What Will It Be?

Louis Sykes
February 8, 2023

Crypto markets can be daunting for those who come from traditional backgrounds.

There are entirely new market mechanisms, trading hours, different exchanges, and distinct ways to analyze the market, let alone the decentralized nature of how these markets operate.

It's no wonder that people find this asset class complicated.

Adding to the already heightened perplexity of these markets is how they're driven and how investors benchmark their performance.

Hear me out.

We know that Bitcoin -- and, to some degree, Ethereum -- are the only drivers of these markets. In other words, there are not many, if any, coins that sustainably perform when Bitcoin is under pressure.

This is completely different from the equity market, which offers more idiosyncratic opportunities to make money.

If, for instance, Apple is selling off, that doesn't necessarily mean that energy stocks or industrials are under pressure.

But in the world of cryptocurrencies, if Bitcoin is falling apart, chances are that everything else will be selling off.

Another added layer of complexity is that Bitcoin is the benchmark of most crypto investors. They denominate their portfolio in Bitcoin to identify whether they're outperforming "the market."

To some deeply entrenched in this asset class, they denominate their entire portfolio, crypto or not, in Bitcoin or Ethereum.

An investor isn't going to denominate their portfolio in Apple. But, in crypto markets, the benchmark is Bitcoin.

With these two points considered, from an analytical sense, this dynamic has the potential to make our jobs easier because we can concentrate our efforts into ascertaining Bitcoin's regime.

If Bitcoin is strong, we can lean on longs in altcoins.

If Bitcoin is weak or cooling off, we step back from our positions.

To use the example of Apple, you can't concentrate your efforts on Apple and use that analysis to categorize the entire US stock market.

But, in crypto markets, you can.

It's why we pay paramount attention to Bitcoin and then focus on everything else once we've ascertained a directional conviction.

So, when it comes to today's market environment, there's a crucial level we're monitoring.

That's 25,000 in Bitcoin.

And it's 1,700 in Ethereum.

Below these levels we can play it cautiously, at least in the near-term.

Above?

It'd be irresponsible not to be positioned long crypto one way or another.

So, will it be this?

Has momentum completely died off, and we're about to puke on this retest of resistance?

Or will it be this?

Is this merely the shaping period before another run-up?

What will it be?

Fire us your thoughts!

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Thanks for reading, and please let us know if you have any questions!

Allstarcharts Team

 

 

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