Market Outlook #175 (16th May 2022)
Hello, and welcome to the 175th instalment of my Market Outlook.
In this week’s post, I will be covering Bitcoin, Ethereum, BNB, Solana, Uniswap, Quant, 1inch, LooksRare and Tidal Finance.
As ever, if you have any requests for next Monday’s Outlook, do let me know.
The poll for this month’s subscriber-exclusive Coin Report has now ended and the winner was Merit Circle, so keep your eyes peeled for that report later this month.
Market Cap: $562.487bn
Thoughts: If we begin by looking at BTC/USD on the weekly, we can see that – after many months of waiting – range support got taken out during an historically volatile week, even by crypto’s standards. We saw price open last week above support at $33k and then nuke lower throughout the week, breaking below $29k and eventually wicking as low as $25,338 before showing some strength late into the week to close out back above range support, at $31,290. This occurred on historic weekly volume for Coinbase – within the top 5 for weekly volume since the November 2018 cycle bottom. So, we have a deep wick below that triple bottom range support on very high volume, with a weekly SFP of a key level. This could be promising. I italicise ‘could’ because the macro context is far different now than at any time in BTC’s history. Nonetheless, the strength shown off the $25k area last week was a good show from bulls to protect range support, front-running that 200wMA by a few thousand dollars but wicking far enough below the range to constitute a proper liquidity hunt. If this is to be a valid swing-failure and a short-term bottom is in here, we should now see $29k act as support once again this week, with price likely to move higher back into $33k as the first prior support turned resistance if we can hold here. Regardless of your thoughts on last week being the bottom, I would not be rushing into anything here – following weeks like we have just had, things take time to settle. The only time price has v-reversed back up following high volume capitulation was the Covid crash – the norm is for another period of consolidation to follow and then price to figure out direction. As I say, if BTC holds above $29k this week, I think we see relief as high as $36.4k for a retest of that support cluster as resistance, but that is where any long exposure would be trimmed as shorts become favourable once again and the probability of another lower-high before a leg lower into that 200wMA grows. If price fails to hold $29k, whether this week or next, I think the 200wMA is inevitable and likely we wick below that into the prior all-time highs where I would expect serious demand to step in. As such, if we close the weekly below $29k, I will be setting spots bids throughout the range between $20-22k.
Dropping into the daily, there are no signs yet despite the bounce off $25.4k that momentum or structure have shifted in favour of the bulls. What we do have though is protection of that $30k level on multiple days last week, which is promising. I would expect price to set the low of the week either today or tomorrow if we are to see some relief and for the pair to then move higher, first into $33k and then likely into $36k if that gives way. If we start to break down below $29k early this week, I think an historic eighth consecutive down week is likely, where $22k becomes the magnet. If you have been fortunate enough to have cash on the sidelines from much higher prices, it is now that we are entering the period of maximum opportunity – I believe Q3 will be where capital can be deployed for long-term positions across crypto.
Price: $2,013.52 (0.06821 BTC)
Market Cap: $243.24bn
Thoughts: Looking firstly at ETH/USD, we can see from the weekly that price sold off from the open and moved below $2159, wicking as low as the $1715 triple bottom, but – unlike BTC – not really wicking through it in any convincing manner. We now effectively have a quadruple bottom at $1700, which is not promising in my opinion for the likelihood of a bottom. That said, if BTC moves higher from here for some relief, we will almost certainly see ETH follow, and I would be looking for a bounce back into the $2425 area to begin scaling into shorts targeting a stop run below $1700. If we look at the daily, price has rallied off $1700 right into support turned resistance at $2160 and rejected for now, but I would expect to see a higher-low form if BTC/USD can hold above $29000 early this week, and subsequently we’ll see ETH push beyond $2160 towards that prior resistance level at $2425. Looking longer-term, I think if BTC does get the next leg down that I am still leaning towards, ETH will flush $1700 hard and likely move towards its prior cycle high at $1416, which is where I will begin to add heavily on spot.
Turning to ETH/BTC, we finally saw price break below local support, selling off below 0.073 into the mid-range at 0.0687, around which it closed, holding above trendline support from May last year. This is a key area now for the pair, and if we see a weekly close below 0.068 follow I would expect further blood in the dollar pair and across altcoins, as it would begin looking like a macro lower high followed by a breakdown, where range support at 0.055 becomes the level to watch. Not much else to add here for now, but the final two weeks of May are likely to be of great importance for Q3.
Price: $293.10 (0.009928 BTC)
Market Cap: $47.856bn
Thoughts: Beginning with BNB/USD, we can see that price closed below support at $317, but given the extent of the sell-off which took the pair as low as support at $208, the strength was impressive. That said, we still just have lower-lows and lower-highs on the weekly for now, as well as a clean close through support. I would expect price to hold above $254 if it is to find some relief, but whilst it is below that confluence of resistance around the mid-range at $460, both structure and momentum appear to point lower on the higher timeframes. If we do continue to break lower following some relief, I am looking at the 200wMA at $151, as well as historical channel resistance likely turned support just below it. Dropping into the daily, we can see just how important $460 is and why I have a bearish bias below it, with any rally this week or next towards $370 looking like a short opportunity to me with a clear invalidation. Ultimately, cycle bottoms do take some time to form, and so even if the $208 support holds on the next test, I would expect consolidation around that level for many many weeks if it is to mark the low for the next cycle. I still don’t believe we have hit that point yet, however, and I would expect another leg lower to follow before we can really start thinking about cyclical turning points.
Turning to BNB/BTC, we can see why the dollar pair showed strength and it is because of BNB’s resiliency, finding demand at 0.00814 and rallying off that level right back into the range that has held the pair for months between 0.009 and 0.0105, with the pair closing right in the middle of that. If we look at the daily for clarity, we can see that price wicked below that 0.009 support but failed to close below it and has since rallied back into the 200dMA as resistance. If it can continue higher and break above 0.105 following last week’s capitulation, I may have to shift my bias on the Dollar pair, but for now it is capped and shorts have become favourable once again. Start to move below 0.009 again and close below it on the daily and I think we fill in last week’s wick and move all the way down to major support between 0.0065 and 0.0068.
Price: $54.06 (0.001827 BTC)
Market Cap: $18.242bn
Thoughts: Looking at SOL/USD on the weekly, we can see that structure and momentum continue to point lower with the weekly close through support at $75 leading to a wick back inside the previous range, as low as $36, but with SOL closing the week above those prior range highs at $54. If we see the weekly close below that level following the buy-back late last week, that does not look particularly strong at all and I would expect the pair to make another move lower towards previous range support at $19. Anything below $25 for me becomes extremely interesting for long-term spot buys given the drawdown from all-time highs on a ‘blue chip’ and it would mirror a similar drawdown for ETH in the previous cycle. If, however, the cycle low is in at $36, we could see relief into $75 for another lower high followed by another test of $36 as support, where price should then begin to print a higher low and flatten out, forming a new range. I am leaning towards another lower high followed by a ‘final’ leg lower towards the bottom of that previous range, given how ETH/USD looks and the fact that BTC/USD hasn’t tested its 200wMA despite it doing so every cycle in far more accommodative monetary policy environments.
Turning to SOL/BTC, we can see a similar pattern where price has closed below support at 0.002 and sold off back towards the previous range, finding support at that range high ~0.00137. Again, from here I would expect consolidation below 0.0024 as the next major resistance (and last week’s high) followed by another test of 0.00137 as support. If we close below that level, I am looking at 72k satoshis. What I am really looking for is a range to form following this capitulation, wherever it forms being largely irrelevant. If we start consolidation between 0.00137 and 0.002, great, and if we break lower and consolidate back inside the previous range then that works for me too. I just want to see volatility begin to diminish and retail interest evaporate before getting involved again.
Price: $4.98 (16,830 satoshis)
Market Cap: $3.438bn
Thoughts: Beginning with UNI/USD, we can see on the weekly that the pair has been in a downtrend for a year, with last week seeing continuation lower with the rest of the market from prior support turned resistance at $7.40 all the way into $3.53. Price bounced there and closed the week back above prior resistance at $4.80. Structure is still bearish here but we are approaching key historical support levels now. I am eyeing up $2.90 as the place to begin loading up on spot if last week’s low does not hold over the coming weeks. Looking at the daily, from the all-time high to last week’s low we have drawn down 93% or so, which is approaching the sort of draw-down you would expect of a project outside the top 10 largest by market cap within a bear market. If the cycle low is in, we should see that level now protected and price put in a higher-low above $3.53 and then begin to consolidate and re-accumulate, which would be the signal for entry. Alternatively, as just mentioned, if we break below that and move into $3 or lower, I would begin loading up on spot there all the way into $1.70.
Turning to UNI/BTC, we are now sitting right above historical support and the previous cycle low at 12k satoshis. Price dumped into 13.9k last week off of prior support turned resistance at 21.4k but found demand and closed up near 17.4k, but there are no signs quite yet on the weekly that the tide has turned. If we look at the daily, we can see how the bear market has progressively gotten more aggressive as price has move lower off that distributive top, with a sort of steepening curve of resistance capping price. As this curve grows steeper, it becomes more likely that a bottom is imminent and the subsequent price-action after higher volatility is consolidation. If we see consolidation now form above 12k satoshis, I am very interested in UNI for a long-term position.
Price: $71.69 (0.00243 BTC)
Market Cap: $865.449mn
Thoughts: Quant is a project that I am keen to build a new position in for another cycle as I do expect it to survive.
If we look at QNT/USD, we can see that last week saw the pair react off prior resistance turned support at $49 and bounce into the close above $73. Last week’s low was around an 88% drawdown from the all-time high, so not quite what we traditionally expect of bear market drawdowns for midcaps, but we are getting there – and of course some stronger projects do front-run the most steep draw-downs. That said, we are still below $100 as reclaimed resistance and weekly structure is still bearish, so I am not convinced of a bottom just yet. We are also still capped by trendline resistance from the all-time high. If price can break above both those resistances, I would look to get involved on the formation of a higher low. Alternatively (and preferably from a risk/reward perspective), we see price make another test of $49 as support and begin to bottom out above prior range support at $28.67, and thus likely above historical trendline support. If we look at the daily, we can see that prior support at $87 is also capping price, and that would be the area I’d expect a lower high to form if we are to continue lower. Either way, I would be keen to begin buying a range that forms below $49, if we are so lucky. If not and the bottom is in, above $100 and trendline resistance and I am looking for longs.
Looking at QNT/BTC, we are playing out a textbook bear cycle and last week saw support at 0.0019 swept but buyers step in and drive price higher back into 0.0024 for the close, around the weekly open. Whether this is indicative of a bottom or not I am not yet sure, but again if we can get above reclaimed resistance at 0.00313, weekly structure turns bullish following capitulation and longs become favourable. If however price continues to print lower-highs despite that buy-up late last week, I would expect another leg lower into the accumulation range that preceded the bull cycle, with prior resistance of that range between 0.00126 and 0.0016, which would be a great area for a new accumulation range to begin forming for a cycle low.
Price: $0.92 (3109 satoshis)
Market Cap: $381.781mn
Thoughts: If we look firstly at 1INCH/USD, we can see that price has sold off all the way back into and below the all-time low at $0.74, printing a new low last week at $0.67 and bouncing off that, with a 92% draw-down from the all-time high in October 2021. This swing-failure of the all-time low is possibly a bottom but we will not know until we see the next couple of weeks play out. What I would want to see is $0.74 now protected as the prior ATL and price find support above it, with diminishing volatility and a consolidation range forming. If we see that, I think we have a case for a cyclical low. If, however, price prints a lower high below prior support at $1.20 and breaks back below $0.74, I think we still have bearish price discovery to follow and I would await a clearer bottom formation before allocating any capital.
Turning to 1INCH/BTC, the picture is effectively identical, with price wicking below the all-time low at 2772 satoshis last week and then closing back above it, but with structure and momentum firmly bearish as price continues to be capped by prior support. Again, what bulls want to see here is price flattening out now above 2770 satoshis and larger holders buying or at least not distributing into the lows. If we see that, we may have a bottom formation. Break below 2770 and no doubt this continues to plunge lower.
Price: $0.62 (2103 satoshis)
Market Cap: $276.071mn
Thoughts: As LooksRare has only been trading for a few months, both pairs look identical, and so I will focus on LOOKS/USD.
LooksRare has had a tough time since its all-time high formation early in its existence back in January, bleeding lower with lower-highs since, but price appeared to have found a bottom at $0.85 in late February, which led to a brief rally into $2.91 that then failed, and price has since bled back into that support, and – as of last week – below it to a new all-time low at $0.52. This is a 93% drawdown from the all-time high and we are getting to very attractive prices, in my opinion. If price now reclaims $0.85 as support and starts to consolidate above it, I think we have found a bottom. If, however, the rest of the market tanks lower and LOOKS falls with it, taking out $0.50, I am going to start buying spot below $0.40, as – even at all-time low fee generation of the past week of ~$200k per day – we are looking at a platform that is generating over $70m in fees annually for LOOKS stakers. I am quite happy to pay a 5x multiple on platform earnings for its fully diluted valuation – I personally think that represents good value. Anything below $0.40 – as long as LooksRare continues to have active trading – I am very happy to DCA into. If we don’t get those lower prices, I want to buy a range formation back above $0.85.
Price: $0.00061 (2 satoshis)
Market Cap: $3.475mn
Thoughts: Tidal Finance was a request by a subscriber and so I will preface this by mentioning that I have no idea about its fundamentals at all.
If we look firstly at TIDAL/USD, we can see that it has – in effect – been in a downtrend its entire existence, with its all-time high forming on its first day of trading at $0.057 and price having drawn down over 99% since, as of last week’s all-time low at $0.0003. Price then bounced off that low into prior support turned resistance at $0.0007. Now, the premise here for me is very simple. If I am keen on the fundamentals on TIDAL here, it is a buy at current prices. The pair is drawn down over 99% – which does raise some flags as you would expect some interest at such a draw-down – but if you think the project is fundamentally sound and preferably can see larger holders either buying or holding on-chain, this would be a no-brainer for me as I would look to allocate a fixed percent and see what happens – moon or die. Given the market cap is only a few million dollars, it is also likely liquidity is very low for this project, so that is another thing to be wary of. Also, maybe take a look at its FDV and see how those token unlocks are going to work – from what I can see, 25% of the supply is already in circulation, so you’re not looking at an absurd multiple for its FDV, but it is always important to know how emissions/unlocks work.
Finally, looking at TIDAL/BTC, we do see price having bled out below an initial range low around 7 satoshis and now flatten out between the all-time low at 1 satoshi and resistance at 4 satoshis. This is the sort of price action you would want to see for a bottom formation, particularly with the volume now coming in here. If you want a slightly more favourable entry in terms of momentum, waiting for that 7-satoshi reclaim makes sense as it would also break above the 200dMA for the first time in its history. That being said, I think a fixed capital approach makes sense here if you are certain on the project’s fundamentals. If it dies, it dies.
And that concludes this week’s Market Outlook.
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