Homero's TA, FA and QA report on Bitcoin and Altcoins

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Technical analysis

1. Bitcoin's structure is mostly bearish (based on lower highs and lower lows)

2. There have been some reversal signals like reclaiming support at 9500-9600, breaking the short term down trend and with a brutal SFP at this local bottom.

3. At ~10000 Bitcoin is sitting right in the middle of nowhere, stuck between support and resistance.

4. In order to call the end of this down trend a move and close above 10600 is the minimum requirement. 10300 seems to early to call for new highs and the most important level is 11300.

5. In a bull market Bitcoin tends to have a maximum of 4 down days where a bounce usually occurs. The same thing happened today, but it doesn't mean this isn't just a relief rally.

6. Based on momentum and time indicators, momentum is still bearish and isn't really showing signs of exhaustion.

7. There was a massive blow off volume has been steadily decreasing, indicating that this down move is losing strength.

8. In bull markets, when volume and price movements tend to contract during a correction, the correction ends by having a rapid high volume down move which is usually the final shake out. (This isn't a requirement and a big move up with high volume could occur as well)

9. The market has taken its time to spend time in all areas. Based on the Volume profile, most moves tend to be smooth and have a nice bell curve. So far this has been perfect and complete for the 3-8k ranges, but imperfect for 8.5-14k.

10. The fact that we lost the 50 DMA again isn't great either. Most major moving averages on shorter timeframes are all bearish. Note that we have lost it only on the BTCUSD chart and not on CME, however the more touches on the MA, the weaker it gets and ends up breaking down.

Now let's talk about which levels could be coming next and why:

1. Based on the large H&S pattern the target is at 8400.

2. Based on the VP HVN from 7900-8100

3. CME double gap fully closing 8500

4. Untested areas on spot BTCUSD 8470 & 8325

5. 100 DMA ~ 8600 & 128 DMA ~ 7750

6. The only old local top that didn't turn into support properly was 8500. All other levels like 5k, 6.8 and 7.4k have been perfectly retested.

7. Montly S1 8220, Weekly S3 8190 and Yearly P 8020 (Pivots)

8. Fractals: Dec 17 – 7800-8100, Nov 17 – 7700-8000, Gold 8100-8200

Fundamental and quantitative analysis

1. Funding rates have been pretty low for a few weeks now, but before that had gone out of hand and got above 0.2%. Not they are near or sub 0. As for futures premiums went from 6% - 9%, down to -2% - 0% and are currently at 1-2%. This is only confirms that we had a frenzy and it might take some time for this to normalise. Anything that goes too high tends to go too low. We might go deeply negative before we reverse, even though current levels are not bad for long term buys either. Fiat / Stablecoin rates have also gone down significantly, but they are still much higher than BTC lending rates.

2. Long/Short ratios are pretty high everywhere. BTC+USD L/S ratios for many alts are above 7:1 with very few being below 3:1 and some below 1:1. During the run up people were going really hard into alts, which seems like it was fueling Bitcoin indirectly hardcore speculators were buying them, while investors were dumping them to buy BTC. After the June top these positions have started deleveraging, but they are still very high. Based on data on Gate and Bitfinex, Bitcoin L/S is around 2:1 – 3.5:1 which is quite bearish.

3. Near 10600 I tried to open a long on Kraken and they told me they had their margin funds depleted (I wanted to play the long from there to 11200) and realised that there were just too many longs. They told me to try Kraken futures which might had been the reason they said they had no funds, but the fact that they were maxed out definitely isn't a bullish signal. At the same time, given the fact that Bitfinex is probably half as big as it was 1-2 years ago, the fact that there are 21k longs, is almost as if longs are at ATHs.

4. Open interest is at normal levels especially given the fact that Bitmex's funds are slowly being withdrawn over the last few months. As Bitcoin gets more expensive, it is normal to see people withdraw their coins to their wallets or withdraw them to cash out their profits. Part of it might also be due to increased competition and regulatory uncertainty. Huobi, Okex, Gate, Binance, Bitfinex, Kraken and Deribit have decent derivative products and/or offer leveraged trading. This might had also been partially due to the decent influx of BTC into Binance and withdrawals from Bitfinex and Bitmex, something definitely benefitial for alts. It is now easier for people to go from derivatives/margin trading into alts (hence part of the reason why I think huobi was so successful). However due to the fact that Open Interest is going down every time the price is going up, it is clear that up moves are mostly due to shorts closing and being shaken out, rather than actual buyers stepping in. Once open interest start going up along with price, then it would be much safer to assume that the trend is gaining momentum.

5. Based on my analysis using several of my own new tools (not deeply tested) which include statistical corrections, production costs and stablecoins, the bottom is either in or there is a maximum 20-25% drop to really get us to really oversold levels (max pain and lowest fair price). These are have to do with other quantitative stuff which have nothing to do with the psychology of the market.

6. There are several gaps on CME, most of which are below 7400 and are probably irrelevant (either too small or have been almost closed). The really big double gap is at 8500. Double gap is a gap within a gap and on CME, if you zoom in you will notice that at 8500 there was more than one gap (a small and a large gap). Somebody could argue that 7400 has been filled, but it has much higher odds of never getting fully filled and on spot exchanges that area was properly retested and 7400 was an old top that was successfully retested several times.

In general there the most untested areas left are in the 5.8-6.8k which have a huge void in between. Binance, Bitfinex and others never retested 5800-6400 and only a few exchanges did. This has opened the risk of that area wanting to get tested as that's when the real 'mini-bubble' started. However it has to be noted that in 2018 we spend an enormous amount of time in that region, so we might not have to revisit it ever again. At the same time Bitmex, CME and Bitstamp retested the VP PoC at 6400 which could be enough for the correction to be considered valid. At the same time 50%+ corrections seems way too large based on the current fundamentals of Bitcoin.

By the way many people ask me why do gaps get filled and whether they have to get filled. The answer is that a. No gaps don't gave to get filled, b. There are different types of gaps and some gaps take some time to close, c. The reason large gaps on CME close is because these are not normal movements. It has been clear that these gaps were caused by big players that wanted to squeeze shorts on CME by taking advantage of the fact that CME closes and Bitcoin is running 24/7. Look at it a mini bubbles, mini irrational moves that tend to correct.

7. A few days ago I put out 3 bearish fractals which really are playing out and could continue playing out. I don't trade based on fractals, but often they are a good guide of what to expect. Most people are unable to see extreme up or down moves, and fractals are a good reminder of the irrational nature of markets. They are a good reminder of what we traders are doing: use tools that give us an edge based on the repetitive nature of the masses, while protecting us from their chaotic behavior. Fractals won't give you the perfect entry or exit and some might work, some might not work like every other tool a trader is using. Even the most perfect fractal can end up wrong.

8. An additional bonus is that historically Q3 is the most bearish one. The one we get the worst returns / loses.

In my opinion we need a little bit more time for this re-accumulation to be over. Meaning that breaking 14k could take 1-3 months. In the back of my head I know that this could also be a a simple but effective shake out where whales are pushing the price below and above 10k which is an important psychological level, forcing people to FOMO in positions in both directions to create liquidity for themselves while shaking out weak hands. The current 35% correction and massive chop is pretty good to shake out a lot of people. A few months ago I thought we'd never see a 30%+ correction again as the market has matured, but I was wrong. Reason is that we moved too fast, too high, too early. Not because the fundamentals were not good, but because it didn't seem like it was enough time to shake people out. 340% in 6-7 months is pretty huge, without any 25%+ correction and without a really long re accumulation like we had in 2016. In case we go higher, breaking above 10600 and 11200 are my requirements in order to get into a long position. Otherwise I am looking for 8500 or lower (or simply following alts and not Bitcoin in that mean time. Altcoin analysis lower!)

6000 is possible but very unlikely. It would set us back tremendously and doesn't match with the fact that Bitcoin corrections should either become more rare or smaller in terms of draw downs. In bull markets we don't usually see 50% corrections. Meanwhile the Macro economic environment is also very different. There will be more QE, lower rates and people are waking up to the fact that there is a need for an alternative, while everyone is chasing high returns in an extremely low return environment. The appetite for risk is growing while even junk bonds have negative yields. People have nowhere to go and crypto is one of the very few places they can get these returns.

As a final note on Bitcoin and before moving into alts, I have to say that the BTC game has changed a lot since 2014-2015. More on ramps, derivatives, altcoins, use cases and all sorts of things have assisted in the accumulation and aprreciation of Bitcoin. Its brand is stronger and its fundamentals are better than ever. However the fact that we didn't spend a lot of time in accumulation mode and went up this hard after only 1 year of bear market while we had a massive altcoin boom makes me thinking we are not ready and a few months of re-accumulation would be normal. it is not necessary, but it wouldn't be abnormal in these levels.

Altcoin market

At these levels, Bitcoin being bearish or moving sideways would benefit altcoins tremendously. Could we see a scenario were Bitcoin goes down and alts go down in BTC terms? It isn't impossible, but if that starts I've got no idea where it stops or if it stops with so many leveraged positions. I truly believe we are in a bull market and below certain level that idea gets invalidated. Personally I don't think large caps have bottomed against BTC, but definitely have against USD. Also the current situation screams that a mini alt season is very likely..

Yes the current reality is that the liquidity of altcoins is getting more and more fractured, there are more altcoins in the game, Bitcoin is more scarce, Ethereum is in trouble, there is lots of regulatory uncertainty, no real use cases after years of promises and all that while Bitcoin is getting all of the attention and money due to its superiority. However as we are less than 10 months away from the halving and like in 2016 there was a long period of re accumulation. Eventually people most people get bored of getting chopped margin trading Bitcoin, so they get attracted by altcoins going up and see it as their last way to recoup their losses. At the same time we are definitely having a slow and steady influx of new money in the space even though it's not as significant as in mid and late 2017.

The question is why would someone bet that this time is different? Well maybe because most people truly know altcoins are scams, but history has proven that nobody really cares or really understands. Even though many scream alts are dead, reality is that many have just recently gotten significantly oversold after many many months or years. I could easily see them dropping another 50-70% each from here and have been talking about this final leg down for some time, but this doesn't mean that this won't happen after some of them pump hard first. For example altcoins on TradeOgre have started their mini rallies and this is a really important sign, as that exchange is the epitome of shitcoinery and degeneracy. If these alts bottomed, then the bottom is close or at least a mini alt season is imminent.

Even though several large caps haven't bottomed, I don't think this would prohibit other altcoins to give amazing returns (from just 30-50% up to 500-1000%). From August 18 to April 19, I believe we saw 3 mini alt seasons all of which had nothing to do with large caps bottoming. If you bought alts that hadn't pumped during those months you probably did pretty well even though large caps didn't show signs of life. For now the entire altcoin market cap has had its major correction of about 42%. That's larger than Bitcoin's correction, even though Altcoins fell 92% from their ATH and have only had a 210% increase. This correction stopped on the 200 DMA and retested some key levels. The entire Altcoin market cap in BTC terms hit its Dec 17 low (a very key level, especially with the addition of thousands of altcoins since then). From their top they dropped 75% and went really oversold with a lot of divergence for the first time in years. I believe the final bottom is a lot lower, but this won't come in a day.

The hangover from the altcoin bear market has to be felt both in USD and BTC terms to the maximum for several reasons that I won't go into right now. However as we are getting closer to the end of their bear market it is good to remember that some alts pump the hardest when they look dead. The reason is that sellers are exhausted and the tiniest buy pressure pushes them a lot higher. The reality is that mostly small-mid caps got utterly rekt while many large caps are holding *relatively* well even though they should had been destroyed as well.

What I didn't expect was alts to bleed in BTC terms along with BTCUSD going down, and this has been a bit of a shock to me. Still trying to figure out their current relationship and what could come next. I expected their bottom to come by BTC going much higher, but the increadible July bleeding in both directions makes me more bullish short term. However I am bullish on small-mid caps and not large caps, except maybe Litecoin, Binancecoin, Doge, Tezos, Cosmos, Leo, Dash and Bcash. With their current order, these are the relatively large coins that I find interesting for various reasons. (Doge should be 10B minimum lol)

The current trend for alts is still down and I am really careful with all my moves. This needs to be thought very carefully when thinking about positions that could last for a few weeks instead of a few days. Reality is that the best thing to do is to look at this as short term only, until we break and close above the 10M BTC market cap on ALTBTC index. Most large caps are getting near strong resistance, so there is agreement between this and individual alts. It is really important to see what the reaction will off that zone (if that test ever happens). Now If we alts lose their current low, then they'll probably drop another 40-50% in BTC terms below it.

The final incredible indicator that is probably the most useful out there is Bull market percentage, which based on the way I am using it screams for an alt season. I am not gonna go into how I am using this, as it is better for you to observe it and incorporate it in your strategy when dealing with alts. All I can say is that it is pretty damn bullish and it has a very high success rate