Market Outlook #90 (24th August 2020)
Hello, and welcome to the 90th instalment of my Market Outlook.
In this week’s post, I will be covering Bitcoin, Ethereum, Chainlink, Cosmos, Golem, Komodo. COTI and Meta. I’ll also be updating my evaluation of Altcoin Market Cap!
As ever, if you have any suggestions for next week’s post, feel free to leave them in the comments below.
Market Cap: $217.65bn
Thoughts: Given the movements of the previous week in Bitcoin, I figured it would be worth first taking a look at the monthly chart for some context, particularly when we consider just how much has happened this year.
So, beginning with the monthly, we can see that the all-time high at $20k and the likely cyclical low at $3,120 have framed price for the past couple of years. Moreover, we can see that the highest monthly close was actually $13,870 back in December 2017. Funnily enough, that is precisely where the 2019 rally, post-capitulation into $3,100, peaked. Resistance was found once again at $13,870 and subsequent price-action saw a gradual pull-back into another important pivot point at $6,383, which ultimately preceded a bounce into $10,760 and then the mid-March 2020 capitulation that I’m sure we all remember very clearly. Nonetheless, that March monthly candle failed to close below $6,383, thus, in effect, acting as a reclaimed support level. This has been the base for the recent months’ rallying, and, significantly, July’s breakout and close above the highest 2019 close of $10,760. This made July’s candle the highest close for Bitcoin since December 2017. Since July ended, August has seen price poke its head higher, though still shy of that all-important $13,870 level. We have also retested $10,760 as support. Lastly, volume has been steadily declining since the 2019 high, which, although in part likely to be a symptom of BitMex’s loss of market share for derivatives, is a little bit concerning as price does approach that key level again.
Now, looking at the weekly, last week was the first bearish close since price broke out above the triple-top resistance at $10,570, which, given the extent of the run since the ~$8700 consolidation area, is nothing too worrying. It does, however, open up the possibility for price to begin consolidating once again, as there is clearly resistance up in that $12,500 area. We also have not yet retested $10,570 on the weekly timeframe (although price has done so on the daily immediately after the breakout), so if we do start to see price take a turn here, that is the obvious area of interest, and one that I would expect to be defended heavily given how long it capped price for. Now, there is every possibility – just like when price broke back above the capitulation candle high at $8118 in April/May – that price will reject here at resistance and simply find a new range between $10,600 – $12,500, which I think would be the bullish scenario for alts. Let’s look at the daily to see if there’s any clues as to where we might be headed short-term.
Looking at the daily, we can see that, following that breakout above $10,570, price found resistance at $12,170 and retested the breakout level as support in the same day. This became the range in which price consolidated for a couple of weeks, printing higher-lows and equal highs at $12,170 (an ascending triangle) before eventually breaking and closing above the high and finding resistance at $12,500. Since, price has rejected the move higher and moved back below the $12,170 double top, retesting the trendline support of the ascending triangle at present. If we see price hold here, I’d expect at the very least a retest of $12,500; where, if we saw rejection, I would then expect price to fall off quite significantly and move back towards $10,600. However, any acceptance above $12,170 would lead me to believe this is going for another leg higher, likely to retest that $13,870 resistance. The most bearish scenario for me here would be to put in a weekly high tomorrow or Wednesday below $12,170 and then break to a new low beneath last week’s; this would turn market structure bearish on the daily (lower high followed by lower low following an upside breakout), and I’d be looking for short-term shorts into $10,600. Above $10,600, there is no need to be bearish for any sustained period, in my opinion.
Price: $404.21 (0.03445 BTC)
Market Cap: $44.871bn (3,846,087 BTC)
Thoughts: Ethereum still looks better than Bitcoin and seems to remain the market leader for now.
If we look at ETH/USD, from the weekly we can see that price found resistance just shy of $450, which was previously a minor consolidation area, but is holding firmly above $365 – the reclaimed support at 2019’s high. I think this is an important level to hold for bulls to see another leg up without any meaningful dip, and whilst we’re above it I think the next area of interest is $550. Looking at the daily for more clarity, we can see that price rejected at the higher high of $448 last week, dumping as expected given the bearish divergences across pairs highlighted last week. Despite the dump, price is finding support in the previous area of consolidation above $365, and if it can get back above $415 I think we see $448 retested; close above that on decent volume and I think Ethereum will just keep running towards that $550 area. However, if price rejects at $415 and closes below $365, there isn’t a great deal of significant support nearby except for the trendline. If the trendline support was unable to keep price lifted, the next major area of interest would be $290, which, if it had confluence with the 200-day moving average, would be an excellent long entry.
Turning to ETH/BTC, we are still seeing price rallying in a parabolic manner, albeit with the pair taking a breather over the past week. Looking at the weekly, price is finding some resistance at 0.035 but given the all-time high volume we are seeing be traded I do think the next leg up is imminent. That 0.042 area is paramount, as any breakout above there would see 0.054 tested swiftly, in my opinion. Turning to the daily, as expected, the steep short-term trendline resistance has given way as price has fallen off from the 0.0379 high, but price could consolidate here for a couple of weeks and still maintain a parabolic curve. I have drawn on a fibonacci extension for the current swing, assuming that 0.0332 is the bottom for this swing, which would put the 1.618 extension at 0.043; giving nice confluence with the next major horizontal resistance. If price does falter here, however, I’d be looking for any dip into 0.0286 as a very good buying opportunity, but I really don’t think we’ll see it anytime soon.
Price: $15.30 (0.00129 BTC)
Market Cap: $5.12bn (454,877 BTC)
Thoughts: Chainlink remains a beast, no matter what CT says about $21 being a potential top. There is absolutely no value in attempting to call tops on coins in long-term bull markets; just play the swings if you’re trading it.
If we begin with LINK/USD, we can see how ridiculous the top calls really look, as there has been no euphoric candle with any meaningful rejection wick, nor has there even been time for a complacency high to have formed. Just like at $9, price has found resistance at $21 and is currently consolidating within the range of the week that broke new all-time highs. Trendline support remains strong, though untested since the $9 high was found last month. Turning to the daily, here we can see just how clean price-action is at present, with support now having been found around the 50% retracement of the whole swing from $6 to $20.60. There are two scenarios that I believe are likely to occur from here: either, LINK continues higher, providing no opportunity better than this for anyone to get long before it runs to new highs; or, price does dip more deeply into the $9 area, which would be the most perfect long entry I can think of. Given how perfect it is, we probably won’t get it, but if we do I will be loading up.
Turning to LINK/BTC, the trend is even stronger and healthier here, with the most recent run taking price to new all-time highs of 0.0017. The long-term trendline support is now no longer nearby as the rally has steepened since breaking above 0.00057, thus it does appear that we may be reaching the latter stages of the market cycle, though by no means quite at euphoria by the look of this chart. If we look at the daily, again we can see that price has come into an area of minor consolidation around the 50% retracement and bounced, although we are yet to see if the bounce can be sustained. If we see price fall here and break the 0.0011 support level, I’d be looking for a sweep of that swing-low at 0.00102 into the 61.8%-79% fib retracement area for a swing position.
Price: $7.99 (67,978 satoshis)
Market Cap: $1.615bn (137,392 BTC)
Thoughts: Cosmos had a fantastic week where most alts had a mediocre one, closing at new all-time highs against the dollar.
If we begin with ATOM/USD, we can see that price rallied hard last week on good volume, continuing on from the previous week’s close above the yearly high at $5.55. Most importantly, price broke above and closed above the previous all-time high at $7.77, hitting $8.70 before finding resistance. Given the clean break above the prior ATH and the solid volume being traded, I would expect this to continue higher and dips are currently for buying. Looking at the daily, a dip into $6.77 as prior resistance would be the first area of interest, although it is possible that price holds above the prior all-time high and continues from here, which doesn’t present the best risk/reward for new longs. As such, it is better to wait for continuation if it comes and long the next dip into support rather than longing all-time highs; having a clear invalidation is vital. At $6.77, your invalidation would be a move below the previous yearly high, for example.
Turning to ATOM/BTC, this pair is still a little way off the all-time high, though I’m sure it will follow. Looking at the weekly, last week saw price close above the 2019 high of 0.00066. The next area of resistance is 0.00086; the high from June 2019. Turning to the daily, a dip into 57k satoshis would be ideal for longs, with yesterday’s candle having printed the second-highest daily volume on Binance of all-time. If you’re not in, do wait for the dips, as they will certainly come. I think new all-time highs are on the cards for 2020. Bears would only regain control from here if price broke back below the pivot and prior trendline resistance at 47k satoshis.
Price: $0.12 (1,036 satoshis)
Market Cap: $120.629mn (10,263 BTC)
Thoughts: Golem has been quietly developing, building through the bear market, and is one of the 2017 runners that now looks primed to run again.
If we begin with GNT/USD, from the weekly we can see that price spent two years in a downtrend, falling from the all-time high at $1.26 to the March 2020 low just above $0.02; the initial trading day’s high from December 2016. Since, price has rallied above the 2020 high at $0.088, with last week closing firmly above the level and above the 2019 high at $0.11 on the highest volume since 2018. I think this could pull back into $0.088 to retest it as support before continuing higher, but ultimately I am looking for a flip of $0.17 before I start getting excited, as this is arguably the most important level for the pair in its history; above it, the path is clear for a run towards $0.75, which would be a monster run.
Turning to GNT/BTC, which is the chart I am most concerned with and the reason I was buying Golem over recent months, we can see that price has finally broken out of a year-long range, closing above historical support turned range resistance at 850 satoshis. This level was the support that preceded the 2017-18 cycle, so closing above it is significant. The next are of importance is 1500 satoshis; hold above that and I do think this runs towards 10k satoshis, as there isn’t a great deal of resistance between the two levels.
Price: $0.878 (7,472 satoshis)
Market Cap: $106.624mn (9,072 BTC)
Thoughts: Komodo is another 2017 runner, much like Golem, which has continued to build throughout the bear market and now looks poised for its second bull cycle.
Beginning with KMD/USD, we can see that price has recently broken out above trendline resistance from the all-time high, after which it has been consolidating for a few weeks and now appears to be pushing higher towards resistance at $1.08. I am looking for a weekly close above the level to open up a move to retest $2.06 as resistance. Looking at the daily, we can see that price closed above $0.88 a couple of days ago, printing another higher-high for 2020 on significant volume. I am expecting the current rally to push this into $1.08 and higher, after which I would imagine we see some consolidation and a correction before moving higher.
Turning to KMD/BTC, again, this is the chart of importance, as we can see Komodo is still inside a 308-day range, holding above 5400 satoshis as support but capped by a triple top at 9900 satoshis. I have been buying inside this range with a view to hold for the next cycle; if we pop above 10k satoshis, the next area of significant is 17k satoshis. Close above that and I think the rally will start to escalate. Volume has been very high throughout the range, which is great to see and supports buying down here. Onwards and upwards…
Price: $0.073 (619 satoshis)
Market Cap: $41.325mn (3,516 BTC)
Thoughts: COTI continues to impress me fundamentally, with so much developmental progress in such a short space of time and so much more on the cards for the remainder of the year.
Given the above, I remain expecting new all-time highs, particularly in the current market conditions; and, looking at COTI/USD, we are currently on track for one in October. Price has recently rallied above minor support turned resistance at $0.068 and found resistance at $0.087, before returning to the previous level to retest it as support. There is confluence here with short-term trendline support, which has steepened since the move above the prior yearly highs at $0.038. If price does fail to hold above trendline support, however, I could see a dip back into $0.056 to retest it as support, followed by a period of consolidation before the next leg higher towards the $0.13 all-time high, which remains the only resistance left.
Turning to COTI/BTC, the all-time high is still a 100% rally away, but – if the most recent dump into 540 satoshis remains the low – then the current swing would see the 1.618 extension at 1176 satoshis, just shy of the all-time high at 1300. 540 satoshis also happens to be the resistance of the previous swing, so I wouldn’t be surprised to see price find a new floor here and rally higher. Volume has picked up significantly since price broke above 500 satoshis, which was major resistance; the next major resistance is at 1046 satoshis – clear skies ahead. Moreover, as we can see by the steepness of the rally, the cycle seems to be very much in its early stages, with the move above 500 satoshis likely marking disbelief.
Price: $5.54 (47,106 satoshis)
Market Cap: $18.944mn (1,612 BTC)
Thoughts: Meta hasn’t been around for very long but the chart is quite interesting and it is one of the smallest DeFi products available to trade on futures.
If we look at the 4H for MTA/USD, we can see that price has recently broken out of a falling wedge and closed above $5.60, which was support before the final push lower to $5. Volume has been rising since the breakout, with it having fallen steadily throughout the duration of the pull-back; a great sign for bulls. I am looking to get long in this area, with a clear invalidation on a 4H close below $5; I am at least expecting a push into the pivot at $6.60, where I would look to scale some off with a view to buy back in once that level is flipped.
Turning to MTA/BTC, much like the first swing from the all-time low at 26.5k to the high at 60k satoshis gave a 78.6% retracement before it bottomed at 35.2k satoshis, price has found support again at the 78.6% retracement of the swing to the all-time high at 75k satoshis, giving confluence to our long bias. Ultimately, this would need to climb back above 55.8k satoshis before market structure reverts to being bullish, but that would significantly decrease risk/reward and make it unfavourable; I prefer entering long here with a tight stop below 43k satoshis.
Altcoin Market Cap:
Market Cap: $150.404bn (~12.8mn BTC)
Thoughts: Altcoin Market Cap has moved a fair amount since I last provided some analysis on it, and, as regular readers will know, it is one of my favourite things to monitor (on both pairs) in order to better determine the mid-term trajectory of the market.
If we look at ALT/USD, it is quite difficult to be bearish here, to be honest, which is great news for altcoins. With Ethereum having been the market leader for so long, I do think this trend will continue, with majors like ETH perhaps dragging BTC up with them as opposed to vice-versa. The first thing I’d like to highlight on the chart is the fact that, peak to peak, the 2014 cyclical high took 1498 days before a new cyclical high was found in January 2018 at $572bn. If we were to see a similar period of time between cyclical peaks, we would be looking at January 2022 before that is found. However, if the altcoin market continues rallying on its current trend, supported by the present trendline, we would be looking at a new all-time high by November 2021, which I do believe to be well within the realms of possibility. Now, the pattern of price-action between the two cycles has also been quite uncanny, with the market in 2014 finding a low in July, before rallying for several weeks and then retesting the bottom a few months later, before breaking above trendline resistance and rallying to new highs in 2016. If we look at the current cycle, we see a similar pattern of an initial low at $43bn, before a rally into resistance at $136bn, before a retest of the bottom in March (and the 360wMA for the first time in history), and the market has since rallied back above the 200wMA and the $136bn resistance. The break and close above this latter level is critical, and should we close out August above the level I would be even more bullish for the coming months. In short, it appears as though alts have broken out of their year-long range and have entered a new bull cycle.
Now, if we look at ALT/BTC, the picture looks equally bright, although there is some significant resistance just overhead in the form of the 200wMA. Nonetheless, we can see that altcoin dominance has reclaimed the trendline support from back in 2014 that has been vital throughout altcoin history, with the most recent leg of the rally taking the market back above two important resistance levels between 11.7-12.4mn BTC. We are clear of both at present, and whilst we remain above both I do expect altcoin dominance to continue rising (thus BTC dominance to fall). Get above that 200wMA, and I’d think we see another 30% rally in alts against BTC. We are well overdue by the measure of historical cycles…
And that concludes this week’s Market Outlook.
I hope you’ve found some value in the read and thank you for supporting my work!
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