Onchain Report 17/08 – Whiskey Tango Foxtrot! Crypto down while Stocks smash the upper bound??
Join the Qluster team in this week's OC as we look at market risk and take a deeper look at ALTPERP. Read on for more 👇
(This article has been written by Vũ Nguyen and edited by Andy Phung)
A quick brief from HQ Commander: The NASDAQ Composite – one of the most important indices to measure tech stocks – is smashing its Weekly resistance marked at the 12,800-13,000 points, up 24% since the last pivot on 22nd June.
However, the crypto market seems to return to its short-term value area, downed approximately 100 points since its latest pivot. [FTX: ALTPERP ▼$2207].
On-chain Supply on Exchange (SoE) data shows mixed signals along with the decline of Bitcoin and Ethereum.
An omen that has different implications depending on your situation.
Part 1 | Short Term
SoE observed a surge compared to its last bottom pivot on 15th August [BTC: SoE ▲9.246].
As a result of the increase, Bitcoin backed off to its short-term support area between the $24,100 and $23,100 mark.
We must emphasise that the SoE is still within the bearish area, with the gap between the metric and its EMA(30,50) at the 0.134 mark.
This condition implies that Bitcoins are still being withdrawn from public exchanges, posing a bullish sentiment toward its future growth.
The second largest crypto also consolidated down to the short-term value area.
Ethereum reached its local peak of $2017, up +130% since its bottom pivot, then fell back to its 4H support [Coinbase: ETHUSD ▲$1899].
SoE broke up the EMA(30,50), indicating a surge in supply as news about the upcoming PoW fork starts to flood the media.
However, we could see that (1) SoE has not surpassed its highest pivot from the last breakout (20th July), and (2) the gap between EMA(30) and EMA(50) is getting thinner, indicating the weakness of the SoE trend.
In summary, one should not take this breakout of SoE at face value until it surpasses the previous pivot.
With the SoE forming a triangle pattern, we believe that the supply decrease will happen if SoE reaches below 13.71.
And for digital assets like cryptocurrency, we're only just getting started 👇
Part 2 | Long-Term
The good news is that SoE is moving down and expanding the gap between the metric and its moving averages.
∆ (referred to the previous report) is now sitting at 1.349 points.
Compared to the previous week, ∆ observed a slight decrease, which is reasonable given that crypto is in consolidation.
This scenario will be validated if SoE goes above EMA(50), which is now at the 11.04% mark.
From a long-term perspective, Ethereum SoE slightly increased to the upside of EMA(50), located at the 13.92% mark.
Following the previous report, we should have had a nice gain; however, one can never have too much diligence when monitoring if SoE breaks up the EMA(50) mark.
Again, suppose ETH confirms its continuation along with the decline of SoE from here.
In that case, we can also consider the present moment as another long opportunity, with minimal loss in the scenario that we are wrong.
ALTPERP returns to its short-term support. This is when it gets personal.
Following the previous report, the FTX’s Altcoin Index basket ALTPERP has fallen back from its short-term peak at $2337 and now consolidating around the 4H area.
Another sign of good news is that the price is departing from the $2241-$2170 range, signalling a bullish continuation.
So why, like we mentioned earlier, does this situation imply differently depending on your situation as a trader/investor?
Think about the moving average not as a trading signal but as a market condition analysis.
Every trend, whether bullish or bearish, shares the same common grounds: the cycle goes from one side, gets into the value area, and then either;
(1) breakout to the opposite side
(2) pushed back to the original side.
The same concept goes for risk management: if “risk” is defined as the loss percentage if we are wrong, then risk will go hand and hand with certainty in the market.
Well done! You’ve almost made it to the conclusion. Help us share this research before reading on 👇
Part 3 | Conclusion
Be conscious of your Risk level when entering the market.
If you have skin-in-the-game:
Manage your portfolio risk level/margin level; keep in mind that the market is going down does not mean this is over.
Start to book profit when Certainty and Risk are expanding.
Start reaccumulating or think about the exit strategy when the market goes south.
Create a strategy for different scenarios. It is always better to think about the “What If” rather than the “If Only”.
If you do not have skin-in-the-game yet:
Start to save money! If you want to make a one-off investment, protect your capital for the optimal market condition that suits you. Starting with the question of how much you can afford to lose is a good approach.
Remember that the market does not wait to touch the “support” for it to start moving. Therefore, if you only wait for the best chance, you could lose great opportunities! Be bold, do the calculations, and be ready to get challenged by the market.
Both short-term SoE of Bitcoin and Ethereum observed a surge while prices were experiencing a consolidation. This is considered a pause in the bullish trend sign as prices follow the increase in supply.
The long-term SoE of Bitcoin is still in the downtrend, with ∆ between the SoE and its EMA(30,50) currently at 1.349 points (SoE below EMAs).
The long-term SoE of Ethereum is still within the Long-term EMA(30,50) area; compared with last week, there is a slight increase in SoE. It still presents a good buy opportunity, but investors/traders should closely monitor the stop-losses.
The cryptocurrency market consolidates around the $2241-$2170 area. However, there is a sign of bullish continuation, a good signal from the bull side.
See you again for the next update.
Did you learn something new in tonight’s research feature? Let us know in the comments to help us deliver more quality crypto and blockchain research 🤗
We’re on a mission to a New World.
It’s a place where people come to share in the wonderful gifts of trading. Where individuals come to qluster their knowledge, united by a shared love for learning.
This is Trading Made Social.
Help us on our mission by sharing the gift of Trading Made Social to new explorers.
Join our Facebook group and connect with likeminded traders 🚀
Like and Follow our Facebook page for activity updates 📣
Connect with us on LinkedIn for future updates 🤝
The information on this website is for general information purposes only. It is not intended as legal, financial and/or investment advice and should not be construed and/or relied on as such. Before making any commitment of a legal and/or financial nature you should seek advice from a qualified and registered legal practitioner and/or financial and/or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any legal and/or financial product. Qluster does not recommend and/or endorse products and does not receive remuneration based upon investment and/or other decisions