Onchain Report 23/08 – Let us call it a trade, wrapping it up before it's too late...
Join the Qluster team in this week's OC as we batter down the hatches and prepare for the incoming storm. Read on for more 👇
(This article has been written by Vũ Nguyen and edited by Andy Phung)
The NASDAQ Composite failed to surpass the Weekly resistance and quickly hovered down to its weakened 4H support.
Once again, the crypto market took the front runner’s place in terms of exiting liquidity, losing all the local supports, and now looking for a dead cat’s bounce. [FTX: ALTPERP ▼1989].
On-chain Supply on Exchange (SoE) data signals investors’ fear, particularly from ETH holders.
Part 1 | Short Term
One observable behaviour of Bitcoin’s SoE is that it stopped falling on 20th August [BTC: SoE ~9.072].
As a result, Bitcoin lost its support area between the $24,100 and $23,100 price range and is now trading at the $21,350 mark.
This condition implies that investors have stopped withdrawing Bitcoins from exchanges, indicating a dangerous situation where a surge in supply could be imminent.
Similar to Bitcoin, the second largest crypto Ethereum observed a crash that smashed all the local supports.
Ethereum fell from its local peak of $2029 to $1630, down -19% [Coinbase: ETHUSD ▼$1630].
One of the essential pieces of information we would like to mention is that SoE has bounced up the EMA(30,50) support and surpassed the 20th July pivot, creating the highest peak since May 2022 [ETH: SoE ▲14.75].
In the previous report, we noted the danger of bullish invalidation in case SoE surpasses the last pivot.
As it is happening right now, an exit plan is highly recommended for Ethereum buyers.
And for digital assets like cryptocurrency, we're only just getting started 👇
Part 2 | Long-Term
So far, long-term SoE is still maintaining the bearish condition, emphasizing that Bitcoin is still a long-term holding asset.
Additionally, practitioners should remember that ∆ (referred to the previous report) is now at 1.433 points.
Compared to the previous week, we observed a slight increase in ∆.
Nevertheless, given the current price action, such an increase would not significantly impact Bitcoin in the long term.
Similar to the previous report, we keep the view that this situation will be invalidated if SoE goes above EMA(50), which is now decreased down to the 10.96% mark.
If I were you, I would run. From a long-term perspective, Ethereum SoE made a substantial move above the upside of EMA(50), located at the 13.89% mark.
Historically speaking, this period is the first time SoE rose above our long-term EMA(50) since 11th August 2018.
Again, we would like to emphasise this event’s importance to the future of cryptocurrency, at least for the next few months.
A rising Supply-on-Exchange is usually not a good condition for long-term investing.
If one follows our previous report closely, this is where we would want to close/cut loss early in our long trades, of course, with minimal loss.
ALTPERP loses support; who is swimming naked?
Following the previous report, the FTX’s Altcoin Index basket ALTPERP has finally broken all of its supports between the $2200-$2047 area.
Big red candles sent the crypto market back to where it was in July, with the index making a dead cat bounce setup within its 21st August bottom pivot and the clustered 4H-12H resistance at the $2060-$2018 price range.
We hold the view that the market has shifted to the bearish condition, as there is no short-term support to keep the index from falling further.
As we have discussed in our previous reports, a properly designed plan is vital for us to stay in this business, especially with this paradigm shift in market perspective.
Let us review what we have noted from last week:
If you have skin-in-the-game:
If you started to book profit in the last two weeks, you should have retained some of the profit before the market hit the happy landing.
If you made an exit strategy, it should be kicked in right when the market confirms its bearish condition, protecting your portfolio from the unexpected downturn.
If you do not have skin-in-the-game:
Remember when we emphasized the question of how much you can afford to lose?
If one strictly follows the risk management rules on buying at support, minds his own risk tolerance, and objectively closes his long in a timely manner; the loss should not be a big issue as we keep waiting on another opportunity, in which the market will not look back.
Well done! You’ve almost made it to the conclusion. Help us share this research before reading on 👇
Part 3 | Conclusion
The short-term SoE of Bitcoin indicates stagnation, while the long-term SoE is still in the downtrend, with ∆ between the SoE and its EMA(30,50) at 1.433 points (SoE below EMAs). Price action in the short-term view is bearish, and we are waiting for the SoE movement from a long-term standpoint.
Ethereum makes a substantial surge in both short-term and long-term perspectives as the metric broke up the Long-term EMA(30,50) area, making a historical movement since August 2018. This movement is considered a significant move of long-term holders and heavyweight investors to the bearish side. We hold the view that holding/longing Ethereum is no longer a good option to pick in both time windows
The cryptocurrency market follows the Ethereum bearish movement. As the ALTPERP index also lost all of its short-term support. Holding/longing crypto is not our favourite decision at the moment.
See you again for the next update.
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