In the new issue, Cred and DonAlt, the authors of the Technical Roundup mailing list, discuss the decline in the BTC and ETH markets, and also update their analysis of futures markets. In sight: Bitcoin futures basis, perpetual altcoin futures funding, open interest and liquidations.
Bitcoin rolls back to weekly structure
Bitcoin / Dollar is testing the breakout level on the weekly timeframe.
As we wrote in the last review, breakthroughs onthe weekly chart is definitely a bullish factor - until one day it works out. From a TA perspective, the argument for bitcoin's strength against the dollar relies heavily on breaking the top of the weekly range. This is okay so far. At the time of writing, it is being tested as a support.
In our understanding, this level has a definingmeaning. If the breakout is unsuccessful - strong evidence of this will be the close of the weekly candle below $ 55.8k - then we would expect a bearish continuation.
When an unsuccessful breakout is formed, two setups are attractive.
The first is buying on a retracement of the price higherunsuccessful breakout level. It may sound a little confusing, but the logic is pretty simple. Markets rarely form failed breakouts twice in a row. There is usually one set-up trap, and if the price then returns past the defining level of the previous unsuccessful breakout, this is usually a good signal to continue the trend. The likelihood of a second unsuccessful breakout in a row is much lower than a simple continuation. Accordingly, if this weekly range high is not held and “catching the falling knives” in the area of the expected larger low is not to your liking, then buying on a recovery above the unsuccessful breakout level is one of the most coherent potential opportunities currently being viewed.
The second potentially attractive setup isa bet on the formation of a larger minimum. Larger highs do not always lead to an immediate continuation of the impulse. Sometimes the market needs additional confirmation in the form of a larger low before resuming an uptrend. Breaking the upper boundary of the weekly range implied a larger high, and it is possible that the market now needs a slightly deeper, larger low. The main contender for this in the BTC / USD pair is the $ 50,000 area, consisting of supports on several timeframes at $ 52,000 and $ 48,000.
In summary, the market is at weekly support$ 55.8-60 thousand. Our “bullish” sentiment remains in force only as long as it persists. With a weekly close below $ 55.8k, our expectations change to bearish in the short and medium term. As of today, we see two reasonable potential opportunities: a purchase upon recovery above $ 60K and / or a bet on the formation of a larger minimum at a defining structural level of ~ $ 50K.
ETH trend breaks off
The neat trend on the daily ETH / USD chart is disrupted. ETH is trading near the upper end of the previous weekly range of around $ 4,000.
In the last issue we mentioned that thisthe trend does not appear to be reliable. For once, Cred's misgivings with his post-traumatic stress disorder from the experience of such a stair-up-then-lift-down price action have come true.
As in BTC / USD, the defining level isthe high of the previous weekly range. $ 4000 is support until proven otherwise. If it is lost, our expectations will change to bearish in the short and medium term.
To this break, the trend on the daily timeframe istake it seriously. This is the first significant lower daily chart low after the September bottom. Ethereum's unhindered march appears to have been interrupted. In other words, the market is still above the $ 4,000 weekly support (good), but the daily trend has just been broken (not good). What options, from our point of view, are available on the market in the context of this temporary controversy? There are two options.
The first is buying from the decisive level ($ 4000) inrelying on its retention and the fact that breaking the daily trend will turn into a bluff and a "bear trap". This is a risky bet, but it implies a maximum risk / reward ratio. Not suitable for everyone.
Another option is to wait for the daily trend to recover. A price return above the nearest structural level ($ 4600) on the daily timeframe would be a good signal for continued growth.
Both of these ideas involve retention of support.$ 4000. If this does not happen, the market structure on the weekly timeframe will look like an extremely unsightly triple top with a false breakout. In this case, the defining level for a potential larger low is around $ 3000 (although DonAlt does not approve of this idea); another option is to buy when the price recovers above $ 4000 (the same thesis about the low probability of two unsuccessful breakouts in a row).
To summarize, as long as the $ 4000 level is held,We see reasonable options for buying, counting on the continuation of the trend, either to search for wicks at the extreme support levels to maximize the risk / reward ratio, or to buy when the price recovers above $ 4600. If the level of $ 4000 is not held on higher timeframes, then our attitude and the rules of the game change somewhat: options for gambling are possible, counting on the formation of a larger minimum around $ 3000, or for a conservative Boomer buy upon recovery above $ 4000.
Peace of mind in the crypto futures market
The basis for quarterly futures declined to one-digit values. These numbers are just another way to look at premiums in the futures market.
One way is funding rates, i.e.variable costs of holding long or short positions in perpetual swaps, with the rate directly dependent on the difference between the index / spot price of the asset and the price of the perpetual swap.
Another way is the quarterly basis in the annualvery similar metric: quarterly futures, as opposed to perpetual swaps, have an expiration date, and instead of a funding mechanism, they should approach the spot price as they expire. The difference between the spot price and the futures price is called the basis. It is sometimes seen as a “risk free bet” tool on the crypto market as well. In a nutshell, it gives an idea of how big the premium or discount of the futures market is in relation to the spot market.
The basis is declining on an annualized basis.At a recent peak in November, the basis was as high as ~ 17%. Now that the price (at the time of writing) has dropped by 11%, it is about 10%. This is quite a significant reduction, given the relatively small scale of the correction so far and the absence of large liquidations.
Historically backwardation (when quarterlyfutures are trading below the spot price) bitcoin futures served as a good signal of market bottom formation, especially if it was the result of strong cascading liquidations. This does not mean that it should happen this way, moreover, it usually happens almost instantly, but, nevertheless, it should be borne in mind as one of the possible signals about the formation of a bottom and a probable return to growth.
To summarize, at the time of this writing, the marketquarterly bitcoin futures don't come across as "overheated." Almost one-digit basis values at a price of about $ 60,000 are quite reasonable, especially considering that when the market first reached $ 60,000, this figure was much higher. If the decline continues, backwardation in quarterly bitcoin futures could be a good signal that (at least) a short-term bottom is forming.
Recurring trend in recent monthsis that even if bitcoin futures look reasonable, the market could be pulled down due to overly aggressive positioning of altcoin futures players.
From Monday the level of leverage in the market insizable has leveled off somewhat, and most altcoins are trading relatively cheap in terms of funding compared to where they were previously.
In previous issues, we based our reasoning onthe fact that the situation in large cryptocurrency assets looks vague, and the futures funding rate was simply extortionate. This time, we have a slightly more compelling case: a drop towards weekly support in BTC / USD, slowing liquidations, leveling futures against the spot price, and a rebound in some altcoins.
We are not formulating an explicit trade idea here, butrather, we are just underlining the fact that the bitcoin / dollar is in the support zone and the futures look more reasonable than before. If the market continues to decline, they will be even cheaper. This creates a relatively conducive environment for finding setups.
At least if the fall continues, thenthe shaken out is likely to be sellers on Bitfinex rather than long holders of altcoin futures. This time (and so far) they have nothing to do with it.
The third chart displays three important metrics: price, open interest, and liquidations.
The main takeaway here is thatopen interest in BTC / USD is close to record highs (nothing unexpected, given that the price is also close to them), but there is an almost complete absence of liquidations.
In the past few weeks, every smallthe decline was greeted by the public with cheers about the implied washing out of the market of some unreasonable and overly aggressive traders and clearing the way for continued growth.
From our point of view, this assumption does not hold up, given the absence of major liquidations, both in absolute and relative terms.
In a sharp drop from $ 52 thousand to $ 42 thousand.at the beginning of September, $ 700 million of longs were liquidated. Even with the continuation of the correction, at the end of September, $ 300 million of longs were liquidated at the low point, and this after $ 280 million of liquidations the day before.
In the fall of the beginning of this week at the time of this writing (Tuesday), only $ 220 million was liquidated. Prior to that, the largest liquidations in recent memory were a paltry $ 140 million at the end of October.
In summary, we can say that large liquidations,obviously not a prerequisite for an uptrend. However, they do occur frequently in this market and have not happened for a while. The market can go to
$ 70-80 thousandand thus fill this gap, or it may happen when the support is broken. However, we wanted to provide some context in this regard and reiterate that in terms of liquidations in the Bitcoin market, things have been going very smoothly for some time now, and the public celebrations of the alleged washouts and dumps are not real. grounds.
Large liquidations are accompanied by a significant reduction in open interest due to the forced closure of positions.
The above argument for what we stand forRecently, we have simply not yet seen a movement of any significant magnitude, which is confirmed by an analysis of the decrease in open interest during periods of mass liquidation.
The April correction led to a decrease from $ 44 billion to $ 35 billion.In May, open interest fell from $ 42 billion to $ 22 billion, in September - from $ 45 billion to $ 31 billion.
As of Tuesday, the peak of open interest was $ 54 billion, at the time of writing this post - $ 45 billion.
In summary, adapt your expectations formarket movements that should lead to washing out of the market and resetting the leverage to more or less neutral values. Not every red candlestick means a massive liquidation, which completely nullifies the market so that it can grow further, especially if open interest remains practically unchanged.
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