Whenever we have any discussion about approaching this market from the long side, we're quickly stumped.
In the current tape, there's just so much supply to work through that there's no reason for getting overly bullish on meaningful time frames.
Go back and look at these infamous retests of supply zones; they are no joke.
Don't be smart money's exit liquidity. At the very least, we want to err on the patient side of things until this supply eventually gets eaten through in some capacity.
A big difference that often differentiates mediocre traders from good ones is the ability to sit tight, wait for a setup to form, and follow the money flow into a position.
There's a common adage around here, a bit of advice to "draw your lines with crayons, not pens and pencils."
What it means is that when you're drawing support and resistance levels, it's best to construe them as zones rather than in terms of a single price.
It's a good rubric and a sound principle. But it makes sense to explore in greater detail why this is the case, particularly for cryptocurrency.
When it comes to this new asset class, technicals are a far more popular choice among traders and investors. It only makes sense in a market where there aren't nearly as many sophisticated fundamentals.
You're not going to discount a crypto project's cash flows to arrive at a valuation; you're going to trade the chart.
But, amid the growing popularity of technical analysis, proponents often don't recognize why price action principles work. There's far more to understand beyond drawing rectangles on charts.
Yesterday, we explained how we're still approaching this recent rally with a high degree of caution.
Most names still find themselves below overhead supply, and this is a tape where whipsaws and fake-outs are likely to continue.
Beyond Ethereum and a handful of other names, this rally hasn't been widespread. Instead, most cryptos are still exhibiting generally weak action.
While this means there are still actionable ideas out there from the long side, we want to explore a higher-conviction trade over more substantial time frames that'll likely be prone to fewer whipsaws.
With the market providing extreme readings, these are conditions by which we can anticipate a mean-reversion rally higher. At the same time, trying to catch this move in a period of continual whipsaws will be difficult.
We think the better trade is to remain patient over the near term while dollar-cost averaging into long-term spot positions with a multi-year time frame.
Over the weekend, we've seen a sharp rally higher, driven by Ethereum $ETH.
The long-awaited James Webb Space Telescope images...
Moments like these are not only significant for the scientific quest. They also deeply change the human condition and what we think is possible.
When Copernicus discovered the heliocentric model -- that the universe doesn't rotate around Earth -- it humbled humanity.
When Newton discovered that the motion of the celestial bodies followed strict laws of mathematics, it gave a seemingly entropic universe order.
When man landed on the moon, it changed our entire perception of what's possible.
And when the Hubble Space Telescope and the more recently launched JWST send back awe-inspiring images, it gives us a perspective of the cosmos we've never seen before.
It's all about knowing what environment we're in and adjusting our tools and strategies accordingly. In environments like these, buying into breakouts is a dangerous game.
In our last letter, we reviewed the recent quarter and provided a structural view of the market.
In a tape as messy as this, we're focusing a good portion of our strategy on longer time frames. The market has been and continues to be a mess on shorter time frames, while equity markets still firmly reflect risk-off behavior.
With the market providing extreme readings, these are conditions by which we can anticipate a mean-reversion rally higher. At the same time, trying to catch this move in a period of continual whipsaws will be difficult.
