A Pivotal Moment For Cryptocurrencies (ETH + BTC Dominance)
アップデート済
I haven't done an extensive written post on the market in a while. Now's a good time for me to get this out of the way, as my schedule is about to fill up again.
Back in August 2019, I called the bottom for ETH/BTC and perhaps a major top in dominance:
In January 2020, I also made an effort to call the top in Bitcoin dominance and a bottom on the ETH/BTC ratio:
Despite being correct, at least for many months, it seems like ETH/BTC is finally ready to break down to a new low. People are really expecting alts to fall off a cliff once again. But is this really the case? In this analysis, I will show why this is another "make or break" moment for cryptocurrencies, particularly major altcoins like Ethereum.
If you don't want to read this whole thing, you can skip to the bottom for a brief summary.
Here, we have the Bitcoin Dominance daily chart on the left and the Ethereum/USD Coinbase chart on the right. We can see that although dominance has climbed during Bitcoin's recent push up to 10K, it's still finding resistance at both the long term downtrend (red) and the downtrend since the previous summer (light blue). Here it is zoomed out:
Zoomed in, you can see that Dominance is actually also just barely holding above the long term uptrend (pink). Needles to say, alts need to choose a direction against Bitcoin soon. I think if it gets back decisively below both the 200 week and 200 day Moving Average, the top for dominance is more likely to be in, perhaps even for the long term. If it breaks out from those downtrends though...we can see it head all the way up towards 75-82%
Something else, which I noted in my last video, is that BTC dominance actually decreased after the last halving. I think this can be due to the fact that miners may decide to buy alts in order to hedge against slower production, in order to multiply their Bitcoin. It can also be because speculators are attracted to the growth potential of other cryptos, particularly those that require less energy and lower fees. The blue vertical line is around the last halving:
This is largely why I drew my yellow projection for dominance in the above chart in the way that I did.
If we observe ETH/USD, there are a number of trendlines. There are two broadening patterns. One of them has been breached twice. It's currently above it (pink). The second (orange resistance) shows a possible bullish target around $270. On the downside, if it gets back below that pink support, it can make a new multi-year low. There's a lot at stake here, and I'll talk about why a bit later on.
What about ETH/BTC? Now below all major weekly moving averages and unable to get above the long term downtrend (orange), while also breaking down from the recent uptrend (light blue)...all these factors look pretty bearish. The indicators show that it could go either way, however. The MACD can finally cross above the zero line if ETH ends up bouncing back above the uptrend and out of that pesky downtrend.
Market Overview TOTAL has confirmed the long term downtrend as resistance. This could be a bearish signal in the short term. However, it's holding above the major moving averages. I don't like to rely on MA's as much as I like to rely on volume and major horizontal levels/trendlines. As long as it holds $230 Billion, I think it should be good for consolidation and a move higher, towards my green X. If it breaks back below $230 Billion again, we can see a failure that takes us all the way to bear market lows again, and the bottom of yet another broadening pattern. Even though there are some bullish signals, there's a decent amount of risk right now, considering the market just made a lower high after a monthly lower low...so in this case, things should somewhat depend on the monthly close.
Bitcoin has failed to make a new high (so far), along with TOTAL. There are two major downtrends here, and it has failed to get above the first one so far. Even if it does, there could be a lot of resistance up towards even the high 11K level. I did call the move towards 10K, but things are a lot more uncertain now. Those upper targets may not be reached.
Zoomed in, Bitcoin has failed to get back into a large rising wedge (light blue), though it successfully tested the low 8K area (confluence of supports), as I suggested in my last BTC analysis. So, I'm a little uncertain here. It can still head towards 11K, but there's a lot of potential downside from here (even as low as 6K), if those purple supports are broken.
Now back to the altcoin market, and some individual coins I follow:
Let's look at the TOTAL2 (altcoin market cap) first. I'm removing all my trendlines and support levels here, just to focus on Moving Averages. While I don't like to use MA's to necessarily predict price moves, I think it's interesting that all the weekly MA's are now converging for the first time in the history of this chart. Professional traders do use these indicators, but retail mostly looks at horizontal levels or trendlines. In any case, the last time the MA's were this close was most likely right before the beginning of the last bull market.
Zoomed in, you can really see the convergence. It's also really important for alts to start at least slowly moving up here, because the 200w MA (blue) could end up crossing to the downside. Oscillators do show some room for upside here, so I think a breakout could be pretty large, particularly if it's big enough to pull up the 50w MA (red).
If I add my trendlines back in, you can also see that alts are actually inching out of a couple long term downtrends! (orange). Ideally, alts will continue holding the 70-80 Billion valuation zone, even if they move sideways for a bit. Why? It's a VERY Important long term decision zone. I want to see as much support built at these levels as possible.
These are the reasons why I think right now is an EXTREMELY important period for the market. For me to become more bullish, I'd really like to finally see a higher high and at the very least, current levels hold for a while.
Now for some individual coins:
XRP/BTC looks horrendous, but if it bounces anywhere between here and 1300 sats, it's still a long term HIGHER LOW on the ratio. In addition, this drop isn't being aggressively sold. Instead it's just drifting along the broken long term downtrend. It's more like people simply aren't buying XRP and buying other coins instead. This makes sense, considering XRP stagnated all the way until Bitcoin tested its all time high in 2016. XRP has still outperformed Bitcoin when measured from certain buy-in points, so if it makes a long term higher low, that would be pretty incredible. Technically, it may not bounce at all until the bottom of the red demand zone is reached.
XRP/USD can pump all the way above $0.30 and still remain in this downtrend channel! If XRP ever makes another parabolic run, it really needs to be so quick that most people miss out on the initial 100%-200% move. That's the way it'll need to happen, in my opinion. It faces a ton of resistances just overhead, so this one will need a miracle.
Some alts are actually starting to look much better. For example, XLM hasn't closed above the 50w MA (red) since July 2018! It also hasn't ever closed a week above long term downtrend channel. It's also continuing to oscillate near the 7 cents zone, which is a major long term pivot level. If it can close here and continue up, it can actually start to gain some momentum and even begin a long term reversal back to the upside.
NEO is out of the primary long term downtrend, having been one of the better performing alts over the last year or so. However, it still can't get back above the 100w MA (green), and It's starting to confirm another downtrend. But It's holding the 9w MA (orange) well so far. The 9w MA does a pretty good job of supporting an uptrend, until a breakdown is sustained, of course.
However, other altcoins remain in long term downtrends. Take NANO for instance. Last time, its inability to break out actually signaled that the top for the market was in. I use NANO here because I think it's an example of an altcoin that has a strong community and long term promise, despite lackluster price action. Check out this channel. Holding above previous long term support between $0.70-0.80 is only the first step.
VET is also an interesting one. It's still contending with a long term resistance and the 50w MA. But...indicators show that there's room for upside. Actually, the majority of cryptocurrencies don't look particularly overheated right now. That doesn't mean a drop isn't possible though.
IN SUMMARY
Overall, I'm feeling fairly cautious right now (less bullish than I was upon the initial recovery), though I'm glad the cryptocurrency market has remained relatively strong amidst the economic uncertainty. This strengthens the narrative for crypto as the future of money.
Reasons to be bullish:
1) Oscillators are in a more neutral zone than they were the last time the market was at these levels, indicating large upside potential upon a breakout.
2) Bitcoin dominance has started to drop slowly during this consolidation period. Could mean that capital is moving around within the market instead of getting out. Usually if alts drop during consolidation it's a bearish indicator,
3) Near full retrace of the dump prior to the coronavirus panic, strengthening the crypto narrative. This came on the back of a major liquidity test of bear market lows. This is similar to what ended the last bear market.
4) I will add, some more positive media attention for Bitcoin.
5) Moving averages are aligning again for a potential bull market.
Reasons to be bearish:
1) A lot of economic uncertainty, and many people still may lack the resources to put any money into a speculative asset. Massive stimulus may change that.
2) Still unable to get above major market-wide long term resistances
3) Lower high after a lower low, even if it was a massive recovery. I did suggest recently that the market can experience wider swings than normal, meaning that Bitcoin can indeed dump right back to 6K and the 200w MA.
4) Dominance increasing isn't that great for the crypto market, as a whole. This is my opinion. I think altcoin growth and competition is healthy, even for Bitcoin.
5) Weekly moving averages are in a very sensitive position, where even stagnation could cause them to look pretty awful on longer timeframes.
Important levels to watch for ETH and Dominance are shown on the main chart, but for Bitcoin, there's resistance at $10.5, 10.8, 11.1, 11.8, 12K, 14K, 16K-20K. On the downside, we have support at 9.3K, 9.1, 8.6, 8.1, 7.7, 6.9, 6.4, and 5.8K. The reason there are so many levels is simply because the market is still range-bound! Right now, I think it's very important to observe the market, since the long term trend really depends on what happens here.
This is not financial advice. This represents my thoughts and opinions only. This should be used for speculative and educational purposes only.
Thanks for reading!
-Victor Cobra
Back in August 2019, I called the bottom for ETH/BTC and perhaps a major top in dominance:
In January 2020, I also made an effort to call the top in Bitcoin dominance and a bottom on the ETH/BTC ratio:
Despite being correct, at least for many months, it seems like ETH/BTC is finally ready to break down to a new low. People are really expecting alts to fall off a cliff once again. But is this really the case? In this analysis, I will show why this is another "make or break" moment for cryptocurrencies, particularly major altcoins like Ethereum.
If you don't want to read this whole thing, you can skip to the bottom for a brief summary.
Here, we have the Bitcoin Dominance daily chart on the left and the Ethereum/USD Coinbase chart on the right. We can see that although dominance has climbed during Bitcoin's recent push up to 10K, it's still finding resistance at both the long term downtrend (red) and the downtrend since the previous summer (light blue). Here it is zoomed out:
Zoomed in, you can see that Dominance is actually also just barely holding above the long term uptrend (pink). Needles to say, alts need to choose a direction against Bitcoin soon. I think if it gets back decisively below both the 200 week and 200 day Moving Average, the top for dominance is more likely to be in, perhaps even for the long term. If it breaks out from those downtrends though...we can see it head all the way up towards 75-82%
Something else, which I noted in my last video, is that BTC dominance actually decreased after the last halving. I think this can be due to the fact that miners may decide to buy alts in order to hedge against slower production, in order to multiply their Bitcoin. It can also be because speculators are attracted to the growth potential of other cryptos, particularly those that require less energy and lower fees. The blue vertical line is around the last halving:
This is largely why I drew my yellow projection for dominance in the above chart in the way that I did.
If we observe ETH/USD, there are a number of trendlines. There are two broadening patterns. One of them has been breached twice. It's currently above it (pink). The second (orange resistance) shows a possible bullish target around $270. On the downside, if it gets back below that pink support, it can make a new multi-year low. There's a lot at stake here, and I'll talk about why a bit later on.
What about ETH/BTC? Now below all major weekly moving averages and unable to get above the long term downtrend (orange), while also breaking down from the recent uptrend (light blue)...all these factors look pretty bearish. The indicators show that it could go either way, however. The MACD can finally cross above the zero line if ETH ends up bouncing back above the uptrend and out of that pesky downtrend.
Market Overview TOTAL has confirmed the long term downtrend as resistance. This could be a bearish signal in the short term. However, it's holding above the major moving averages. I don't like to rely on MA's as much as I like to rely on volume and major horizontal levels/trendlines. As long as it holds $230 Billion, I think it should be good for consolidation and a move higher, towards my green X. If it breaks back below $230 Billion again, we can see a failure that takes us all the way to bear market lows again, and the bottom of yet another broadening pattern. Even though there are some bullish signals, there's a decent amount of risk right now, considering the market just made a lower high after a monthly lower low...so in this case, things should somewhat depend on the monthly close.
Bitcoin has failed to make a new high (so far), along with TOTAL. There are two major downtrends here, and it has failed to get above the first one so far. Even if it does, there could be a lot of resistance up towards even the high 11K level. I did call the move towards 10K, but things are a lot more uncertain now. Those upper targets may not be reached.
Zoomed in, Bitcoin has failed to get back into a large rising wedge (light blue), though it successfully tested the low 8K area (confluence of supports), as I suggested in my last BTC analysis. So, I'm a little uncertain here. It can still head towards 11K, but there's a lot of potential downside from here (even as low as 6K), if those purple supports are broken.
Now back to the altcoin market, and some individual coins I follow:
Let's look at the TOTAL2 (altcoin market cap) first. I'm removing all my trendlines and support levels here, just to focus on Moving Averages. While I don't like to use MA's to necessarily predict price moves, I think it's interesting that all the weekly MA's are now converging for the first time in the history of this chart. Professional traders do use these indicators, but retail mostly looks at horizontal levels or trendlines. In any case, the last time the MA's were this close was most likely right before the beginning of the last bull market.
Zoomed in, you can really see the convergence. It's also really important for alts to start at least slowly moving up here, because the 200w MA (blue) could end up crossing to the downside. Oscillators do show some room for upside here, so I think a breakout could be pretty large, particularly if it's big enough to pull up the 50w MA (red).
If I add my trendlines back in, you can also see that alts are actually inching out of a couple long term downtrends! (orange). Ideally, alts will continue holding the 70-80 Billion valuation zone, even if they move sideways for a bit. Why? It's a VERY Important long term decision zone. I want to see as much support built at these levels as possible.
These are the reasons why I think right now is an EXTREMELY important period for the market. For me to become more bullish, I'd really like to finally see a higher high and at the very least, current levels hold for a while.
Now for some individual coins:
XRP/BTC looks horrendous, but if it bounces anywhere between here and 1300 sats, it's still a long term HIGHER LOW on the ratio. In addition, this drop isn't being aggressively sold. Instead it's just drifting along the broken long term downtrend. It's more like people simply aren't buying XRP and buying other coins instead. This makes sense, considering XRP stagnated all the way until Bitcoin tested its all time high in 2016. XRP has still outperformed Bitcoin when measured from certain buy-in points, so if it makes a long term higher low, that would be pretty incredible. Technically, it may not bounce at all until the bottom of the red demand zone is reached.
XRP/USD can pump all the way above $0.30 and still remain in this downtrend channel! If XRP ever makes another parabolic run, it really needs to be so quick that most people miss out on the initial 100%-200% move. That's the way it'll need to happen, in my opinion. It faces a ton of resistances just overhead, so this one will need a miracle.
Some alts are actually starting to look much better. For example, XLM hasn't closed above the 50w MA (red) since July 2018! It also hasn't ever closed a week above long term downtrend channel. It's also continuing to oscillate near the 7 cents zone, which is a major long term pivot level. If it can close here and continue up, it can actually start to gain some momentum and even begin a long term reversal back to the upside.
NEO is out of the primary long term downtrend, having been one of the better performing alts over the last year or so. However, it still can't get back above the 100w MA (green), and It's starting to confirm another downtrend. But It's holding the 9w MA (orange) well so far. The 9w MA does a pretty good job of supporting an uptrend, until a breakdown is sustained, of course.
However, other altcoins remain in long term downtrends. Take NANO for instance. Last time, its inability to break out actually signaled that the top for the market was in. I use NANO here because I think it's an example of an altcoin that has a strong community and long term promise, despite lackluster price action. Check out this channel. Holding above previous long term support between $0.70-0.80 is only the first step.
VET is also an interesting one. It's still contending with a long term resistance and the 50w MA. But...indicators show that there's room for upside. Actually, the majority of cryptocurrencies don't look particularly overheated right now. That doesn't mean a drop isn't possible though.
IN SUMMARY
Overall, I'm feeling fairly cautious right now (less bullish than I was upon the initial recovery), though I'm glad the cryptocurrency market has remained relatively strong amidst the economic uncertainty. This strengthens the narrative for crypto as the future of money.
Reasons to be bullish:
1) Oscillators are in a more neutral zone than they were the last time the market was at these levels, indicating large upside potential upon a breakout.
2) Bitcoin dominance has started to drop slowly during this consolidation period. Could mean that capital is moving around within the market instead of getting out. Usually if alts drop during consolidation it's a bearish indicator,
3) Near full retrace of the dump prior to the coronavirus panic, strengthening the crypto narrative. This came on the back of a major liquidity test of bear market lows. This is similar to what ended the last bear market.
4) I will add, some more positive media attention for Bitcoin.
5) Moving averages are aligning again for a potential bull market.
Reasons to be bearish:
1) A lot of economic uncertainty, and many people still may lack the resources to put any money into a speculative asset. Massive stimulus may change that.
2) Still unable to get above major market-wide long term resistances
3) Lower high after a lower low, even if it was a massive recovery. I did suggest recently that the market can experience wider swings than normal, meaning that Bitcoin can indeed dump right back to 6K and the 200w MA.
4) Dominance increasing isn't that great for the crypto market, as a whole. This is my opinion. I think altcoin growth and competition is healthy, even for Bitcoin.
5) Weekly moving averages are in a very sensitive position, where even stagnation could cause them to look pretty awful on longer timeframes.
Important levels to watch for ETH and Dominance are shown on the main chart, but for Bitcoin, there's resistance at $10.5, 10.8, 11.1, 11.8, 12K, 14K, 16K-20K. On the downside, we have support at 9.3K, 9.1, 8.6, 8.1, 7.7, 6.9, 6.4, and 5.8K. The reason there are so many levels is simply because the market is still range-bound! Right now, I think it's very important to observe the market, since the long term trend really depends on what happens here.
This is not financial advice. This represents my thoughts and opinions only. This should be used for speculative and educational purposes only.
Thanks for reading!
-Victor Cobra
ノート
Whaddyaknow? Dominance has dropped since this post, with many alts starting to make new highs. New update to come relatively soon.ノート
In my telegram group, I've made some more detailed updates. Same with Twitter.
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