IN THIS ISSUE
- German Law unlocks potential $400b+ of crypto investment funds
- The “China FUD Effect” dries up
- Legacy markets make new ATH’s
- DeFi Blue Chips rise from the ashes
- USD Index threatens HTF trendline breakout
The third quarter of 2021 is upon us, and crypto investment news continues to pour in each week. A big development out of Germany this week as a new law was passed that will allow “Spezialfonds” to invest up to 20% of their portfolios in Crypto. A maximum allocation over time could see as much as $415B USD invested into the space.
This news dropped on the same day that another round of “China FUD” made headlines.
“China’s central bank closed down a Beijing-based company providing software services for virtual-currency transactions and reiterated that no institution under its jurisdiction should engage in such transactions.”
The effect on price for such headlines seems to be diminishing over time. This makes sense when looking at on-chain metrics that suggest that long term & large holders of BTC are accumulating at these prices and that the majority of the recent sell-off is being attributed to recent entrants to the space. My hunch is that the sellers are drying up at current levels and that would explain why we’re not seeing double digit drawdowns in the wake of new “China FUD” like we did in May.
There is a growing buzz around Greyscales GBTC unlocks and what the impact they could have on price throughout July when some large unlocks are slated to take place. The biggest unlock of this sort will take place on July 18th (16,000 BTC) and could be the catalyst that helps Bitcoin break out of its current range.
There are mixed opinions on exactly how these unlocks will impact the price of Bitcoin. Indeed, there is both a bullish and bearish case to be made, so in the end, I think this will serve as a bias-fitting event and in the end, will be tough to trade with any real sense of conviction.
My general rule of thumb is to not take on any large spot or leveraged positions into a highly anticipated fundamental event like this. If we break higher or lower in anticipation of the July 18th unlock I may look for trades in the other direction as a “buy rumour/sell news”, or more likely in this case a “sell rumour/buy news” trade.
Otherwise, my general positioning in the market and outlook for the next 1-2 months hasn’t changed since last week. I’m building a spot long position in BTC and watching ETH/BTC + BTC Dominance for signs of a trend reversal before getting back into altcoins in a meaningful way.
The Bitcoin daily chart is coiling up above 30k support in what looks like preparation for its next big move. The RSI could give advanced warning if it breaks its HTF downtrend line, and the bullish divergence I’m seeing on it + bullish on-chain metrics have me cemented firmly on the long side, but not “all-in” as I’d like to have dry powder available if I’m wrong and we break lower.
A very important question to consider in trading is “What if I’m wrong”? If the answer to that question makes me uncomfortable, then I need to re-consider my positioning. There should never be a scenario where I’m getting rekt.
- Could ETH/BTC breakout to new highs and leave my “BTC heavy” portfolio in the dust? Yes.
- Could DeFi & Altcoins crank higher here throughout the summer while BTC moves sideways? Yes.
- Could BTC break lower and drag the entire market with it? Also yes.
These are not scenario’s that I’m positioned for, but I’m aware that they could play out and need to have a plan in place for each one. In case of downside, I maintain a healthy cash position and DCA slowly. In case of a market shift back to altcoins, I prepare to hunt long setups when that new trend is confirmed. I don’t panic or suddenly FOMO back into DeFi blue chips when they rally 80% over 2 days like they did this week. Having a plan in place makes it much easier to take in each new day as it comes. My emotions should be as close to “flat” as possible.
Coins like SNX, ALPHA, AAVE & COMP caught a strong bid this week that looks very encouraging. They’re coming into resistance right now which is where the important battle takes place. We’ll be diving into those charts and other big DeFi names tomorrow on Delta-Fi!
USD INDEX DAILY
The US Dollar Index (DXY) is threatening to break free of its HTF downtrend which could put pressure on all assets that trade vs. USD. There is no clear signal yet that the downtrend has broken, but that could come in the next week or so if it continues to rise. This is a critical moment for the DXY that is worth keeping an eye on.
There is always a chance that we enter a new paradigm where Bitcoin rallies in the face of USD strength, but we’ve never really seen that, and I’m not in the business of betting on new paradigms. So, IF the DXY does break out in earnest, I will re-assess at that time and most likely slow down my DCA buys and/or hedge my long exposure.
For now, I am leaning towards this being a local top for the DXY and more consolidation to follow in the coming weeks/months.
The bullish close on Ethereum last week played itself out on the ETH/USD chart and price has moved back into the $2,300 area at time of writing. There is a lot of room for price to move around in this consolidation range. A re-claim of the $2750 key resistance is the next key area for bulls to look for on the weekly.
If we close above that level, then a move up into the short reload zone would likely follow. Personally, I’m more focused on the ETH/BTC pair since I’m already heavily positioned in Bitcoin.
ETH/BTC confirmed bearish market structure on the weekly while tagging the weekly support that I highlighted last week. Since that confirmation, price has reversed locally and is moving higher, up towards the short RLZ, confluent with trendline resistance. This is where we’ll get our next important bit of information.
From another perspective, there was a long setup to be had over the last 7 days that is nearing completion but with my broader market positioning, I was content to potentially sit this leg out and wait for the big decision level up around .072 before trading this pair. The volume on this push up leaves much to be desired for the bulls. If there is a push into the short RLZ on 4hr bearish divergence and exhausted volume, then I’ll have everything I need to begin hunting shorts.
In the absence of a large BTC/USD move, I don’t see this trending back down to reward my short setup. There are a lot of moving parts here, and it will be heavily dependent on Bitcoin breaking upwards out of this range and likely trading back above 40k. For now, I’m just playing armchair analyst until the setup triggers (if it does).
Bitcoin dominance is trending back down on the 4hr this week and showing signs of continued consolidation on the daily. It could “trade” as low as 40-42% while still maintaining its newly minted uptrend on the daily/weekly timeframes. This is the beginning of what I believe will be the bottoming of the altcoin market vs. USD.
Bottoms take longer to form than tops, so I don’t expect to have to chase my favourite names this week, but will be watching for the emergence of new trends, and hunt entries on “higher lows” when that new trend emerges.
In the meantime, my focus remains on BTC for the most part.
ALTCOIN & DEFI PERP
The Altcoin and DeFi perps are enjoying a bounce-back week but are both still stuck trading below key resistance. For those who have been DCA’ing the recent blood, their conviction is beginning to pay off in the short term. The recent sweep of lows suggests we’ll carve out a range here through the summer.
I’m seeing calls for another big “DeFi summer” but I don’t see anything on the charts like I did last summer that gives me confidence in that call. In 2020, altcoins were coming out of a long consolidation/bottom formation and had much more pent-up energy potential. This summer, we’ve just come off a multi-month rally and sharp 70%+ pullback and are stuck in the depths of a market fear state.
Having another parabolic run in the next 8 weeks to new ATH’s seems unlikely to me. However, the consolidation range is so big, that there could be some volatile moves on both sides of the market to hunt setups on.
In the event that we get some echo rallies in altcoins following the DeFi Blue chip green this week, I’d like to be prepared to trade it. I’ll do a full Binance alt/btc scan and go over my shortlists with you all on Hxro Labs LIVE this Friday at 3:00PM EST!
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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