Equity markets have stalled at logical resistance zones, while the greenback looks primed to experience a mean-reversion rally. At the same time, Bitcoin $BTC, Ethereum $ETH, and most altcoins are either below their June lows or messy at best.
It's no surprise crypto stocks continue to slide and now trade at year-to-date lows.
Alright, in all seriousness, there's been a fair amount of rumors surrounding Binance's solvency this week. This narrative originated from Binance's ambiguous proof-of-reserves and internal audits.
Following these questions, Binance saw a net outflow of $1.3B over the last few days, with many prominent trading firms withdrawing nine-figure amounts.
And Binance's public image has been under fire, with the company's official Twitter account leaking a private chat log featuring a crypto trader with over 280,000 followers.
It appears you are still confused in regard to the reason your account was put into withdrawal-only mode. @CoinMamba, here is a screenshot of your conversation with our CS agent. pic.twitter.com/Na2MagN6Dy
Over the last few months, I've started taking my fitness and my health more seriously.
In my first fourth months of strength training, I packed on 30 pounds and added close to 100 pounds on my squat and deadlift. I started out at a tiny frame for my height, so my progress has been no surprise.
While I've been growing at this rate, I've needed to prioritize my recovery. That meant eating tons of food, getting plenty of sleep, and only training three days a week.
It isn't rocket science.
In fact, it's the very physiology of training: stress, recovery, and adaption.
Without sufficient recovery, there is no growth.
Whether or not you're on a fitness journey, I think we can all relate to the pleasure of a weekend recovery. These two precious days allow us to review the events of the prior week while planning ahead for the days to come.
Our Monday crypto letter is a manifestation of this recovery process. It's our weekly "state of the market" that documents how we're approaching crypto as a collective.
I certainly get a ton of value from putting my thoughts down on paper.
This recent risk-off move in the equities market was textbook.
It's no coincidence the S&P 500 sold off at the channel resistance and AVWAP off the highs. We're more or less seeing a confluence of developments skew risk-off over the last few weeks.
The US Dollar Index is at a logical level to bounce, while cyclicals, which have been leaders in the equity markets, are pausing at their August highs.
Meanwhile, most crypto assets are retesting their June lows from the underside.
There's been no questioning how we've been positioned in crypto markets.
For the longest time, we've promoted high cash positions in this tape. Patience has been a significant virtue for traders to maintain.
Extending on this overarching theme, we yet again argued that caution is advised in the short term in yesterday's note.
While we've been putting forward the utility of patience in this cryptocurrency market for some time, we especially see a confluence of concerning data points.
Most importantly, the S&P 500 is once again testing its channel resistance and AVWAP off the highs, where it has found resistance over the last year.
Further, the dollar index is retesting its breakout level from the 2017 and 2020 highs following the collapse of the FTX and Alameda ecosystem.
Equities and cyclicals have seen some modest gains off the lows, while growth areas and crypto markets have waned. In fact, by our calculations, this year has seen one of the greatest disparities in performance between growth and value.
You can see it when you compare something like Bitcoin or Ethereum against the Dow Jones Industrial Average.
Sure, crypto markets have been dragged down by the FTX contagion. Still, perhaps the bigger driver of this price action has been the macro flow out of long-duration growth assets (crypto included) and into traditional value areas.
We're talking industrials, materials, and, of course, energy stocks.
There's an endless number of participants, countless investment vehicles, and a million ways to analyze money flow.
Here at All Star Charts, we analyze thousands of individual markets and securities, all belonging to various asset classes. It goes without saying that we collectively look at thousands of charts every week.
There's no substitute for setting aside time to go through our chartbooks and putting in the work.
But, every now and again, certain environments and conditions dictate simplicity. Sometimes, we can step back and identify the major themes in just a handful of charts.
Indeed, for crypto markets, it has been rather simple.
The argument has been to be long if Bitcoin's above its prior-cycle highs and to be patient if the opposite is true.
But I'll pose that there's an equally significant data point that we'd be irresponsible to ignore.
It’s not so much because JC and Louis needed me to step in. It’s because I wanted to share something with you.
I want to discuss a potential mean-reversion trade opportunity in Coinbase $COIN.
I think it’s one of the best ways to express a bullish tactical thesis on cryptocurrency markets right now.
I know that’s really not saying a lot these days. The asset class is a mess. “Disaster” might be a better descriptor, particularly as it relates to the FTX meltdown.
In the aftermath of its collapse, how can we trust any of the crypto exchanges right now? Why the hell would we want to buy Coinbase? Isn’t it just the next domino to fall?
We like to keep things simple and remove unnecessary complexity.
As far as we've been concerned, over the last few years -- and particularly since the November high -- Bitcoin has merely followed legacy markets.
For the longest time, it's been all about correlations. Has this made our job slightly boring? Sure, there's no doubt.
As technicians, we love having multiple uncorrelated asset classes at our fingertips. The more assets with their own idiosyncratic drivers away from systemic risk factors, the better.
But we need to see the market for what it is and profit from what ultimately pays, and that's price.
