Bitcoin Stuck In Purgatory As Market Chooses Meme Coins Over Useful Projects
Crypto altcoins are in a massive bubble. Meme coins have taken over the space, accruing billions of dollars in valuations and ranking among the top 10 on popular crypto ranking sites. While this doesn’t have any bearing on the great bitcoin trade, it’s worth noting that this market behaviour has happened in the past and always ends the same way.
Let’s dig in.
Peter Thiel’s Palantir Accepts Bitcoin As Means of Payment
Data analytics , an investor inquires as to whether Palantir will have bitcoin or any other cryptocurrency on its balance sheet, to which Palantir’s CFO, David Glazer said: “also considering holding bitcoin on its balance sheet, potentially joining the likes of Microstrategy, Tesla, Square and other firms in due course.
Check out the full article here!
Litecoin On a Tear
LTC/BTC is on a tear and continues to show signs of strength. The last remaining resistance for the pair is ₿0.008 and once that’s gone the sky’s the limit.
On the BTC pair, market structure looks like a first impulsive weekly candle. If price falls through ₿0.0057, the bullish case for continuation becomes shaky. Presently, there’s no reason to expect anything other than continuation until proven otherwise.
Meanwhile, the USD pair formed its highest weekly close ever. As of right now, there’s no significant technical resistance, with the closest daily support resting at $345 — $356. Below that, we can expect the $300 psychological level to play a supportive role if the market opts for bigger haircuts.
Earlier in May, we outlined the reasons as to why Litecoin serves a useful function in the cryptocurrency space. You can find out more about the case for Litecoin here.
Is BTC Stuck in Purgatory?
BTC/USD has been ranging for 91 days. It’s one of the longest consolidation rounds yet and has no apparent end in sight.
On lower time-frames, BTC/USD offers two buying opportunities. Earlier this morning, price rejected off the golden pocket, at around $58,000. If bears follow-through, weakness below $53,000 would open the door to lower levels, namely the $51,000 (.235 fib) level. On the flip-side, reclaiming the golden pocket (.618 fib ratio) would be the first indication that the bitcoin bulls are back.
Aside from that, BTC/USD price-action is a death trap on low time-frames not worth paying attention to. The unpredictability of choppy price-action seldom makes for a good swing trade, though this might be a scalpers haven.
Having said that, bitcoin’s network strength is increasing. The hashrate continues to rocket higher, miners are accumulating more bitcoin and there are no signs of serious investors pulling out any time soon (or ever). Quite the contrary, rumours are now swirling around that Facebok might soon officially put bitcoin on the company’s books.
Massive Bubbles Take Over Crypto
Retail is clearly in crypto. One way to figure this out is by looking at exchange sign ups. In fact, Coinbase added 13 million customers from January to March. Similar figures have been noted by Robinhood (9.5 million) because apparently the GME scandal wasn’t enough to put people off from using the platform.
Another sign that retail has joined the game is the increased money flow into meme coins like DOGE — up 10300% YTD. Other animal coins like SHIBA also put in 100% rallies in 24 hours.
The psychology of these new participants is fairly straight forward (and flawed). They see bitcoin and think that it’s up significantly and therefore opt for riskier and riskier bets to the point where you might as well be playing the lottery. Fundamentals, market capitalisation, circulating supply, dev teams, tokenomics, the project’s vision or any technical or fundamental predictors go out the window and it’s all about the next hype cycle — the next meme.
These participants will continue to cycle funds to the next project until the music stops. Many will be left holding the bags as they witness 99% draw-downs on vaporware tokens. For example, Ethereum Classic outperformed Ethereum recently. Bearing in mind that ETC has been 51% attacked very often (i.e. the network isn’t secure), one can only presume that new participants bought it instead of Ethereum by mistake.
These are signs of a bubble (that is distinct from bitcoin). When your family or people close by begin to ask you about which altcoins to start trading, this is definitely not a time to invest in altcoins any more. In fact, it’s probably a good time to exchange them for bitcoin, stablecoins or something that will at least be around a year from today.
In my estimation, we are close to the peak of this altcoin bubble, simply because all the signs are pointing in that direction. This does not mean that bitcoin is over-valued, as bitcoin is in a league of itself entirely and always has been. One important thing to remember is that if bitcoin drops by 10%-15%, altcoins will lose anywhere between 70%-99% of their valuation. On the other hand, if bitcoin opts for another leg up, capital will flow back into the king and altcoins will bleed out.
This happened in August 2020. I fully expect it to be the same this time around.
Finally, bitcoin has been in a range for 91 days. It won’t be consolidating for much longer.
Catch you next time.
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BTC address: 3EydsEYpjHn68axKnCUqBB7EbqcxrEjamr
Originally published at https://mailchi.mp.