Let the Volume be our Guide

IN THIS ISSUE

  • Morgan Stanley discloses BTC dip buys from back in July
  • Crypto Fear & Greed returns to “Extreme Fear”
  • BTC sits at -11.65% on the month as September wraps up
  • DXY breaks out of weekly consolidation
Analysis by @RandomTask555

September is drawing to a close this week which will mark the end of Q3 and provide the market with an opportunity to pivot. At least, that’s what we want to believe right? I’ve been in the “Bullish Q4” camp throughout the month and still am but would be lying if I said I wasn’t questioning my assumptions yet again this week.

Being right isn’t as important to me as making money, and making money starts and ends with protecting capital. I’ve been blessed with a bullish September in the AVAX ecosystem which is where most of my capital has been tied up but there is exhaustion showing on those charts now and given the broader market analysis, I’ve took on some more cash in the account over the weekend. Securing profits and preparing for what the market gives us next.

The news cycle has slowed down a bit this week, but we did get a peak at the Morgan Stanley balance sheet with their latest SEC filing, indicating that they doubled their Greyscale BTC holdings through the summer. It appears that the 4-Trillion+ behemoth bought the dip in July in an attempt to meet the growing BTC demand from their clients. Another positive development at the macro level, hinting at the general direction that Bitcoin & Crypto is headed.

The Crypto Fear & Greed index dipped back into “Extreme Fear” today as we head into what I think could be the final leg down of this correction for Bitcoin & Ethereum. On socials, in the chats, everyone seems to be walking on eggshells. There is certainly a strong sense of discomfort which tends to mean that many are still holding on and haven’t sold yet. But they will, given the right motivation. It also means that there will be no shortage of sellers to capitulate their bags if we do take another leg lower.

Fear&Greed Index

 

I’m only around 45% cash, so I do feel exposed to the current price action, but also comfortable knowing that I’ve put myself in a position of strength that I can now play both sides of the market again. Nothing really changed on the majors this week, still grinding through the HTF range, down towards the Reload Zones I highlighted previously.

 

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Sitting on your hands is one of the toughest skills to learn as a trader. It’s so easy to buy, sell, buy, sell etc. but when the conditions change, most traders will take at least a few hits before they come to their senses and step back to re-strategize. There are setups for all market conditions, but if you’re like me, you thrive in a particular market state, and struggle in others. Downtrends & Ranges are probably the toughest for newcomers to trade, and that’s what we’ve got right now. Sideways and down on the BTC and ETH daily.

Above all else, there is one indicator that you should watch closely. That is volume. There will be no secrets about when the bulls are back in action. It will be written right there on the chart near the bottom on those little candles that most, newer participants, never think to look at. We saw it at the lows in July, and when the time comes, we’ll see it again here. Waiting for that signal, means not getting to buy the bottom. For me, that’s a trade-off I’m willing to take every single time. The silver lining is that if it doesn’t come in as soon as expected, I save myself a lot of pain, and sometimes, end up getting a much better entry than I expected.

Daily. Volume. That is what I’ll be waiting to see a reversal on. The chart gives me an idea of “where” I’d expect to see that but doesn’t guarantee that I’ll get it there. More patience here should continue to pay off.

 

BTC/USD

BTC/USD is slowly filling in the void on the VPVR to the right as day traders scramble to get in position for the next big move. The chop at this level has been incredible to watch on the low timeframes. If you listen carefully, you can actually hear the cries of agony as one after another, overzealous leveraged traders sees their position wiped off the board. I don’t envy the day traders here. For most, this has been treacherous waters to navigate, especially when using leverage.

You can see on the chart here the subtle hints that volume gave us in July around the $29,500 area, suggesting that bulls were lurking and ready to put the bid on BTC. For now, there are still no signs of them. That’s the easiest way to tell that we’re likely not out of the woods yet. When “they” arrive. We’ll know.

BTCUSD Daily Chart

 

ETH/USD

Seeing much of the same on the ETH/USD chart this week. Bearish trend, bearish retests rejected, and bears in control on volume. Womp Womp. Not what I want to see, but it’s what we’ve got for now. Making peace with the current state of things and securing a position of strength for whatever comes next is the priority. Wishing for the market to be something other than what it is, is a great way to end up on the wrong side of it.

Have a plan, be comfortable with all outcomes, and act when there is a clear signal given. For now, as with BTC, it’s time for the ETH bulls to be patient. The transition into Q4 could be enough to spur the bulls back into action, or we could be headed for more grinding. The volume will be the first clue.

ETHUSD Daily chart

 

ETH/BTC

ETH/BTC is the least volatile pair in the newsletter this week, just quietly drifting down into bullish throwback levels. I’m looking at the local reload zone as my next area of interest, that could intersect with the upper trendline of the Livermore Cylinder from the beginning of the year.

ETHBTC Weekly chart

 

Bitcoin dominance

Bitcoin dominance is perking up at the lows again this week, beginning to show signs of life as Altcoins fall out of bed amidst the extreme fear. This is where we’ve been expecting to see a reversal if there was going to be one, so it should come as no surprise that the appetite for risk against BTC is beginning to decline. Looking back to the highs on the year from January that peaked around 72%, then comparing to where BTC dominance is now. It’s easy to conclude that this is not the ideal place to be laying risk against Bitcoin.

Just like buying resistance in a down trend is not an optimal strategy over time, selling at support during what appears to be the higher low, following a trend reversal, is not a +EV play either. Trading away my BTC for Altcoins here would be a bet that the next major leg on BTC Dominance is down. But what I’m seeing, since confirming bullish market structure back in late June, is the making of a new trend, namely, an uptrend.

It’s not all doom and gloom here for Altcoins though. We could just see consolidation in this range between 40-49% before another leg down. Fundamentally, that would make the most sense to me, given what we’re seeing with the rise of alternate L1’s, DeFi, NFT’s etc.

For Bitcoin dominance to rally back above 50%, would take a lot of imagination on my part. I just don’t see it. But I’m prepared to listen to what the market is telling me, and for now, stay a little more “risk-off” with new altcoin vs. BTC positions.

BTC Dominance weekly chart

 

DeFi Perp

DeFi names like DYDX, UNI, SUSHI and some other AMM’s caught a bid this week on the heels of the latest China ban. The narrative is that DEX’s and on-chain DeFi products will see an uptick in usage after exchanges in China are forced to shutdown or kick-out their Chinese users. It makes sense then to be hunting this sector when the bullish energy returns to the market.

The DeFi Perp is still navigating the recently claimed weekly support. If we lose this level along with BTC and ETH, the daily support, confluent with local RLZ is where I’ll be watching for the bulls to step in. My guess is there will be a LOT of doom and gloom if we arrive there. Talk of 2-3 year bear market, extreme fear etc. The perfect scenario to be thinking long from a position of strength. The key ingredient again will be volume. Buy volume returning, will likely lead both price and sentiment, and give as much as 48 hours of leeway for me to get re-positioned on the long side.

DefiPerp Daily chart

 

Altcoin Marketcap

Despite all the drama, the Total Altcoin Marketcap continues to trade above the 20-week moving average and looks like it barely moved this week. I don’t know how much weight I’d put into the volume on this chart or how it’s calculated, but for now, as you’d expect, the volume isn’t painting a bullish picture. It’s going to be fun to watch this one develop through the end of the year. If we do manage to break to new highs. The 4.669 Chaos PRZ up at 2T+ will almost certainly be in play.

Total Altcoin marketcap weekly chart

 

 

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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If you haven’t already, you can follow me on Twitter @randomtask555 & subscribe to our Youtube Channel here: youtube.com/c/Hxrolabs.

 

Disclaimer:

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

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