What are the things we look for most when trying to identify leadership?

First, it’s all relative. When the market is selling indiscriminately, this becomes more challenging. You’re literally looking for the assets that get hit the least. It's not until the volatility subsides that we start looking for those that rebound out of it the strongest.

In today’s post, we’ll use the recent selloff and rebound in crypto as a case study for how we pick winners out of a loser's market.

Here are two of our favorite ways to find future outperformers:

• Relative resilience during selling pressure.
• Relative momentum and strength - both into the peak and off the lows.

With the former, we can use tools like relative strength - or, rather, the absence of weakness - in addition to chart characteristics like bullish divergences and momentum not hitting oversold.

With the latter, we’re again looking at relative strength. Who were the biggest gainers since the market bottomed? Who are the first to take out their AVWAP from the highs and/or other key levels?

If there's one prevailing theme right now, it's that there's a growing list of cryptos making new highs.

It all started with Cardano, and we know how that turned out...

For us, it's very simple. The coins that are among the first to breakout are the strongest names and will continue to lead the asset class higher.

As we said in yesterday's note, if you're solely focused on Bitcoin wedged under resistance, you're not seeing the strength under the surface:

Just take a look at the Altcoins reasserting leadership versus Bitcoin at this very logical level.

Cardano was the talk of the town last week.

Even though our initial target of 2.20 was hit within a matter of days, let's not underestimate the implications of this base:

With a breakout of this magnitude, this thing could be at $10 in no time.

It's no joke.

But it's not just Cardano showing incredible leadership right now.

If you're solely focused on Ethereum and Bitcoin, you're not seeing the whole picture.

This is the video recording of our August 13, 2021, All Star Charts Crypto Weekly Strategy Session.

In the world of crypto, there's one overarching relative theme that governs the entire asset class.

That is, Bitcoin vs everything else.

Over the years, this simple trend has dominated the asset class for so long. Due to the sheer size of Bitcoin compared to the others, when it's in a leadership position, it scoops up so much capital that most of the other coins are forced to wait for their turn.

Could this change?

It would only make sense, especially as the market-caps of the other altcoins grow.

But as we said in yesterday's note, all we can do is look at what's in front of us, right now.

That is, this relationship is still the single most important relative trend for crypto traders to pay attention to.

We've talked in great lengths about this dynamic before, and the various way to visualize it.

Have you ever watched the "did you see the gorilla" video?

Viewers are asked to count how many times basketball players wearing white shirts passed a ball while someone in a gorilla suit walks into the middle of the scene, thumps their chest, and walks off.

Despite looking straight at the gorilla, over half of the people who watch the video completely miss it.

It's a hilarious showcase of how we can often miss what's right in front of our very own eyes. Psychologists call it inattentional blindness, and it's a very real thing.

People are always trying to find a narrative about why the market's behaving as it is. This is arguably more prevalent in crypto, where people base their investment decisions on stories of a new "global currency", or god forbid the arguments of Bitcoin being a "better store of value."

But in occupying ourselves with all these stories, we can often miss what's right in front of us.

The strength coming out of crypto in recent weeks has been impressive, and for the first time in many months, we can say that the bulls are in the driving seat.

The median change for all coins above $1B in market-cap in just the last 20 days, since Bitcoin bottomed, is a whopping 53%! In this same period, nearly 100,000 Bitcoin have been withdrawn from exchanges, and many more hundreds of millions of dollars committed to short positions were liquidated as the accumulation for these digital assets has ramped up.

Even the crypto stocks are showing strength.

Long story short, the cryptocurrency landscape looks the best it has in a long while, and we're subsequently looking for more names to express this bullish thesis of ours.

This is the video recording of our August 6, 2021, All Star Charts Crypto Weekly Strategy Session.

Why didn't I buy this coin when it was $10?

Why did I sell early?

Why didn't I buy the dip?

Why didn't I buy more?

How did I not see the top?

These are questions almost everyone who's been involved in crypto has asked themselves and felt, at one point or another.

Some call it a lack of discipline or FOMO, but it's really all about managing future regret.

This dynamic is undoubtedly present in other asset classes too. Still, it's put on full display in this space, where people are made to believe that regularly achieving 10x baggers is a normal occurrence.

The returns people feel they can obtain by holding coins in this space are largely based on a perfectionist mindset which is both unhealthy and unrealistic.

It's often said that patience pays dividends.

Of course, in the crypto world these adages don't make too much sense. So, just like how we say that "Tether's a position too," in crypto it can be said that "patience pays sats."

But all jokes aside, Bitcoin has fallen back below 41,000, placing prices right back into this range. With Bitcoin below this level, new longs are likely to stumble in the coming days/weeks.

At least in the near term, some level of patience is warranted.

So while we're anticipating we ultimately resolve higher, the only question that remains is "how long?"

Regardless of the market environment, we always want to be pushing our bets on secular leaders.

The most effective way of positioning ourselves with the strongest (or weakest) names is through relative strength analysis - by simply comparing names to their counterparts.

So before we dive into all some of the names we're buying, let's address where this space finds itself, and what we're anticipating in the coming weeks and months.

This is the video recording of our July 30, 2021, All Star Charts Crypto Weekly Strategy Session.