What Monthly Candles Are Telling Crypto Investors

June 1, 2021

Shifts are taking place for the first time in over a year.

Bitcoin just printed its second consecutive negative monthly candle, which hasn't happened since the Covid crash. Meanwhile, Ethereum was down on the month for the first time since September of last year.

Riding along in the Cryptocurrency space has been the ultimate momentum strategy. As a result, gains have far exceeded any risk asset by a country-mile.

But the same applies to the downside.

In the case where volatility's ramped up as it has, there's nothing wrong at all with sitting on heavy cash positions until a more definitive trend forms. If the history of these digital assets have taught us anything, it's that knowing when NOT to be in the trade puts us in an incredibly advantageous position.

Just take a look at Ethereum's monthly candle:

This is the definition of an ugly mess.

Good luck to any trend followers trying to participate in recent weeks...

And how about Litecoin?

There's clear overhead supply governing the trend here. Not just in Litecoin, but the overall Crypto complex.

And to be clear, this is nothing out of the ordinary. In fact, it would've been more unusual if Litecoin blew past this level like it didn't exist. Consolidations happen and frantically swinging when they're taking place is a recipe for getting chopped up. Stock Market investors have certainly been reminded of that in recent months.

The weight of the evidence still suggests patience in the near-term is prudent here.

Let's zoom out even more. This time with the 800-pound gorilla of the asset class:

Is the long-term trend up?

Absolutely, there's no doubt.

But there is now opportunity cost at stake, on shorter time horizons. In environments like these, opportunity cost is a genuine risk too.

For a more tactical look, it's a reassuring data point for the bulls that buyers are currently defending this key 30,000 level, which coincides with some critical structural Fibonacci extensions.

Until we get a decisive move below 30,000 or above that overhead supply of 48,000, the intermediate trend is very much a mixed bag.

As always in these mixed environments, we expend our effort on the names bearing the brunt of the volatility and showing relative strength.

In our Universe of the Top 50 Cryptocurrencies, these were the only positives for the month.

We've written extensively about both Cardano and Polygon, so while this mess continues to play out, we're steering towards these relative leaders to express any kind of bullish thesis in this bifurcated market.

In essence, it's a frustrating time for trend-followers.

Before we do anything, we need to understand where the broader environment lies.

Until we get a decisive move in either direction, the weight of the evidence suggests sitting on the sidelines, evaluating the evidence as it comes, and taking bets in relative leaders when the risk is well-defined.

To wrap things up, here's a look at how the top Cryptocurrencies tracked yesterday:

Another big day for Cardano, and the same goes for Polkadot, Ripple, and Ethereum...

What Monthly Candles Are Telling Crypto Investors

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