Obvious Capital
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Obvious Capital

Crypto Investor Report, July 23

Summary

After plummeting into the $9k levels, Bitcoin went into relief-rally mode. Prices hovered for the week in the $10–11k range, but market’s conditions — that have been deteriorated recently — haven’t improved, and the selling pressure seems to be intensifying lately.

A scenario of a mild retracement, bringing us below $9k levels gains more consistency and that retracement can even drag prices into lower levels if FUD kicks in. In markets, history doesn’t repeat itself, but it often rhymes, and if we look into the NVT performance that revisitation can’t be completely discarded.

Bitcoin’s dominance seems also to have reached a top, and is now declining. Allied to that, we have seen finally some altcoins over-performing and starting to recover much of the huge recent losses. Not a widely spread and unanimous scenario, but getting first glimpses of it might be determinant to finally understand the performance of the altcoin universe.

Market Overview

Not much changed during the course of last week in terms of global market capitalization. After a short relief to the $280 Bn mark, its value has steadily declined and now sits just slightly above the $272 Bn level.

Total Market Capitalization (gently provided by coinmarketcap)

Regarding dominance, it appears that Bitcoin has found a high at the 66,62% level and, since then, it has retraced down almost 1.5%. Part of it has seen some flow into Bitcoin Cash (BCH) and Litecoin (LTC), but the majority of it went to non-top 10 assets by market capitalization.

Percent of Total Market Capitalization — Dominance (gently provided by coinmarketcap)

Looking into the coins and tokens that have at least $1 Bn (or near) of market capitalization, the scenario is of a relief rally since the last week plunging of prices.

The highlight goes to Bitcoin Cash SV (BSV), with over 50% gains in the 7-day period, trading now at $167. Binance Coin (BNB) also outstands with gains of over 17%, aiming to break the 30 dollar resistance. Cosmos (ATOM) and Ripple (XRP) failed to reach Bitcoin’s pace of almost 6% but still finished on the green.

Top Digital Assets — Weekly Movements (gently provided by coin360)

Looking into the top-20 rankings by market capitalization, a notorious move from Binance Coin (BNB), overthrowing EOS from its 6th place. Tezos (XTZ), currently in 17th, with over $75 Mn increase in market capitalization during this week, also surpassed NEM (XEM). Ontology (ONT) closes the rank with its valuation slightly above the $500 Mn.

Top Digital Assets — Ranking by Market Capitalization (gently provided by coinmarketcap)

Bitcoin Market Analysis

After some first signs of market deterioration — that we flagged last week — , the big picture is now becoming more clear. And with it, the confirmation of a topping structure in the Bitcoin market, that we can look into by two different perspectives:

These facts, combined with the recent price action and markets behaviour, leads to a scenario where we might see a significant retracement during the course of the next weeks/months. How deep should we aim for? Well, that’s something we need to wait and see.

NVT Indicator (https://www.tradingview.com/x/RyC5loBY)

The previous instances in which the NVT indicator signalled a market top were situations that brought us with corrections of magnitude from 50 up to 70%. To be rigorous, these occurrences happened previously during bearish periods but this time — the good news — it has occurred under a slightly more bullish market behaviour.

If we project the magnitude of these expected corrections, then Bitcoin price would probably bottom in the range between $3,750 up to $7,000. If this turns out to be true, it will draw a higher low visible in the weekly charts time frame. These are great news for crypto-investors as that’s precisely what they want to see as a solid foundation for the next bull run.

Nevertheless, it’s reasonable to consider an alternative scenario, in which the retracement might not be as severe as we’ve seen in the past. The bullish market structure that has been being built during the first half of 2019 supports this thesis, allied to the fact that we have clear signs of the market being more mature than previously. Currently, there are far more institutional players than in the past and the retail participation hasn’t been quite notorious along the last bull run.

With these two scenarios in mind, it seems plausible to advocate for a milder retracement that could find a bottom around the $8k area.

Jumping into our market state charts, we can see that Bitcoin is breaking into the below side of the Weekly DMA3x3, perfectly aligned and synchronized with the NVT cross that we mentioned above.

Bitcoin Technical Charts (https://www.tradingview.com/x/bM9g4pYg/)

On the daily time frame, Bitcoin is being rejected by the (now) red market state cloud, precisely in the zone of the previous candle body lows. Here we have a solid confirmation of the bearish hypothesis.

Diving into the 4-hour time frame, we can appreciate more details of that rejection. A thick resistance area, covered by our two reference clouds, has seen Bitcoin trying to breach in and breakthrough, but it eventually failed. Therefore the subsequent move forces us to look South.

And looking down we find some appealing price targets just below the $9k levels, which were not hit during the last week lows. Those targets set up a good starting point to bring the market a further step-down.

Looking into other digital assets, some major altcoins are showing a timid up reaction when benchmarked against BTC.

Bitcoin vs Others (https://www.tradingview.com/x/a2v9juPD/)

There could be some names willing to outperform Bitcoin, but we need some sort of extra-confirmation about the real intentions of the altcoin universe as a whole. In the meantime, best to stay neutral or carefully pick up a few ones just to be positioned in the short-term.

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.

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