Over the last few months, I've jumped down the rabbit hole that is Crypto Twitter (better known as CT).
As someone who's snooped around Financial Twitter (or FinTwit), a community dominated by industry professionals, CMTs, and CFAs, opening the trapdoor into CT felt similar to the culture shock I would experience moving to a new country.
Anyone that's had a presence in CT knows the culture: anon (anonymous) accounts, constant meme-ing, and shit-posting from a community of outcasts and degenerates enjoying riding the volatility of a new generation of assets.
This carnage was the perfect breeding ground for the wassie...
One of the hallmarks of the beginning stages of new trends, irrespective of asset class, is the thrust.
Thrust: push suddenly or violently in a specified direction.
There are many different ways markets can thrust, but it's commonly one of two:
momentum; or
breadth.
In Monday's letter, we discussed that if Bitcoin could close in the green, it'd be the first time it's seen seven consecutive positive closes since the July short squeeze.
Fast-forward, we're now sitting on eight with a probability of nine green candles in a row:
There are no called strikes on Wall Street. In other words, we’re not penalized for not swinging, like you are in baseball.
We have the ability to be patient, to a certain extent at least, depending on your mandate. But most of us don’t have mandates! Even one of the best hitters of all time struggled when he swung at bad pitches.
In this video from our Charting School, we compare Ted Williams’ batting average when he swung at good pitches versus when he swung at bad ones.
Why do we bring this up?
Well, what's the last few months been for crypto traders?
In last week's letter, we outlined a handful of key bullish developments leading us to forecast a high probability of an upward resolution from this consolidation.
Alleviation of the selling in futures and renewed spot demand pointed to a high probability of Bitcoin resolving higher out of this multi-month trading range.
As of the writing of this note, we've seen this take place, with Bitcoin taking out resistance at 46,000.
We do a lot of intermarket analysis here at Allstarcharts.
We include all asset classes and countries in our process.
How can we not?
I mean we have the time.
This is what we do.
And so, Australian dollar vs. Japanese yen has historically been a great indicator for me to measure risk appetite. That's not just in the currency markets but, more importantly, in stocks and commodities as well.
So, take a look at what Bitcoin has been doing when compared to aussie/yen, one of my favorite intermarket relationships...
We can't help but notice that all the dinosaur coins are moving right now.
Those coins that got heavily pumped into 2017 and never recovered (think names like ZEC, DASH, XRP, XLM, ETC, etc.) have always gone through cycles of bleeding lower for months on end before getting aggressively pumped.
Just look at them over the last week or two.
When these bad boys move, they move.
There's one contrarian play we like from this rotation as a tactical long.
In yesterday's note we outlined our new tactical approach to the crypto market.
For those who missed it, after playing defense and remaining patient on the sidelines for many months, we're now seeing signs conducive to Bitcoin resolving higher from its multi-month consolidation.
Alongside this, we're noticing a ton of great setups in the alts.
It's been a while since there's been such a breadth of good setups, which can only be seen as a positive development.
For some time, we've reiterated our neutral approach. By staying out of the market in this sloppy tape, we've avoided emotional and financial whipsaws.
During this period, we've been downright obnoxious about how little edge there is in pushing longs.
But this could finally be changing.
As we'll discuss in today's note, we're seeing signs selling pressures are beginning to subside. Price action is heavily coiled, and the clock's ticking for a resolution out of this range.
Looking ahead into April, we forecast a high probability of an upward resolution from this consolidation.
One of the key themes we've been monitoring in the crypto ecosystem is the movement to a new era dominated by an increasing number of derivative vehicles at investors' disposal.
In previous Bitcoin cycles, investors primarily moved to cash through selling spot.
Now, with a liquid futures market, savvy traders have been hedging their positions (today's equivalent of going to cash) by shorting calendar futures.
This constant selling pressure in calendar futures has driven the term structure lower over the last few months and is a reliable metric for both long and short time frame analysis.
