What NO ONE Is Expecting (BTC Dominance + TOTAL2)
This is really just for fun, and for my own personal record. But...let's take a look at these two charts. Based on what I'm seeing, I think there's a chance we see a massive shift in the crypto market soon. You can see that Bitcoin Dominance looks relatively bearish, having failed to reclaim the 200 weekly Moving Average, with the 9W MA crossing down over the 50 for the first time since February 2016. The daily looks weak as well:
Even more interesting, Bitcoin has fallen BACK into its own bearish channel, while alts have instead successfully tested their own previous downtrend as support. Alts are also back above the horizontal support from December, while Bitcoin is not.
My "job" as an analyst, is to figure out what's going on. What psychological and systemic behavior is driving the market? Based on these charts, we know that
1 ) Alts have outperformed Bitcoin since last fall, even when factoring in the massive liquidity event that sent Bitcoin briefly below $4K.
2 ) Bitcoin dominance is still in a long term downtrend, having also broken the uptrend from the previous 2 years.
3 ) Bitcoin has so far failed to hold the horizontal support level from this past December, but alts have rallied back above it.
So what's the big deal?
What's clear is that Bitcoin has suffered massively due to a global flight to cash. This has cast doubts as to whether the original cryptocurrency can function as a hedge or a store of value. I think they may be right, but perhaps certain altcoins will rise from the ashes. Most people in the cryptosphere would agree that alts cannot survive without Bitcoin. But look at all the new alt-USD/USDT pairings across the most liquid exchanges. If someone wanted to take all their money out of Bitcoin and put it into alts, sure, they can do that.
This brings me back to why I actually still do not own any Bitcoin. Yeah, I love crypto. I think it's fascinating, and I acknowledge that it may not pan out as an "investment" per se. And of course, I will sell if I decide I could use the money for whatever reason. Anyone in this market should be ready to lose their entire original investment. What bothers me about Bitcoin, particularly at moments like this...is that it's not only slow, but difficult to produce. In fact, the difficulty of producing a single Bitcoin will become twice as hard in the not so distant future. What happens when most miners cannot be profitable anymore? They must lower their price to meet demand, at the same time that production difficulty goes up. Just as with what happened to oil recently, we can get both a supply AND demand squeeze simultaneously. This would undeniably cause the price to crash.
Under "normal" circumstances, perhaps the halving would go by just as the others, and the market would adjust. Here, I think there's a possibility that the market will be unable to adjust. Sure, Bitcoin offers a potentially secure way to store your funds, but we are now experiencing a true global black swan event - a real catalyst for change that only happens once every 100 years or so. Other blockchains offer more openings for future applications that may actually be able to solve global issues, even outside the world of finance. Even for coins like XRP and XLM, this provides a great opportunity for there to be an un-tethered asset that can be transmitted across the globe in mere seconds.
What am I saying here? I'm saying that no one in the crypto space thinks Bitcoin will go to $1K or lower with alts holding their ground. But this is a distinct possibility. A major shock (just like the COVID-19 has done to our economy) to the crypto market will need to take place for the status-quo, along with the narrative, to be shifted. Do massive industrial mining farms really seem attractive during a pandemic? Or would you rather have a lightweight currency that was also conveniently not backed by any established financial or governmental system? I think this is a perfect chain of events that could make altcoins seem more attractive. Bitcoin is liquid, yes....but it also means that there's a lot more "big money" parked there. Who bets on the altcoins? The dreamers. The people who have imaginations. Sure, I'll get shot down for saying this, but I'm putting it up here in writing, you know, just in case the market does what no one expects.
Even if this seemingly impossible scenario does not occur, it seems to me that if Bitcoin can establish support and eventually find buyers, alts can easily outperform once again. As I mentioned in my last Bitcoin analysis, I think there is some evidence that people are buying with fiat at these levels are lower. There's even another seemingly unlikely scenario where Bitcoin pumps straight to ATH from here.
As for the bearish possibility, if alts break below the multi-year horizontal support, around $36 Billion, that would probably mean they can halve in value at a minimum. That would put ETH at $40 or below and XRP at $0.05 or below. For a true bullish signal, we need to see alts rally back above $70-80 Billion, which is a tall order, given current circumstances. Perhaps crypto will vanish as quickly as it appeared.
In Summary
There are two "unlikely" scenarios that I'm throwing around with this post.
1. Bitcoin crashes to $1K or lower due to a supply/demand squeeze, but some alts actually do well. Bitcoin's throne is finally usurped.
2. Bitcoin heads straight from here to ATH, with alts outperforming.
The most reasonable and rational scenario is of course that the entire crypto space breaks bearish, or at best moves sideways and down until more global clarity arises. One could say, well, markets never take the "rational" course. But perhaps in the face of a disaster, everyone becomes rational. Being one of the herd, in this case, is a good idea, right? But many traders have already been forced out of position on the recent dump to $3.8K. How many sellers are left? And will people buy crypto at all if Bitcoin makes a new low beneath $3K?
That's it from me!
This is not financial advice! This is just me rambling based on speculation only. This is for speculation, education, and entertainment. I am neither an economist or a professional financial advisor. I analyze markets for my own satisfaction.
-Victor Cobra
Even more interesting, Bitcoin has fallen BACK into its own bearish channel, while alts have instead successfully tested their own previous downtrend as support. Alts are also back above the horizontal support from December, while Bitcoin is not.
My "job" as an analyst, is to figure out what's going on. What psychological and systemic behavior is driving the market? Based on these charts, we know that
1 ) Alts have outperformed Bitcoin since last fall, even when factoring in the massive liquidity event that sent Bitcoin briefly below $4K.
2 ) Bitcoin dominance is still in a long term downtrend, having also broken the uptrend from the previous 2 years.
3 ) Bitcoin has so far failed to hold the horizontal support level from this past December, but alts have rallied back above it.
So what's the big deal?
What's clear is that Bitcoin has suffered massively due to a global flight to cash. This has cast doubts as to whether the original cryptocurrency can function as a hedge or a store of value. I think they may be right, but perhaps certain altcoins will rise from the ashes. Most people in the cryptosphere would agree that alts cannot survive without Bitcoin. But look at all the new alt-USD/USDT pairings across the most liquid exchanges. If someone wanted to take all their money out of Bitcoin and put it into alts, sure, they can do that.
This brings me back to why I actually still do not own any Bitcoin. Yeah, I love crypto. I think it's fascinating, and I acknowledge that it may not pan out as an "investment" per se. And of course, I will sell if I decide I could use the money for whatever reason. Anyone in this market should be ready to lose their entire original investment. What bothers me about Bitcoin, particularly at moments like this...is that it's not only slow, but difficult to produce. In fact, the difficulty of producing a single Bitcoin will become twice as hard in the not so distant future. What happens when most miners cannot be profitable anymore? They must lower their price to meet demand, at the same time that production difficulty goes up. Just as with what happened to oil recently, we can get both a supply AND demand squeeze simultaneously. This would undeniably cause the price to crash.
Under "normal" circumstances, perhaps the halving would go by just as the others, and the market would adjust. Here, I think there's a possibility that the market will be unable to adjust. Sure, Bitcoin offers a potentially secure way to store your funds, but we are now experiencing a true global black swan event - a real catalyst for change that only happens once every 100 years or so. Other blockchains offer more openings for future applications that may actually be able to solve global issues, even outside the world of finance. Even for coins like XRP and XLM, this provides a great opportunity for there to be an un-tethered asset that can be transmitted across the globe in mere seconds.
What am I saying here? I'm saying that no one in the crypto space thinks Bitcoin will go to $1K or lower with alts holding their ground. But this is a distinct possibility. A major shock (just like the COVID-19 has done to our economy) to the crypto market will need to take place for the status-quo, along with the narrative, to be shifted. Do massive industrial mining farms really seem attractive during a pandemic? Or would you rather have a lightweight currency that was also conveniently not backed by any established financial or governmental system? I think this is a perfect chain of events that could make altcoins seem more attractive. Bitcoin is liquid, yes....but it also means that there's a lot more "big money" parked there. Who bets on the altcoins? The dreamers. The people who have imaginations. Sure, I'll get shot down for saying this, but I'm putting it up here in writing, you know, just in case the market does what no one expects.
Even if this seemingly impossible scenario does not occur, it seems to me that if Bitcoin can establish support and eventually find buyers, alts can easily outperform once again. As I mentioned in my last Bitcoin analysis, I think there is some evidence that people are buying with fiat at these levels are lower. There's even another seemingly unlikely scenario where Bitcoin pumps straight to ATH from here.
As for the bearish possibility, if alts break below the multi-year horizontal support, around $36 Billion, that would probably mean they can halve in value at a minimum. That would put ETH at $40 or below and XRP at $0.05 or below. For a true bullish signal, we need to see alts rally back above $70-80 Billion, which is a tall order, given current circumstances. Perhaps crypto will vanish as quickly as it appeared.
In Summary
There are two "unlikely" scenarios that I'm throwing around with this post.
1. Bitcoin crashes to $1K or lower due to a supply/demand squeeze, but some alts actually do well. Bitcoin's throne is finally usurped.
2. Bitcoin heads straight from here to ATH, with alts outperforming.
The most reasonable and rational scenario is of course that the entire crypto space breaks bearish, or at best moves sideways and down until more global clarity arises. One could say, well, markets never take the "rational" course. But perhaps in the face of a disaster, everyone becomes rational. Being one of the herd, in this case, is a good idea, right? But many traders have already been forced out of position on the recent dump to $3.8K. How many sellers are left? And will people buy crypto at all if Bitcoin makes a new low beneath $3K?
That's it from me!
This is not financial advice! This is just me rambling based on speculation only. This is for speculation, education, and entertainment. I am neither an economist or a professional financial advisor. I analyze markets for my own satisfaction.
-Victor Cobra
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I will also emphasize that even if this does play out, by some freak of nature, then we can see alts still decline heavily in value. Only some may ultimately survive a purge of this nature.
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Here's what I can see happening to TOTAL2 if this was a terminal shakeout. There's a potential broadening formation (purple). The pink horizontal resistances are the main zone of control. Every time bulls have lost control of that region, we've dropped heavily. The opposite is also true when bears lose control there.
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Daily chart for dominance looks a bit bearish with the rejection from today.
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Weekly is reaching a major decision point
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BTC still trapped in the bearish channel, but at least made an attempt to break it today.
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Dominance still looks bearish.
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Bitcoin has broken out of its bearish channel, and alts are trying to reclaim the zone of control between 70-80B.
Alts clearly have the upper hand here, since they already broke out of their potential bearish wedge to the upside.
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Still dpoing much better than stocks, even from Dec. 2019.
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ETH is still in a giant broadening pattern.
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Here's sort of a messy diagram of what kind of buying behavior has resulted in market moves over the last two years.
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Edited version:
