Crypto Investor Report, August 20
Summary
Last week we were discussing Bitcoin’s price consolidation and its most probable resolution downwards. It did perform that way and it even broke below the $10k psychological mark flagging some bottoms in the Fear and Greed Index.
Nevertheless, bulls buying pressure kicked in and Bitcoin’s price has sustained to stay above that level until Bakkt’s announcement helped the market to relief a little bit further. Since then, we are watching some positive short-term structures being developed that may help in a possible upcoming upwards leg.
Bitcoin’s dominance is also on the rise again, aiming to break through the 70% level. As an immediate consequence, altcoins are still largely underperforming the main digital currency and getting further squeezed down.
In the Spotlight
Market Overview
The weekly performance of digital assets led to a further decline in the total market capitalization. Seven days ago, the net sum of all crypto assets was almost $290 Bn and now sits slightly above $275 Bn, a 5.2% depreciation. The average daily traded volume suffered a spike following the Bakkt’s announcement but has since then declined to trade in the range $40–50 Bn during the past few days.
Regarding dominance, Bitcoin’s share has stopped raising and flattened out above the 68% level but, during the last days, it seems to be aiming once again to test the 70% threshold. Currently, it stands at 69.25%, at the time this report is been written. We need to go back to March of 2017, to recover the last time Bitcoin’s dominance was standing well above 70%.
Looking into the digital assets with at least (or near) $1 Bn of market capitalization, the weekly performance was moderately negative. Bitcoin led the pack with a seven-day negative performance of -1.71% and is now trading at $10,743.89, at the time this report is being written.
Highlight to Monero (XMR) who managed to counter-perform the market and achieve 0.23% of weekly gains, sustaining its price over the $86 mark.
On the other hand, Litecoin (LTC), EOS (EOS), and Tron (TRX) saw a double-digit loss during the course of the last seven days. But the week was also negative for the remaining spectrum of the top altcoins, with the majority of them carrying up 5 to 10% of weekly losses and struggling to keep up with BTC’s pace.
Regarding the top-20 listing by market capitalization, no notorious change to flag. Ethereum Classic (ETC) raised one position in the charts, for another consecutive week, overtaking IOTA (MIOTA) in the 16th position.
The full list is still lower-bounded by Ontology (ONT), but now with a lower market capitalization of just $421 Mn. NEM (XEM) is the other coin in this top 20 that is still below the $500 MM threshold. Only the top twelve have now over $1 Bn of market capitalization.
Bitcoin Market Analysis
Last week we were discussing Bitcoin’s consolidation above the $11k level. The market resolved it to the downside. That movement brought some positive market structures, especially in the form of higher lows, in a construct that may help to build the next leg up.
That down resolution also triggered some extreme bearish sentiment, once we broke the $10k level. The Fear and Greed Index went down to 11 (on a 100 scale) and signalled extreme fear from the investors. That sort of extreme read was not seen since the $3k lows back in December of 2018.
The Fear and Greed Index is a secondary metric which usually gets pretty in sync with local bottoms. The bear story might not yet be over, but we are seeing some re-alignment of technical and fundamental metrics that suggest another leg up for Bitcoin along the next weeks.
Another interesting metric to look at is the Bitcoin Difficulty Ribbon. This fundamental indicator narrows itself down during tough times and expands itself during bullish seasons.
When the difficulty decreases, that usually means that the mining network is experiencing severe challenges, and the longer it contracts the more miners might get out of business. During these contracting times, the Difficulty Ribbon narrows and becomes a significant proxy to recognize cycle bottoms.
If we take a close look at the Bitcoin chart, we can see that the Difficulty Ribbon contracted during the $3k bottoming in the same sort of fashion that it did during the bottoms of 2012 and 2015.
And after that period the ribbon starts to fan out and expand. We are seeing the first glances of that expansion that suggest we are in the early stages of the next bull cycle. The Bitcoin Network Hash Rate is also supporting this idea, to the point that it crossed the all-time high mark in sync with the Difficulty Ribbon broadening.
If the bull case has already taken over the bear trend, then the retracement we’ve experienced from $14k to $9k is already a significant one in line with the ones Bitcoin has printed during past bull cycles. Therefore, higher chances for an upper resolution of the weekly consolidation.
Now let’s focus into the most actionable information.
The weekly chart shows a clear consolidation pattern going on. It might take still a bit until this gets resolved. But as traders, we want to anticipate which could be the next significant target areas once the consolidation resolves.
And we could highlight two strong support areas on the downside. The first one around $9k, where we meet some pending harmonic levels and the weekly EMA21. For the second one, we see strong support building up around the $7.5k region.
Looking upwards, there’s a clear strategic target screaming for attention at mid-$15k area. There we find an all-time harmonic level in combination with some other resistances that are getting build in the daily time frame.
The daily chart is the one showing very clearly the whole picture of the consolidation, which alternates lower highs and higher lows. The resolution timing for this dynamic is due until the end of August up to mid-September range.
On the 4-hour chart, we can see the nature of last week’s drop, and the subsequent recovery above the S.E.X.200 cloud and around the Daily EMA21.
Nevertheless, the last bounce from mid-$9k is not yet that convincing as to set case. Bitcoin needs to retake the $11k mark and might be still a long grinding path. It would be welcoming a retracement back to mid-$10k to reload the positions.
Altcoin Analysis
The Bitcoin Dominance is climbing up to the 70% zone, and it seems that there might be some serious resistance at the 73%-75% region. If Bitcoin manages to break above $11k, be mindful of your exposure in altcoins because, usually, that’s not a good sign for them. We might see some overperformers but, overall, the altcoins might be squeezed once again to challenge the previous lows.
Looking Forward
This week we are mainly interested in increasing our exposure to Bitcoin to get well positioned for the next potential leg up. We have some good-looking bottoming structure protecting the positions.
A retrace back to mid-$10k area is the preferred path to scoop some more BTC in anticipation for its upward resolution.
Important Note: The information provided on this post has been prepared solely for informational purposes and should not be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any transaction or trading activity. The contents are based upon or derived from information generally believed to be reliable although no representation is made that it is accurate or complete and Obvious Capital accepts no liability with regard to the user’s reliance on it.
