a loss as soon as you have evidence that suggests your idea was wrong.
It takes years of practice to be consistent in all of that. I’m still developing as a trader and could count on two hands the mistakes I’ve made just this month. I journal as often as I can and try to learn from each mistake so that I can avoid repeating the same ones over and over.
If you haven’t yet, do it this week. Setup a Google Doc, call it “Trade Journal” and just spill your guts all over the page for 10 minutes each day. How are you feeling? What did you see in the market? What did you learn today? Paste a chart into the doc for future reference. Get it out of your head, and on to the page and you’ll be amazed at how valuable that practice can be over time.
ETH/BTC is coming into a level this week. Unlike the BTC and ETH /USD charts, this one still shows bulls in control on the volume at the bottom. That means the PCZ could still be in play here and is a level to keep an eye on this week. I’m not planning to trade it myself but will keep a close eye on it as a signal for the broader Altcoin market. If we lose this area, it’s back to the local RLZ below (not shown here) that would setup for an even stronger entry if it comes in.
Optimal entries for a mid-term long in that case would come in between .06 – 0.065. Of course, I’d like to see the price action at the time of entry to analyse the volume, hunt for bullish divergences, and signs of market structure reversal.
Bitcoin dominance reacted to the weekly support that got the big bounce earlier in the year and could be putting in a mid-term low. Technically this marks a higher low after confirming bullish market structure back in July. It’s too early to tell if this will turn into a mid-term swing to the upside, but with Taproot scheduled to go live in November and rumours of Bitcoin ETF’s lurking, it’s not a potential outcome to be ignored.
During this week’s chaos, I did rotate a few altcoin positions back into Bitcoin. I’m looking to get my BTC exposure back up to around 30% as that’s about the probability I’d give to BTC leading the next leg and leaving Altcoins in the dust.
After putting in a strong bid this time last week, the DeFi perp rolled over heavily this week, crushing the momentum that it had built up since the July lows. This is a squiggly I put on the chart during last Friday’s episode of Hxro Labs LIVE, illustrating what a “dip” could look like over the next few weeks.
As painful as it would feel, and as bearish as the social media predictions would become if price went down to that level. Such price action would be par for the course in crypto and if positioned correctly, could provide a generational entry to several promising DeFi names in early Q4.
Lets not waste energy hoping for a bullish reversal, but rather spend that energy developing ourselves as traders, analysing probable outcomes and positioning ourselves to capitalize on them.
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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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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