Since last week's report, war has broken out between Ukraine and Russia.
This has been the dominant driver of recent price action in risk assets, Bitcoin and crypto included.
We're still positioned heavily in cash, with little crypto exposure.
Particularly with the geopolitical volatility we've seen over the last week and the resulting impact on global markets, this remains an aggressive tape to be actively trading.
Sitting out remains the most prudent option for the vast majority of traders.
At All Star Charts Crypto, we've emphasized the value of on-chain data that allows us to peer inside the blockchain to find reliable and actionable signals.
It seems almost every day in this blossoming asset class, there's a new dataset, indicator, or some other avenue to analyze price action with incredibly high resolution.
Alongside the on-chain data that's supplemented our traditional analysis, we're taking an increasing interest in incorporating order flow into our work.
We're beginning to find it provides considerable value in fine-tuning our approach, making for better executions, and helping skew the probabilities of success in our favor.
We'll walk through one of the many ways we use order flow in this post. Today we'll be discussing volume, or more specifically, volume delta.
Yesterday's report, which you can read here, laid the groundwork for today's note.
To summarize, we're of the strong view that there's little to no edge in pushing directional bets in this tape.
Because Bitcoin's lost all momentum, we anticipate more weeks of ranging and contracting price action that's likely to involve a high concentration of whipsaws.
This is not a market conducive to aggressive moves.
The vast majority of crypto investors are better served by not pressing trades.
However, in today's note, we'll discuss market-neutral trades that can quietly yield results in periods where absolute price trends hold little edge for directional bets.
In last Monday's report, we pointed out a handful of bearish developments but restated our neutral outlook on the crypto market.
We noted that there was demand coming from spot, while futures were still in the process of selling.
This continues to be the key theme to monitor; selling spot no longer appears to be the primary way savvy and large investors are going to cash.
Rather, they're doing it through shorting calendar futures driving down Bitcoin's term structure.
Since then, we've seen Bitcoin lose our risk level of 41,000 and are positioned heavily in cash.
We're anticipating a longer period of sideways price action, and this is a tape conducive neither to trading nor to establishing aggressive long positions.
Remember back in the day when crypto was its own thing?
It didn't matter what the Dow, copper, or bonds were up to because Bitcoin and crypto did whatever they wanted.
That ain't the case anymore.
Today's market is entirely different, with far more sophisticated drivers than just a few years ago.
Crypto and risk assets have become heavily correlated. And, in some respects, Bitcoin's really just been somewhat of a beta chase ever since the onset of the pandemic.
Last month, the 30-day correlation between the Nasdaq 100 and Bitcoin was an incredibly positive 0.90. They've traded in lockstep with each other.
So it's fair to say that if you're a crypto trader, it's paid to watch the macro environment.
The last time we discussed altcoins, we mentioned we were tactically shorting overbought names bouncing into supply while eyeing more intermediate-term long positions.
This approach paid off, with names like Gala $GALA and Sandbox $SAND succumbing to the selling pressure, booking a quick profit.
Moving forward, as we laid out in yesterday's note, the market's in a state of balance, and we have a neutral outlook.
This is the time when we're closely monitoring names showing leadership, waiting patiently for setups to solidify.
This will be a short and sweet note with three long trade ideas.
In last Monday's note, we discussed a variety of data points suggesting Bitcoin was in the beginning phases of carving out a tradable bottom.
We also mentioned that we anticipate a few weeks of sideways price action ahead of further upward price discovery. Since then, we've seen a handful of developments paint a more neutral picture.
Unlike spot prices, futures never flipped to buying and are still in a fairly strong regime of selling via calendar futures.
There's also been a gentle deleveraging of open interest and an increase in defensive positioning, as investors have been withdrawing capital off the back of geopolitical volatility.
Meanwhile, legacy markets continue to act as a headwind. Bitcoin and equity trading correlations remain high, and it's yet to be seen whether Bitcoin can front-run equity weakness, like what took place in October last year.
This all takes place as Bitcoin remains above our risk level of 41,000.
