Tuesday Inferno market report

TL;DR There’s good. There’s bad. And then there’s Ugly. 

The good: fundamentals

Bitcoin is storming ahead in terms of infrastructure. Hashrate and Difficulty are at all time highs, indicating long-term confidence in the network. Bitcoin dominance is at over 60%, almost a two-year high, showing that right now, crypto traders are interested in BTC above all else. Overall, then there is a high degree of confidence in the #1 digital currency. Then we have the fact that trading volumes are up massively over the last few months. BitMex reports annual volume of $1 trillion, with $164 billion in the last 30 days. Bitcoin is here to stay.

The bad: technicals

But as much as the long-term fundamentals are good, the short-term technicals are bad. The run-up of the last three months ended spectacularly at $13,880 (Bitstamp), which is also around the 0.618 fibonacci level as measured from the top of the bubble to the bottom of the bear market. That’s the so-called golden fib level, and it often acts as strong resistance. We saw a nasty shooting star doji on the weekly candle, with a $3,000 wick. Then the price dropped below $10k, an important psychological support level.

What we’re looking at here could be framed a couple of ways. It could be wave 2 of a typical five-wave Elliott wave cycle. Markets move in phases and after such a stellar run-up, profit-taking and correction is only reasonable. Once wave 2 ends, we’ll start the longer and more powerful third wave of the cycle. We could also see it in the same terms as the big retracement of November 2015, when bitcoin had recovered from its capitulation lows, went into a parabolic rise to $500, and retraced to $300 – before beginning its ultimate rise to $20k. That was a 40% retracement. It will possibly be less this time, since there’s greater interest in bitcoin. Equally, it could be worse as it was a sharper run-up. As Alessio Rastani has discussed, it’s natural for bull markets to correct to the 21-week EMA periodically. That’s around $7,300 right now.

The Ugly: alts

The upshot of BTC going wild and then dumping is that alts were sold for BTC on the way up, and sold for fiat on the way down. Result: most major alts have been slaughtered. In fact, not so much slaughtered as taken out to the woodshed and beaten half to death, then set upon in a dark alley and had the other half beaten out of them. After that they were dragged bleeding from the scene, stuffed into the boot of a car and taken to a remote location, at which they were beaten some more. Then they were slaughtered.

In short, alts have had a bad time recently. And while that can and quite possibly will change at some point, it seems unlikely that the picture will get appreciably better while all eyes are on BTC.

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