IN THIS ISSUE
- Crypto Fear & Greed Index sinks to new monthly low
- Solana/SCRT/Arbitrum all face major network issues
- EIP-1559 ETH burns eclipse $1b USD
- Charts signal potnetial rotation into DeFi
There is a saying in life, “When it rains it pours”, that could aptly describe what we’re seeing in the market today with regards to network health issues. After a period of explosive growth in emerging networks this quarter, today, three of them went down. In three unrelated incidents, Solana, Arbitrum & Secret Network all experienced down time (and two are still not operational at time of writing).
A healthy reminder that we are still early and aside from price action, there are tangible risks that should be taken into consideration by all crypto participants. Thankfully, from the looks of it, no funds were lost or stolen on any of the networks, however there are some secondary risks associated with a full network restart that were discussed in this thread by @CometShock. It’s a first for Solana, so it’s impossible to know exactly how this will unfold.
Never a dull moment in crypto…
In the coming days, a more thorough analysis will be available on team channels, but for now, you can find the headline announcements below.
Secret Network (SCRT) – https://twitter.com/SecretNetwork/status/1437856678830133258?s=20
In other news, Jump Trading Group announced the launch of their new crypto arm @JumpCryptoHQ. For those who don’t know the name, Jump Trading is one of the biggest prop trading firms in the world with a focus on algorithmic and high-frequency trading strategies. This announcement shouldn’t come as a surprise as they’re name can be seen on several investor pages in the space. But it marks a step towards public & community engagement that is a far cry from their, mostly secretive, involvement that we’d witnessed to this point.
This should be seen as a welcome development by anyone who wants to see crypto succeed in the long-term, given the expertise, funding and influence that Jump brings to the table!
Despite the upside we’ve seen on the charts in this newsletter over the last few weeks, the Crypto Fear & Green Index continues to drop, hitting its lowest level today since the end of the 2021 “bear market” that ended mid-July. It just goes to show how outsized of an impact the majors like Bitcoin & Ethereum have on the market. We’ve also seen sizeable drawdowns on public favourites like ADA and SOL that likely factored heavily into the current score.
As a trader, I prefer to enter positions while the market is in a state of Fear or Extreme Fear. I get uncomfortable during periods of extreme greed and have trouble pulling the trigger on new longs even though things always look bullish during those times. So, in a way, I’m relieved to see, what I’d consider to be an over reaction, emotionally speaking, to the recent price action.
If we get a few more weeks of unfavourable price action in the market, it’s going to setup some of the most incredible opportunities of the year to lay risk back on the table. I’m still holding some spot positions, but a lot of TP levels came in over the last week, so I’ve got some cash back in the account and will be ready to deploy when the setups come in.
Bitcoin is navigating a bearish retest of the $47,000 daily S/R level at time of writing. The VPVR suggests that price could remain rangebound for the mid-term. That’s a big range we’re talking, so it certainly won’t feel boring but from the looks of these gaps, price isn’t done exploring the 40k-55k region just yet.
We got the sideways price action that I was expecting to see on Ethereum this week, given the sharp drop in price last Tuesday into daily support. A strong pullback like that, during an uptrend, will usually shock price into consolidation as what once felt like a sure bet to continue higher, suddenly leaves market participants in a state of confusion and uncertainty.
The next move from here will be incredibly important to pay attention to. If we lose this support, we are likely headed into a short/mid-term retracement down towards weekly support as far as the low-mid $2000’s (assuming we are headed for a bullish Q4, which looks highly probable).
Otherwise, a break back above the 20-day MA would signal a high probability bullish continuation which this time, means price discovery on the second biggest marketcap in crypto. No doubt signalling that a major bull for the rest of the altcoin market would follow.
The ETH/BTC consolidation continues this week as the total amount of Ethereum burned by EIP-1559 eclipses $1B USD. The time for bulls to pay attention grows nearer each day with price sliding into the local Pump Chaser Zone, possibly getting ready for its next big move. But there are two ways to view this chart, whether a bull or a bear. The Bitcoin Dominance chart presents a slightly different view.
The Weekly ETH/BTC chart indicates a rejection in the short RLZ (not shown here) and with Bitcoin dominance testing the key weekly support, I can’t help but wonder if this will mark a mid-term pivot on this pair, and if we could be headed into a more Bitcoin dominant Q4 than perhaps I’d like.
For now, the trend is friendly for altcoin traders like me, but we’re at a pivotal moment indeed. For what it’s worth, I’m still leaning towards new lows for Bitcoin dominance this year and prefer this view of the ETH/BTC weekly chart.
Solana never managed to close a daily candle above the 8.77 Chaos PRZ last week and is headed for a visit to the HTF Pump Chaser Zone once again. The further along in a trend we get, the higher risk there is in using this tool for entries. Given the network issues that SOL faced today, the some of the secondary risks that could come from a network restart (highlighted in the twitter thread above), I’m inclined to watch and wait for my re-entry.
There is a good chance in my opinion that we’ll see more consolidation on this one in the coming days/weeks, and I can be patient with my entry, and perhaps grab an even better one.
AVAX is my largest holding right now. My average entry is now somewhere in the mid-$40’s and price made new all-time highs over the weekend. There is a strong case to be made for continued price discovery in the coming weeks and months so I’m continuing to hold most of my position, but I did take some risk off the table this week.
The lack of momentum on the most recent highs gives me pause. With Avalanche RUSH on the horizon, we should see a resurgence of interest from the bulls, but I can’t help but wonder if it’s been overcooked and that the incentives program kicking off could act as a sort of short term sell the news event. The program is set to release 10m AVAX into the wild, so there is also a possibility of that supply finding its way on to the sell-side.
Maybe I’m just an overly cautious bull (or a big dumb bear, lol). But at this time, it made sense to me to lock in some recent profits and position myself to buy more if we see a prolonged dip. Despite my recent take profits, AVAX remains my biggest position, and will continue to be as I think the probability of 3-digit AVAX coin sometime in the not-so-distant future is quite high.
ATOM smacked into the Chaos PRZ / Fib Extension confluence zone that I shared last week and as one would expect, these levels acted as strong resistance with traders rushed to cash in on their recent gains. Consolidation down towards the PCZ seems probable from here.
FTM made one more attempt to break the 8.77 Chaos PRZ since last weeks newsletter but the bulls ran out of steam at the highs and price is now trading back down in the HTF Pump Chaser Zone, getting ready for it’s next move. Given what I’m seeing on the momentum indicators on a number of these L1 names. I’m not going to rush back into position in hopes of catching a rally like the ones we just saw. Patience now for me, while the market shakes out a bit and gives its next actionable signal.
DOT & KSM
DOT and KSM both saw strong bounces off the PCZ levels they tagged last week. Both made new local highs but they’re also both showing some exhaustion in volume and momentum. I know. It sucks. Not what I want to see either, and while it’s not a lock for local highs just because of that, it does mean that I have to consider taking a little extra risk off the table as they approach the local TP levels (Fib Extension + 4.669 Chaos PRZ) I have set out on the chart. It just is what it is. I’ve got to follow the plan.
I’m seeing early signs of a rotation into ETH DeFi today that could bring about a strong next leg on names like AAVE, COMP, ALPHA, SNX & SUSHI (among others, found on this list https://www.coingecko.com/en/defi). It might sting for the L1 rally apes a bit at first, and frankly, I’m not sure what kind of mass participation we’d see on chain given the impractical ETH fees the come with any form of on-chain mania.
But the charts are starting to look pretty good for DeFi. The SNX chart in particular, looks headed for a reclaim of a key level. This is one of the ideas found on our Tradingview ideas section from earlier in the year. Perhaps ready for it’s next big move (although this is not an area where I’d be entering a fresh long).
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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