Market Trends Newsletter #1 1st March 2021
Welcome to the first edition of the Bull & Bear Market Trends Newsletter.
Periodically released, we examine the recent variety of developments from the crypto space to identify key trends so we can best understand what’s happening in the markets and take advantage.
This edition is public and completely free to give a would be subscriber a look inside and get idea of what is in each newsletter. One the agenda in this edition:
- Market Health Check. BTC.D, BTC Technical Analysis. Important levels.
- OnChain data. key metrics examined to see where Bitcoin is going
- Recent Trading Insights and Lessons
- Shitcoin Set-ups. Simple, easy to trade alt-coin set ups
- Crypto Trends. What’s hot in the markets at present
- Content worth consuming. Quality content from the rest of the space to help you get the signal vs over the noise
Market Health Check
The most recent price action on the BTC.D chart is completely untenable. The non-technical term for price action like this is organ grinder due to the blade like look of the long upper and lower wicks. So what does this mean? Well from a trading perspective it’s not very useful however what it does tell us is the market is some what moving together. Although there are alt coins that of course outperform bitcoin and some that under perform, what we can see here is generally the majority of the market is moving directionally. Now when we examine OnChain data a little later we’ll see why. Traders aren’t rotating profits and are instead being conservative or staying in their current positions.
As mentioned in my video on my YouTube Channel today there are some clear opportunities to breakout traders looking for confirmation denoted by the three arrows on the chart where price starts from $45601 and up. You would initially look for that first sign of a trend change which was the Higher High, the retest of previous support ($45601) and then an entry breaking above recent resistance. There were two more opportunities for breakout traders to take advantage denoted on the chart before we would face the most significant resistance at $51,567.
Trading above the POC on the VPVR and highest volume nodes was a very good sign of strength with the next being a new 4HR Higher High which seems to be developing nicely as seen from the chart below with key resistance still being $51567.
Lastly for me to comfortably saw Bitcoin is back in business and as recovered from the sell off I’d like to see price action confirm it’s uptrend, break and close above $52170 on the daily time frame establishing a new Higher High and ideally retest this for a support and resistance flip for strong confirmation. Lot’s of volume while doing so would be great too.
So how does one play this. Well this is an opportunity for the altcoins to really shine especially if Bitcoin starts ranging between any of these levels. If bitcoin retraces and we see some side ways action or bullish consolidation alts will flourish. If we see strong rejections from any resistance levels with bitcoin dumping breaking through recently established support then there will be a strong shorting opportunity among the weakest alts.
The key thing here is not to rush any trades. Bitcoin is the safe play once we have comfortably established a trend change on the daily time frame which means candle closing and ideally a retest of previous resistance. Until then it’s time for some ranging during March.
There were two catalysts to the initial dump. Over leveraged traders going long after news that Tesla bought Bitcoin despite the purchase price and date being much earlier. Sentiment was bullish. This was followed by miners sending large amounts of Bitcoin to exchanges as seen by these sharp spikes on the graph below. However after the initial sell off during this bounce miners are STILL sending the same amount of Bitcoin to exchanges just in much smaller amounts. This is likely due to the fact that some of the miners have been asked if this is true and matches the OnChain data (F2POOL) which was denied and to not “shock” the market so they can continue to sell at a reasonable price. During this sell off we also saw large amounts of Bitcoin being consistently sent to exchanges throughout the day not originating from miners which if you follow me on twitter will have noticed I posted about consistently. This was likely retail. Although it we did see another trigger (miners selling Bitcoin in large batches) causing this retail bitcoin to sell it has still been sitting there.
Incidentally we can see via the two graph below that after the initial dip large amounts of Bitcoin began out flowing from coinbase once more and other exchanges with those that with a history of accumulating bitcoin the longest and strongest hands acquired the most bitcoin during this dip. This could either be miners knowingly selling into their own bids as they knew if they dumped Bitcoin on the market that would drive price down so they could bid cheaper or simply experienced whales getting their hands on more Bitcoin on the cheap.
What can we learn from this?
1. The bitcoin blockchain is open and when miners move large batch of coins at once there will be a sell off because traders can see the move and expect there to be sell off regardless of the intent of the miners.
2. Miners don’t need to move large amounts of coins at once as noted by the smaller batches of 1000 being sent to exchanges meaning if they do send coins again in the future in batch it’s with the intent to sell but also potentially place fear into the market.
3. Most traders did not buy the dip and instead sold their spot bitcoin to whales, institutions, stronger hands, or miners. Don’t sell your spot Bitcoin next dip.
Recent Trading Insights and Lessons
If you follow me on twitter you know I’ve been explaining how my trading has been going play by play. Recently I have had considerable success using some of the index contracts on FTX to find strength and weakness in the market.
I have also been staying up on the days that I work late to get directly bias for the next day by seeing which way the Asian session moves the market. For reference the Asian session starts from 0000UTC to 0300UTC. By then we can typically see how the market is likely perform however with much less volume. When the market is down and only a few coins are showing strength the best thing to do is find the weakest alt coins and look for shorting opportunities.
If the market is showing signs of recovery then find the alt coins that held the most strength and look to long them on the bounce. I do not short Bitcoin as more volatility can be found via the alts but I do use Bitcoin for directional bias during that time.
Below are some common trade set ups you can find across different alt coins at the moment. The key here is not to just ape into these coins because I posted them but understand the different patterns and how they can be played. Right now Bitcoin is likely to continue to trade sideways between our recent low and our target resistance. It is a good opportunity to look at some of the Bitcoin pairings although of course the same could be applied to the perp contracts if we do see good set ups. Bare in mind my strategy when trading is to acquire as much Bitcoin first and fiat second. Now to the set ups.
CAKE/BUSD – The break out of the down trend to find horizontal support
BZRX/BTC – The Classic Accumulation Pattern
ORN/BTC – The good old double bottom with resistance break
Hopefully you get the idea! Any questions simply comment below.
High fees cause infighting:
This past week has been the week of hype. We’ve seen Ethereum fees sky rocket due to activity onchain thanks to all the decentralised exchanges. This has lead to a bit of competition from Binance chain offering cheaper fees. This has caused a bit of back and forth between the ETH & BSC communities however the dark horse of this whole drama has been the Cardano community. For a project that hasn’t launched properly yet, with no smart contracts, ADA fans couldn’t help but exclaim that their network was cheaper than their counterparts and the future of DeFi will clear be built upon ADA. This lead to the Cardano climbing the ranks of coinmarketcap and dethroning Binance Coin taking up the number 3 spot.
Regardless of the the developments on other chains with smart contracts Ethereum clearly has enough of a network effect to not be dethroned from the number 2 spot so easily and with the EIP proposal to reduce fees likely seeing majority approval from miners we’ll likely see this being a non issue from June/July on-wards provided everything goes to plan without any hic-ups.
One decentralised exchange that has taken advantage of this however has been 1INCH which is now utilizing both Ethereum and Binance Chains.
What we’re likely to see if fees do become a real issue is more cross chain pollination especially if we see the likes of Raydium AMM & Solana kicking into gear utilizing liquidity across multiple decentralized exchanges.
NFTs Loved by GaryVee:
If we could compare the 2017 ICO mania to anything this bull cycle some would point in the direct of DeFi. The only problem there is a great deal of DeFi projects aren’t scams, aren’t hyper inflated vs the value they create, and actually offer something real and tangible to the market.
A better alternative might be to look at the NFT hype cycle we’re seeing. Artists selling one of a kind works for 6 figures and more however some really don’t see the allure. There’s been an argument going around as a proxy to the NFT space which roughly translates to this:
“Why buy NFTs when you can just copy and paste the photo”
Followed by a response like…
“Would you rather own the Mona Lisa or a photo of the Mona Lisa”
A good rebuttal but is that really what you’re owning when you purchase an NFT?
Well one friendly internet influencer, entrepreneur, and businessman has gone all in on NFTs. Gary Vay-Ner-Chuk. He clearly sees some value to them similarly to what he sees acquiring rare trading cards and if artists are able to sell their work to their adoring fans are these NFTs overprice. Well a good comparison is to look at the fine art market. If someone were to purchase fine art with the intention of if being worth more and having resale value well working out how much a piece is really worth and how much it could potentially be worth would be extremely difficult and would require a depth of knowledge, history, skill, and market foresight that if one were to compare it to the history of NFT market simply doesn’t exist yet. Yes one could use skills from haggling and determining price vs value from a lifetime of “flipping” goods as Gary Vee calls it but how many of those buying and selling these NFTs really going to make money off their purchases. Likely a small minority.
If someone is buying an NFT to support an artist and to have a collectible then the value is simply what they ascribe and are willing to pay. Yes there may be a greater super fan then them willing to pay even more down the line. What’s more likely though, especially as we are in the intial stages of the NFT hype cycle, is that price will continue to inflate until the market reaches it’s absolute peak and shall start to deflate similar to CryptoKitties last cycle or the ICO mania.
So who wins in this equation?
The artists. Those selling the NFTs. The platforms hosting NFT sales. Most importantly the Ethereum blockchain.
Regardless if you’re a Bitcoin maxi or a crypto poly it’s hard to argue that for a blockchain that should’ve fallen by the way side a long time ago it has been extremely successful and capable when it comes to reinventing it’s use case and the world computer is an apt definition for Ethereum…. at least until the next blockchain comes along.
Content worth consuming
Lastly we’re rounding out this newsletter with some content worth consuming. The signal from the noise.
How to hit Bitcoin Bottom & Tops – Bull & Bear Crypto
Play By Play Twitter Thread On How I’m Trading The Markets – Bull & Bear Crypto
Will Rising Yields Send Stocks Tumbling? – Macrodesiac’s Opening Belle
Best 2nd Passports For Crypto Investors – NomadCapitalist
Gleb Naumenko: The Label, Bitcoin Dev & Consulting – Steven Livera Podcast
Bottlepay – Buy & Send KYC’d bitcoin over lightning network. Recurring buys from hourly, daily, weekly, monthly
If there’s anything you’d like to see in these newsletters let me know.
See you in the next one.
Bull & Bear