In yesterday's note, we outlined our neutral approach, pointing out that sideways, messy action looks to be the most likely scenario for Bitcoin.
We're currently in elevated cash positions, sitting on the sidelines waiting for a higher-conviction entry before moving back into aggressive long positions. It appears as if these next few weeks could involve a high concentration of whipsaws in the context of choppy price behavior.
But today is when we publish our full crypto chartbook, so we thought we'd share how we're approaching new longs, despite the evidence pointing to this being a messy market for Bitcoin.
There's really a common pattern appearing in the alts right now.
In a note published on Saturday, we briefly outlined what took place over the weekend, a $700B total market-cap decline that saw most crypto assets fall over 25% on an intraday basis.
As we'll cover in this week's report, we're on the sidelines with elevated cash positions. Risks still linger for long positions right now--we're waiting for a higher-conviction entry.
Here's a quick summary of what took place over the weekend:
As we've demonstrated, investors' on-chain buying regime remains intact, so, when these headwinds from traditional markets ease, the bias looks to be higher for Bitcoin and the overall asset class looking out on an intermediate to long-term horizon.
But, until that happens, we anticipate some more choppy action in the near term.
We publish our thoughts on traditional markets every day, but let's quickly summarize a handful of key indexes we're watching right now.
For every asset you own, it's essential to understand its drivers.
We do this all the time when looking at the components of ETFs and funds and evaluating intermarket correlations, and crypto shouldn't be any different.
As we outlined in yesterday's note, the recently observed increased correlation between Bitcoin and legacy markets is something to be mindful of in the near term.
Volatility in the macro environment is likely to be a headwind for most major crypto assets in the coming weeks.
Given the recent volatility over the last few hours, we wanted to quickly send this update ahead of the recording of our weekly conference call to detail what's taken place and to discuss our approach to lower time frames right now.
The most likely selling event would be driven by derivative volatility through a cascading of long liquidation forced selling pressure. There is certainly a possibility this could take place, with funding still pointing to bullish positioning from speculators, but it looks unlikely with the strength of spot flows supporting the market right now.
This is primarily where we've seen the selling pressure take place, with over $750M of liquidations experienced over the last 24 hours. As much as on-chain spot-buying drives long-term cycles, the derivative markets ultimately get the final say for lower time frames.
If we know one fact about markets, it's that they trend.
Markets trend; it's why technical analysis works.
Unlike what the university professors will argue, returns are not normally distributed.
It doesn’t matter if you’re a technical analyst, a fundamental analyst, an economist, or whether you look at the moon and the stars to make your buy/sell decisions. You can't argue with the fact that stock prices trend.
The macro accumulation pointing to a bull run over longer time frames remains intact. But things have certainly been messy in recent weeks, with Bitcoin losing a key level of interest this weekend.
The thesis was that if Bitcoin was below 58,000, the downside risks become elevated for long positions, and elevated cash levels are prudent.
Bitcoin continues to flirt with this level, and the price action in most cryptos looks messy in the near term.
