Market Outlook #74 (27th April 2020)
Hello and welcome to the (much delayed) 74th Market Outlook, following a few of the most volatile and interesting weeks in recent market history.
Before I begin, I’d just like to say that I hope yourselves and your families are all keeping well in these strange times.
Turning back to market volatility, recent movements included several of the largest single-day sell-offs in the history of legacy markets, as well as what can quite rightly be considered a black-swan event in Bitcoin between 12th and 13th March, culminating in a series of cascading liquidations and BTC/USD priced as low as $3800, having begun the 48-hour period as high as $8000.
As I mentioned on Twitter during that period, in the six years I have been involved in the space, I have never experienced anything quite like those 48 hours, particularly in the context of the progress that the cryptosphere has made (and the growth it has experienced) over the preceding years.
In this week’s post, I’ll be covering Bitcoin, Ethereum and Monero, as usual, plus taking a look at Cosmos and Algorand.
I also have an important announcement to make:
As regular readers of my Market Outlook will know, I have now been publishing these effectively every week for almost two years. The response I get to them is fantastic and I am very much glad to know that they are useful to the many of you that get in touch and let me know. That said, they do occupy many hours in order to produce and publish. I have been thinking for quite some time about how to improve these posts and begin to generate some income from them in order for it to make sense for me to continue to dedicate time to them. Moreover, I do not want to alienate readers that enjoy reading my Market Outlook but cannot afford to pay to do so. As such, I believe I have come up with a solution:
Following this final Market Outlook utilising the current format, I will be launching a Premium Content section of the blog, where I will be publishing an exclusive weekly Market Outlook, featuring a thorough top-down analysis of Bitcoin and 10 or more altcoins each week, starting with a Weekly chart and working my way down for each. These will also contain my thoughts (a combination of fundamental and technical analysis) on smaller projects that I am looking at. As you can probably imagine, this will be a very lengthy post that will likely take me the best part of a day to produce. Moreover, I will also be publishing one exclusive Coin Report per month, chosen by subscribers via poll. This will allow you guys to decide what project you would like to see deep research published on. Finally, I will also be providing one-off blog posts to the Premium Content section, such as How To Spot Accumulation and Distribution and My Top 5 Undervalued Cryptocurrencies, to name a couple of posts that I have drafted.
And what’s the price for all of this material, I hear you ask?
Access to this content will be priced at half a pint of beer per week – £9.99 per month, to be precise – as I also want to ensure that it is affordable for you guys.
Equally importantly, I will be publishing a free version of this Market Outlook in the current format for those that do not wish to pay for the more detailed exclusive content. These will consist of analysis of Bitcoin and 3 or 4 alts on the Daily timeframe (as presently exists).
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That’s about all I had to announce, so let’s crack on with this week’s Market Outlook:
Market Cap: $141.775bn
Thoughts: Well, where do we begin? In the 6 weeks since the previous Market Outlook was published, Bitcoin has been on quite the roller-coaster.
Let’s start with those fateful two days.
It began with the forging of the Gr… wait, no, wrong tale. It began with BTC/USD relatively calm, though having experienced a bit of a violent dump through $8400 support into $7900, where it consolidated in the second week of March. Meanwhile in the world, coronavirus was beginning to be taken more seriously and legacy markets were also falling; none were spared, as commodities, metals and equities all got slaughtered. And then – on March 12th – Bitcoin began to fall.
As we can see from the chart provided above, the fall was unprecedented, and the levels that all of us had marked out as strong support ($7500, $6400, $5900 and so on) ceased to exist in the space of a few hours, as price dumped through the entire accumulation range that preceded the rally to $10,550 in February. Cascading liquidations sent price as low as $4600 that same day – perhaps the most brutal one-day drop, when placed in the context of present liquidity and market cap, in the history of Bitcoin. The following day had some follow-through on this, as price dropped all the way to $3850 (over 50% from the highs just the day before at $8000); this was just shy of the 2019 open price of $3690, above which, as we can see, price reversed sharply on the highest single-day volume recorded in years. More impressively, where many (myself included) expect the bounce to be short-lived, price has simply retraced the entire dump over the past few weeks.
If I’m honest, I was expecting a retest of the $6400 base as resistance and then perhaps a dump back to $4250, but despite initial rejection we climbed back above the level very swiftly on good volume. This is an important point, as many have been considering this rally as false simply due to declining volume, but given that the days of the capitulation saw the highest recorded volume most exchanges have ever seen, it goes without saying that subsequent volume would be declining. If anything, all I see is a return to normal levels of volume, as can be seen on the chart.
Now, having covered the volatility of the past few weeks, what is it that I’m now looking at?
Well, the reclamation of the $6400 base was important for me, as this was the support that preceded the rally into $10,550. As we can see, we retested this level as support back in mid-April and it held firm. Whilst we hold above this level, I am expecting higher prices, although things are beginning to look a little more precarious.
Having drawn on the Fib retracements, we can see that price is pressing up against the 61.8% retracement at $8000, with the 200-day MA overhead as resistance. Moreover, we have left almost every swing-low on the way up untapped. Regular readers will know my thoughts on free rides – they don’t exist. The build-up of stops below these swing-lows combined with significant overhead resistance does make me think that we will at least return to retest the April open price and prior support around $6400. If we lose that support, I’d expect to see both swing-lows below $5900 to be taken out before a new bottom forms. I do not, however, think we see $3850 retested anymore, simply because the movement down to those prices was so illiquid and swift that very few will have been able to buy spot or open leveraged positions there. Exchanges were malfunctioning and orderbooks were the thinnest I have seen. Moreover, every single believer in Bitcoin would sell their family for another chance at buying spot at $3800, so I think any potential retest of that area gets front-run hard.
I do think we could see a little more upside, perhaps stretching even as far as the 360-day MA around $8600, but risks short-term seem skewed to the downside for me here.
Regarding potential long entries, if we swept $6400 and closed the Daily back above the level I would get long for a retest of $10,550.
Regarding shorts, I’d want to see a sweep and breakdown in this area on the lower timeframes to trade back into $6400. There is, of course, prior resistance and the Yearly open around $7200 that may provide a lot of support if we do start to fall off here, so shorts should look at early indicators of a reversal in that area to cover.
Price: $192.48 (0.02515 BTC)
Market Cap: $21.526bn (2,787,456 BTC)
Thoughts: I will refrain from telling the capitulation story again for Ethereum, and instead opt to begin with the reversal from the lows at $90.
As we can see from the chart, a similar pattern occurred in ETH/USD (as one would expect) where price capitulated into the November 2018 lows and sharply reversed, with the most significant reclaim occurring above $128. Why? There are two important levels stacked between $128-133: the 2019 open price and the 2020 open price. The monthly open price for April occurred in between both of these, with price rallying hard out of March into another important pivot at $167. Price poked its head above the level but ran into the 200MA, where it was slapped back down into prior minor resistance turned support at $150. We see a nice sweep and run at the level, leading to new highs above the 200MA and as far as the 360MA at $192, where it currently sits.
ETH/USD has now entirely retraced the March dump and some. But, we can see declining volume begin to appear on these most recent pushes above the 200MA. I am now looking at $217 (the March open price and prior support) as the upside limit before we see a retest of $167 and perhaps even those levels of confluence at ~$130. If we do come into $130, I will be buying spot ETH to hold for a long time.
Turning to ETH/BTC, we can see a parabolic advance from the September 2019 lows, with two successive higher peaks and higher troughs following that. We can also see that price rapidly and violently reclaimed the old resistance at 0.023 (also the 360MA) as support on solid volume, leading to more upside and a move back above the prior double-bottom at 0.0246. Whilst price is above this area between 0.023 and 0.0246, I am very bullish on ETH/BTC and would expect continued upside. If we see price start to break back below 0.023, I would expect that the trend is over and we would likely retest the April open price at 0.0207.
Price: $61.22 (0.00797 BTC)
Market Cap: $1.079bn (139,741 BTC)
Thoughts: Monero is trading very similarly to ETH at the moment, although unlike its peer it failed to hold above November 2018 lows, trading as low as $24.50 – almost 33% below those prior lows. Price has recovered very sharply since, with the move back above $41.80 leading to a break higher, retest of the level as support and continued strength into the 50% retracement area where it currently sits. If we start to stall here in XMR/USD, I would expect to see the swing-low at $49 swept. For me, however, this is a no-trade area for XMR/USD.
Regardless, I am more interested in XMR/BTC, which has recovered the prior range resistance as support at 0.0074 (the level I continue to bang on about). Moreover, we can see a relatively clean retest of the two-year trendline resistance as support during March capitulation, from which price has bounced hard but now appears to be stalling at the 360-day MA ~0.008. I think a retest of 0.0074 looks like a solid area for support to be found if we do fall here and I am ultimately looking for new highs above 0.0095 into support turned resistance at 0.01.
Price: $0.21 (2,749 satoshis)
Market Cap: $152.4mn (19,735 BTC)
Thoughts: Algorand has spent the vast majority of its life in an accumulation range, which was destroyed briefly by March capitulation.
Beginning with ALGO/USD, we can see that price spent months between $0.16 and $0.30 in 2019 before rallying up and out above range resistance in February 2020. Price retested this area as support before climbing above $0.50, but that was where its luck ran out, as a weak bounce following a second retest of range support led to a breakdown, which was followed by the mid-March capitulation, taking price below the range support and as low as $0.09. Since then, price has slowly been rallying, breaking back above range support and now climbing above the consolidation area that preceded the initial rally out of the range. The 200-day MA looms overhead as resistance, but I want to see $0.30 reclaimed before I start to look for leveraged longs.
ALGO/BTC tells a similar tale, with range support at 2100 satoshis and range resistance at 4150 satoshis, but unlike its USD pair ALGO failed to break below range support in March, instead now having spent several weeks in consolidation below the 200MA at 3000 satoshis but above range support at 2100 satoshis. If we break above 3000 satoshis, I would be a buyer of the retest looking for 4150 satoshis as a first target and 5300 as a second target. My invalidation would be price closing below range support.
Price: $2.71 (35,141 satoshis)
Market Cap: $517.54mn (67,009 BTC)
Thoughts: Finally, Cosmos also had a difficult time of it in March, a little like ALGO, falling straight through its September 2019 low at $1.85, as far as $1.03. Price bounced hard from this level, reclaiming the September low as support and printing a double top at the 38.2% fib at $2.75. Price then consolidated for a little whilst above $2.20, retesting it as support, before rallying above the double top, where it currently sits. There is a very important pivot zone overhead at $3.25, which is also the 50% fib retracement. If we are able to get back above this zone (and the 200-day MA above it), I would expect a rally all the way into new highs at $5.55. For now, I do expect the bottom end of the zone to act as serious resistance, with a retest of $2.20 and potentially $1.85 on the cards if we do fall off around here.
Turning to ATOM/BTC, there isn’t particularly much to add as the two charts are quite similar in their structure, but I would not be a buyer whilst price is pushing up against prior support turned resistance at 38k satoshis. If we cleanly break above on good volume, I’d buy the retest for a short-term trade into resistance above 42k satoshis.
And that concludes this week’s Market Outlook.
I hope you found some value in the read!
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