Market Outlook #180 (20th June 2022)
Hello, and welcome to the 180th instalment of my Market Outlook.
In this week’s post, I will be covering Bitcoin, Ethereum, PancakeSwap, Curve, 0x, COTI, Constellation, Flamingo and Fear.
As ever, if you have any requests for next Monday’s Outlook, do let me know.
Later this week, I’ll be publishing a new Coin Report on Verasity.
Market Cap: $388.215bn
Thoughts: If we begin by looking at BTC/USD on the weekly timeframe, we can see that last week saw another capitulation leg lower, this time taking price down from the weekly open above $25.4k through the 200wMA like butter and below the previous cycle high at $19.9k, right into $17.6k, where it found support and bounced over the weekend to close back near $20.5k, all of this occurring on even higher volume than the previous leg lower. The close below the 200wMA shows the lack of willingness to bid at any level at present, but – as I mentioned in my recent tweet – we are now approaching levels that I believe present good value for the long-term outlook of Bitcoin. As such, as we moved below $20k, I began scaling into spot, and I will continue to do so over the coming weeks. Looking at this weekly chart, it does not look as though a bottom is in just yet – excluding the March 2020 low, bottoms do not just form on a capitulation low and v-reverse from that point, particularly not in these macro conditions and subsequent to a bull cycle, unlike the conditions of that March low. Instead, I expect Q3 to find the ultimate bottom: whether it is at $17k or at $14k I have no idea, but it is likely that we see volatility begin to diminish once that bottom is found and price form a new range for several weeks afterwards, which is where I would like to allocate more dry powder. That is not to say that we won’t now see some relief given last week’s capitulation into and below the prior cycle high; in fact, I would expect to see the 200wMA retested from below as resistance at $22.4k sooner rather than later. If that retest is rejected, no doubt we are going to retest the $17.6k lows. However, if we do break through and reclaim the 200wMA, I would then look for consolidation to begin above the $20k level for signs of a bottom formation. The most brutal scenario I can imagine is that despite some relief early this week for crypto, legacy markets continue to dump and send BTC through that $17.6k low towards $14k, where I do expect much more demand than we have seen thus far to step in.
Turning to the daily, we can see that momentum indicators are still not showing any bullish divergences or signs of exhaustion – they are simply showing a heavy trend lower. As such, I do expect relief to be short-lived here and I Would expect that $23k area to cap prices this week and the first test of the 200wMA to be rejected, leading to more ranging between $17.6k and $20k. If we break and close beyond $23k, the untested support at $25.4k is likely next up. Not much else to add here except that if you are positioned comfortably with plenty of dry powder, I think we are approaching the latter stages of the most volatile legs lower, following which we are likely to see volatility diminish and price move sideways for some time, which is where I will look to allocate most heavily.
Price: $1098.37 (0.05428 BTC)
Market Cap: $133.951bn
Thoughts: Beginning with the weekly chart for ETH/USD, we can see that price closed below the 200wMA, having sold off from the open at the prior cycle high at $1416, selling off as low as $883 before bouncing to close above $1125, but still marginally below the 200wMA. Unlike BTC, it is common for ETH/USD to move below the 200wMA in bear markets before a bottom is found, and I have had the 2021 open and prior resistance between $740-830 marked out for quite some time as a zone in which to more heavily allocate capital to spot. If we catch a bid this week and see some relief after the 12 consecutive red weeks, I would expect $1420 to cap prices and mark a lower high before continuation lower into that $740-830 zone. If that zone does not find demand, I would be looking at $550 as the next major support level, followed by $365, with minor support at $448 in between. I am not expecting those lower levels to be tagged but I will keep some dry powder in case we do, but again I expect to see a few weeks of consolidation around a low before we bottom out and even then we will likely return to form a higher low on the weekly before marking out any long-term reversal, so I’m remaining patient. Turning to the daily, again there is not a huge amount of encouragement from the momentum indicators just yet, but I do like the swing-low we put in just above that $830 level as a potential short-term bottom for a bounce this week. If we can break and close above weekend highs, I think we continue through $1250 towards that prior cycle high at $1415, where I expect more resistance to be found. If, however, the market continues to show weakness, we would expect to see $1250 provide more resistance and price begin to break down on the lower timeframes from around that level, then looking for a retest/higher-low above $882 for another chance at some more sustained relief.
Now, looking at ETH/BTC, we have closed below the major range support at May 2021 lows ~0.055 once again but we printed a nice reversal candle off 0.049. Unfortunately that is something of a nothing level, so I am not super convinced just yet that we will see a reclaim of that range this week – it would be more convincing had we dropped into prior resistance at 0.046 and that level have acted as support. Nonetheless, there was some demand and we closed week green, so if price starts to break and close above 0.055 on the daily this week, we could see a retest of the minor support levels above at 0.0577 and 0.0594 respectively. If we close the week firmly back above 0.055, that looks more promising and I would look to bid 0.055 the following week as reclaimed range support, looking for 0.064 to be retested. If, however, we pop above 0.055 but close back below it, I am looking for another leg lower to follow into 0.046.
Price: $2.98 (14,640 satoshis)
Market Cap: $464.84mn
Thoughts: Beginning with CAKE/USD, we can see on the weekly that price is now down nearly 95% from all-time highs but is still sitting in no man’s land really, continuing to break lower and flip prior support as resistance. Last week saw price close marginally below the prior support level at $3.11, and if we see that level act as resistance this week and price begin to break down below last week’s low at $2.54, I think much more downside is on the way until we hit the next major level at $1.24. If, however, no man’s land is where we stay and price is finding demand here, we want to see a new range begin to form between $3.11 as reclaimed support and support turned resistance at $5.19, with the next indication of a bottom coming if and when we can close above $5.20 and reclaim it as support, with trendline resistance just above that. Dropping into the daily, I have marked out these trajectories – and the reason I say this range could mark out a bottom is simply because another 50% or greater drop is only going to happen if BTC and ETH take out last week’s low. If those lows hold, we may well start bottoming out on the large-cap alts, but again that will take time and I expect at least the first 6 weeks of Q3 to depict that sideways action if we are indeed bottoming out.
Turning to CAKE/BTC, the picture is largely the same, except that we are flattening out nicely having wicked below support at 13.3k into 12.4k and then reclaimed it a few weeks ago, now tightly consolidating between that 13.3k level as support and resistance at prior support ~16.6k satoshis. This is looking more like the late stages of the altcoin market cycle to me and we are sitting just above a major prior resistance level at 10k satoshis, so this could well be where a bottom formation occurs, but I want to see continued sideways action around here if that is the case. If we break and close below 13k, I think the 10k retest is happening, which will no doubt assist in that $1.25 area on the dollar pair drawing closer, which is where I would blindly bid spot.
Price: $0.66 (3273 satoshis)
Market Cap: $357.341mn
Thoughts: Looking firstly at CRV/USD, we can see on the weekly that price broke below range support at $1.03 and reclaimed that level as resistance, selling off into $0.56 last week, sitting in no man’s land, with no major levels anywhere nearby. The next major support is down at $0.37, which is the final level above the all-time low at $0.315. As such, if we do see more bleeding, I will look to bid $0.37 with invalidation on a close below the all-time low, where I would look to exit and re-enter on a reclaim of the all-time low or a new range forming at a new low. Either way, I will be looking to allocate fairly soon I would imagine. It is possible we see relief if the wider market runs higher, and in that case I would expect reclaimed resistance at $1.03 to be retested and possibly mark out another lower-high before the next leg lower into major support.
Turning to CRV/BTC, we can see that price closed below range support on this pair too at 3500 satoshis, which may act as resistance this week. If it does and we see price break below last week’s low at 2660, I think 2200 gets retested as support, which again is the last support above the all-time low at 1560 satoshis. If, however, we see price reclaim that range support this week, I would then look for consolidation to occur over the coming weeks back above 3500 and begin spot allocation in that scenario, with invalidation at last week’s low. Nothing else to add here – very simple structure to contend with.
Price: $0.27 (1324 satoshis)
Market Cap: $228.336mn
Thoughts: If we begin by looking at ZRX/USD, we can see that price has drawn down around 90% from the 2021 highs and has now returned to historical resistance turned support around $0.26, wicking below into $0.22 last week but closing above. Momentum indicators do not yet show exhaustion but we are approaching prices that have historically provided value. That being said, given the wider market conditions, it is unlikely an ultimate bottom is in yet, but if you do find the fundamentals of ZRX to be attractive, you are now looking at the accumulation range that preceded the previous cycle. As such, it may make sense to dollar cost average in from current prices, then looking to add more heavily into major support at $0.16 if that level is retested, as that has been historical support since inception, with invalidation at new all-time lows.
Turning to ZRX/BTC, unlike the dollar pair we are sitting right on the all-time low at present, having marginally made a new low last week below 1038 satoshis, but bounced off it and rallied back above historical support at 1184. This provides confluence to the DCA scenario outlined above, as we may now see volatility begin to flatten on the BTC pair as it forms a bottom around this historical support whilst the dollar pair moves with BTC/USD, and buying around 1200 satoshis has historically been rewarded for ZRX holders. That being said, there is a clear pattern here that needs to be mentioned and that is a perpetual downtrend, despite bull cycles existing. We have seen continued lower highs throughout ZRX’s inception against BTC and thus it may be better to look for opportunities elsewhere with greater upside potential in the next cycle. Of course, ZRX may buck the trend a have a bull cycle that outperforms its previous performances, but it is more likely looking at this that the next cycle is again capped by the 200wMA, which at present is only a 3x away. I would personally be looking for better opportunities than this, but if we look at the daily chart briefly there is a short-term setup that makes sense, which is to buy a 1200 satoshi retest with invalidation at new lows and look for a retest of the next major resistance around 2160 satoshis.
Price: $0.089 (438 satoshis)
Market Cap: $93.444mn
Thoughts: Looking firstly at COTI/USD, we can see on the weekly that price lost the long-term uptrend months ago and has since been bleeding lower, capitulation into the previous range support at $0.09 a few weeks ago and then consolidating above it but retesting reclaimed resistance at $0.135, where it failed to break through. Since, the pair has moved lower once again and is now closing below that $0.089 area. If we see price now break down below $0.078, I think there is another 50% of downside to come into into the next major resistance turned support level at $0.04, where I would then look for volatility to diminish and a new range to form before looking for entries.
If we turn to COTI/BTC, we continue to see price capped by trendline resistance and prior supports become resistance, but we are holding above the prior range support at 308 satoshis and consolidating below reclaimed resistance at 450, which is a major level historically. Naturally, if we were to see a bid and price reclaim that level and close above trendline resistance on the weekly, then I will begin to look for entries, but for now structure and momentum are still pointing lower and we are below key historical resistance. If we do break lower, I think trendline support from the November 2019 lows is undoubtedly being retested but we are likely breaking that and moving into major support between 180-220 satoshis from there.
Price: $0.0645 (322 satoshis)
Market Cap: $81.665mn
Thoughts: If we begin by looking at DAG/USD, we can see on the weekly that price close below support at $0.06 a couple of weeks ago and wicked into $0.048 last week, but closed back above $0.06. Whilst this does show some strength after a 90% drawdown, we are properly in no man’s land here. with the next major support down at historical range resistance turned support at $0.024 ad the next major resistance at $0.098. It is possible we see relief from here to retest that $0.098 area from below and then mark out a lower high before continuing lower, and I personally am not interested in spot accumulation until/unless we see that $0.024 area traded again, as I believe it presents far more value for a long-term position. Alternatively, if we do begin to form a new accumulation range above there, I will look at that more closely as the next couple of months unfold, but for now I will be sitting on my hands.
If we look at the BTC pair, we can see that price bounced off prior support just above the 200wMA last week at 199 satoshis into reclaimed resistance at 360. Whilst this was a strong bounce, we have come right into resistance, with even more significant resistance above at 458 satoshis, which I would expect to cap price. If we do start to break down below that level, I think another leg lower occurs, at least retesting the 200wMA at 181 satoshis as support, above which we may well begin to form a new accumulation range. If that levels gives way, I would be looking for an unwind of the rally from May last year back into the 68-83 satoshi zone, where there is significant support.
Price: $0.11 (575 satoshis)
Market Cap: $35.738mn
Thoughts: Beginning with FLM/USD, we can see that price broke below the prior all-time low at $0.10 a couple of weeks ago and made a new low at $0.076, then consolidating below $0.10 before expanding above the level and reclaiming it as support, then wicking as high as the 360dMA and prior support turned resistance at $0.39 before returning to the $0.10 level, where it is currently sitting. I would now be looking to the larger holders to see if any were buying during that spike and during this period around historical support more broadly, as that would be a good indicator for an opportune entry here, with invalidation at the all-time low. Over the coming weeks, bulls would want to see price start to flatten out and form a range once again, likely between $0.10 as support and $0.17 as resistance.
If we look at FLM/BTC, price deviated below the all-time low at 330 for a couple of weeks, forming a new low at 300 satoshis before rallying over the last week or so as high as 1600 satoshis and now trading back below support turned resistance at 620 satoshis and the 200dMA. If we start to break back above 620 this week, we may see continued upside, but for a more sustained bottom I would prefer to see volatility flatten out here and price begin to form a new range. That said, looking at the dollar pair, if large holders are buying, I do think this makes sense for spot allocation.
Price: $0.21 (1015 satoshis)
Market Cap: $1.349mn
Thoughts: Finally, I will be looking at FEAR/USD primarily here as both pairs look identical due to FEAR only trading for around a year.
On the daily, we can see that price has been playing out its first major bear cycle, having now drawn down 95% from the all-time high and as of mid-May broken below the prior all-time low at $0.29, now acting as resistance, with a new all-time low at $0.19. Price has been consolidating below the prior all-time low for 40 days now, which is nice to see, with this looking very much like the depression stage of the market cycle for FEAR. If we continue to see price flatten out and consolidate below the $0.30 level over the coming weeks, this is very much looking like a new accumulation range before the next cycle, which we can support by looking to whether larger holders are also adding (which in this case it does seem they are, at a glance anyways). I would be looking to DCA into FEAR here up to a fixed risk allocation of 2%, where it becomes ‘moon or die’ given how small this project is, and I would be looking to hold for 12 months or more.
And that concludes this week’s Market Outlook.
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