Mar 15
MIM 03–14–2022
Magic Internet Mondays
Last time we discussed farming the range with a bullish bias at range lows and a bearish bias at range highs as we are in a non-trending environment. Our market proxy or base risk is BTCUSD given the highly correlated nature of the crypto market and the current lack of relative strength in the majority of altcoins; Therefore we only look for alt exposure in coins that are outperforming BTCUSD and our preference should be to take profits in USD as BTCUSD is in an intra-range downtrend.
Looking at our roadmap we can see BTC struggling at the border between where our bias should start tilting long and where it should start tilting toward protection. The bulls have tested the midrange 3 times which should have absorbed some sellers but those runs have been consistently weaker as we can see on the daily chart. Another technical signal to note is the RSI crossing over the 50 midpoint and rejecting on the retest; RSI ranging in the lower half can often accompany a downtrend.
In our strategy we utilize the AVAX-MIM liquidity position on Trader Joes to have some AVAX exposure, earn yield and most importantly give us some borrowing power on Abracadabra. So far AVAX has maintained its high time frame outperformance against BTC but has been consolidating in a range for quite some time and is now testing the range low. Per our principles we want to be bullish at range lows:
In this context it looks like a nice spot to consider AVAX exposure as long as BTCUSD is bullish… which puts us in a conundrum. BTCUSD is throwing mixed signals and on top of that in the last down move AVAXUSD broke market structure in a way that shouldn’t be ignored. Therefore lets take recall our strategy: Farm and survive the volatility; hedge collateral rather than selling to maintain exposure as well as buying power.
We are already long through our AVAX-MIM JLP and our GLP (BTC, ETH and AVAX), and given that price is at the border of our long/hedge zones we know we will need buying power soon it’s just unclear which direction we need to deploy it. In general we want to borrow from our AVAX-MIM JLP on Abracadabra when AVAX is at support to give ourselves the best chance of avoiding drawdowns and liquidations, so this looks like a great time to summon some MIM on Abracadabra (against our AVAX-MIM JLP).
Taking a look at the AVAXUSD chart we can see an intra-range down trend that just broke the midrange. In general a break of a horizontal will flip which type of level it is, support or resistance. So when a support is broken, it should be treated as resistance on the first retest and if a resistance is broken it should be looked at as a level of support. When the midrange was lost on AVAXUSD our bias should flip at that level to bearish and we should look for rejection as price comes back into it, as it currently is.
If BTC can put show some strength, which looks like a 50/50 chance at this point, then its possible for AVAX to reclaim the midrange and return us to our bullish bias in which case we can take some of our borrowed MIM to leverage long AVAX into at least $78 but in the absence of that reclaim it makes sense to consider shorting the AVAXUSD retest of ~$70 targeting range lows at $56 with a chance to take early profits around $63.5. If the short setup lines up the market rallies afterward we will lose 1R (1% of our trading funds) on the hedge and participate in the rally with our liquidity positions. If the market dumps, with the right amount of leverage, we can hedge all our collateral and load up at much better prices at the range lows.
Stay long time, have good time, until next time…
- Eroneus
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