IN THIS ISSUE
- Market-wide shakeout leaves late bull reeling
- Ukraine Legalizes Bitcoin & Crypto
- Total burned ETH approaches 1b
- El Salvador buys the bitcoin dip
Crypto never does anything “nice and easy”. Looking back at the charts from the 2017 bull run, new participants may incorrectly think “I wish I was around then, I would be so rich”. The reality is that the 2017 bull run (much like the current one) was FILLED with uncertainty, doubt, fear and painful stints of aggressive selling on the heels of gut-wrenching FUD.
There is no “easy”. Making it in trading requires an incredible amount of patience, discipline and skill to survive long-term. Speculators and investors admittedly have a much “easier” time in crypto during a bull run if they are truly able to just buy at the right time, and hold through the chaos. But even then, it’s hard to call it “easy”, with what we endured yesterday.
A total of $2.6b USD worth of positions was liquidated yesterday morning in a single hourly candle. Larry Cernak shared some data that highlights which exchanges were hit the hardest during the liquidation cascade.
What started off as a fairly innocent draw down to open up the new trading week, ended up cascading into a seemingly endless dip that saw Bitcoin dive just over -20%, Ethereum -27.58% and our beloved Solana, a staggering 36.33% from high to low! Almost everyone who was using leverage on the long side was either stopped or liquidated.
It was pure chaos everywhere, and then suddenly.. Just like that, prices rebounded, closed a bullish 4hr candle across the board and are now consolidating +/- 15% above the lows that came in.
So, what happened? Where did the bulls go? How did what appeared to be such a strong bullish trend, suddenly turn into bloodshed? For one mans perspective on this, I’ll point you to a thread that Sam Trabucco of Alameda research posted last night on Twitter.
In a nutshell, things were overheated. Warning signs of this could be seen in things like derivative funding rates which had increased substantially in the last week. Open interest was also hitting levels not seen since May of this year. Personally, I don’t look at the data nearly enough (although I will have it up on my screen more from now on). However, the data I was seeing on the charts and other tools like the Crypto Fear & Greed index, did signal some red flags.
Despite sharing my own analysis on these warning signals in last weeks newsletter, even I was caught a little more offside than I would have liked. After moving to 50/50 cash last week, I did end up taking on more spot positions over the weekend that quickly moved into profit, and I failed to lock it in before the big drop. So while I managed to avoid any major drawdowns/liquidations since I wasn’t using leverage, it stung a bit when I looked at my available dry powder and saw that I’d deployed most of it, much too early.
I’ll say it again so we’re 100% clear. Trading is an incredibly difficult thing to do well over time. It takes years of experience and hard work to master and even with 4 years under my belt, I’ve still got plenty to learn when it comes to patience and discipline. My guess is that even people who have been reading this newsletter for the last few months+ were caught offside, despite the warnings I included in last weeks issue:
“Historically, September is the worst-performing month for markets (it’s not just a meme). That’s not a reason in and of itself to go risk-off, but add to that the straight shot we’ve taken from July lows with hardly any break, and the waning momentum on Bitcoin, and I have to think, that we’re headed for a correction. Not a bear market. But a shakeout, that will leave the late bulls reeling on the side of the road, and provide patient traders with an opportunity to get long from a position of strength.”
If you took a hit yesterday, just know, that you’re not alone, and you WILL recover. Don’t sleep on the opportunity that comes with an experience like this. Learn from it. Journal it. Adjust your trading plan to protect yourself! It’s happened before, and it will happen again this year. Humans are the cause of this sort of washout, and we haven’t (and won’t) change our ways en masse.
So next time you catch yourself bragging to a friend or family member about how much you’ve made that week, buying breakouts near highs, watching price tag Chaos PRZ’s, do yourself a favour and take a little crème off the top. Thankfully I did some of that, so was able to add some long exposure to ETH and AVAX during the bloodshed.
The goal, as ever, is not to be perfect, but to be a little better each time, until someday, we reach a level where trading approaches something we could readily describe as “easy”.
I definitely still have plenty to journal about tonight…
The Crypto Fear & Greed Index was knocked down from “Extreme Greed” to “Neutral” today, which is ultimately a good thing for the market. Open interest and funding rates have returned to much healthier levels also. This data, along with the charts ahead, point to a high probability that this was a big shakeout during a bullish trend, and that the part is far from over for the bulls.
The wick lows from yesterday’s price action will act as a very powerful invalidation level. If we’re to continue in the current daily trend, those lows need to hold. Anything below, and I’ll be liquidating most of my trade positions back into cash. Otherwise, it’s full steam ahead!
Solana blasted higher last week straight into the 8.77 Chaos PRZ in the sky before tumbling all the way down to tag the pump chaser zone in a matter of hours. Incredibly, it then bounced straight back up and tagged the 8.77 Chaos AGAIN! Price is looking very strong today and given the momentum this one has had over the last month, it’s not surprising to see it leading the market yet again in the early stages of the market’s recovery.
Usually after a market wide smackdown like we’ve seen, I’d expect assets to be shocked into a state of consolidation for 1-2 weeks. That’s the most likely outcome here as well, but if any crypto can disprove my thesis, and continue trending higher, I’m sure it’ll be SOL.
The big “AVAX unlock” happened last Saturday night and while it didn’t have an impact on price right away, I have no doubt there were some panic sellers dumping their recently vested tokens on the market yesterday. That could be the cause of the recent underperformance we’ve seen on AVAX this week.
It’s still above key daily support and is trading in the HTF Pump Chaser Zone today. It’s one of the few coins that I added long exposure to through this. Looking at the volume on the chart through late August, it’s probably not hard to figure out why.
ATOM reacted nicely to the daily support throwback and Pump Chaser Zone this week and is still in a HTF bullish uptrend. It has yet to announce any sort of ecosystem DeFi grants like AVAX and FTM, but that could catalyze a continuation in the coming weeks if they take that route. This is one I’d like to have exposure to into Q4.
The HTF Fib Extension is holding down FTM price for the moment. I added the Chaos PRZ (retroactively) this week because I realized I didn’t have it on the chart previously. Incredibly, once again, the 8.77 acted as a line in the sand. This should be taken with a grain of salt, of course, because it was “drawn to fit”, despite still being a valid Chaos level. There were 1 or 2 different pivots this could have been drawn on, had I done it up last month *shrugs*. As with the others, I think this one is due for some consolidation this month after an incredible run up to new ATH’s and a strong shakeout.
DOT is looking for a strong daily close today to recover the key support level it lost through the bloodshed yesterday. A wick into the Pump Chaser Zone was quickly eaten up on this one, as with all the others. Strong daily closes following events like this greatly increase the probability of a bullish continuation.
KSM retested the daily support and Pump Chaser Zone as well this week. Not a level the bulls want to lose if they’re looking for a strong continuation into Q4.
As with previous weeks, Bitcoin is actually looking the weakest out of everything. The daily close was below the 20-day MA (not shown here), and price is still trading below key support (unlike Ethereum which has already reclaimed it). That’s great news for Altcoin traders as it could mean we’re in for a further drop in Bitcoin dominance and that The King is prepared to let the party continue.
BTC has tagged the Pump Chaser Zone and can hopefully recover the Weekly support/resistance level above before closing the weekly on Sunday.
Ethereum is much stronger of the two and from the daily view, yesterday’s drop in price looks fairly typical of bullish trends. A bit too far too fast, smack down into support, wash the books, recover, and resume trend. I’d expect a bit of sideways action here as well, but that chart looks great. Honestly.
ETH/BTC is looking incredibly bullish through all this, having now retested the breakout level from last week. I’m still not seeing the large rise in buy volume that I’d prefer, if thinking about a blast to new yearly highs, but that could come sometime later this month. For now, the market structure remains bullish. We just don’t want to see price lose yesterday’s low.
Bitcoin dominance is approaching the point of no return. While still in a potential reversal area, the charts shared above, suggest that we could be headed for new All-Time lows in Bitcoin dominance in Q4. Fundamentally, when you look around the market at all the development that’s happening on other chains. This should come as no surprise. A healthy future for crypto, to me, is one where no coin holds complete dominance over the market. If we break the ATL’s… Be prepared to witness something absolutely incredible across the board in Altcoin vs. BTC price action. It will be a sight to behold!
The Total Altcoin Marketcap just gave it’s first test to the 20-week moving average since reclaiming it back in August. The upward trend looks clear as day to me, and the next major targets, marked by the Chaos PRZ, don’t come in until 2T+.
Small chance this is the end of the bull for 2021, but I’d forgive you if you said you’d be more comfortable waiting for confirmation of a bullish continuation.
There is no shame in trading this market conservatively. As a guy whose hands could oft times readily be described as “lettuce hands”, let me tell you, they’re 100x better than having no hands at all. For now, I’m long and strong on my spot positions (85%), with some cash reserved for LTF confirmations in the coming weeks and will only invalidate my mid-term bullish thesis if we lose the wick lows we put in yesterday. If we’re a bull. We shouldn’t be trading below them. Period. If we do trade below, it could be a few weeks before I’m ready to redeploy down at daily/weekly supports below. There will be no rush.
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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