PvP Market - White Paper January 19, 2022

Analysis of trading ranges in BTC and ETH, as well as the author’s comparison of PvP markets and PvE markets, in a new review from Cred andDonAlt, authors of the Technical Roundup mailing list.

https://coinmarketcap.com/coins/views/all/

Bitcoin is still highly correlated with stocks

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Bitcoin/dollar continues to trade in close correlation with stocks.

A week ago, we wrote that we did not see any significant prospects for a rebound from $40 thousand. Since then, the market has risen to $44K before returning to where it started.

For now, we can add little to the previous review. The market is still highly correlated with the S&amp;P 500, and does not trade technical levels particularly clearly.

As before, the key levels are above($46 thousand, the middle of the weekly range, previous support and coincidence with moving averages) and below ($32-38 thousand, the low of the weekly range) of the current values.

Accordingly, a more clear purchase setupcould be a show of strength with a recovery above $46k, or buying from forced sellers on another move below $40k, or the aforementioned $32-38k area.

At the same time, volatility is decreasing.Expected volatility is approaching historic lows on the back of a slow market decline. In general, such slow declines are unfavorable buying conditions.

It's not very fun to write, but it isthe reality of the market (as we will discuss later in the PvP section). Low volatility, fragmented liquidity and short fluctuations without a pronounced trend with a gradual decline. Counter-trend bounces are still possible, but our choosiness about when to trade and when it's better not to risk capital is currently very high, so we don't waste time looking for unprofitable bets. For us today, short-term and medium-term directional positions in BTC/USD are a very dubious bet.

Ethereum: on the bitcoin route in slow motion?

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ETH/USD is trading near the structure-defining support level of $3050-3310. The pair against BTC is testing the high of the previous range at ₿0.077 as resistance.

The pair against the dollar is in the weekly areasupport ($3050–3310). So far, the bounce does not look convincing, but it is reasonable to note that structures on higher time frames need to be given more time to form a reversal.

Selling at the first support on the higher timeframe is unattractive. If there is any rebound in the near term, it should probably come from this area.

More broadly, the main problem with the ETH/USD chart isis structural. That is, first of all, how the price ended up on this support in general. In our opinion, this is a direct consequence of the failed break above $4,000, which is now resistance.

This means that the price has returned to the previous range, inwhere the aforementioned $3050-3310 level is the middle, and the lower border is in the $2000 area. And we have repeated many times in previous reviews in the context of bitcoin that the middle of the range is the least attractive area for confident positioning. Bounces and short-term trades are possible, but trades with clear levels of invalidation and/or the best trend prospects are much more common near the ends of the range ($2,000 and $4,000 in this case) than in the middle ($3,000).

In short, logically clearer setups inETH/USD occurs when recovering above $4,000 or falling towards $2,000. Everything else is much closer to a simple coin toss, especially given the high correlation with the stock market.

ETH/BTC returned below the resistance of ₿0.077,but to be honest, this pair is only interesting when the market as a whole has a tailwind, not a headwind. Hopes that ETH/BTC can somehow pull the weak-looking BTC/USD are untenable.

PvP markets

The general state of the market resembles a PvP environment, thenthere is Player vs Player. It's an abbreviation for the game world. It implies that the market consists of (mostly) the same participants trading directly against each other.

While the idea of ​​this state of affairs may seem self-evident, given that every short has its own long, the analogy here is a little more subtle.

When markets are in growth mode, the environmentthey are much closer to PvE (Player vs Environment). In this case, the environment is a large influx of new capital into the crypto market. And the difference between these markets is striking.

In the PvE environment, new money enters the market.Trends are clear and last a long time. Retreats are shallow. The transitions are very clear. The mood is always positive. Sector variance is high and allows for profitable (above benchmark) longs in many different areas, even if the performance of the largest crypto assets is not outstanding. Liquidity is everywhere, whether it is to raise funding for a project or for an NFT fashion collection.

You may arrive late. The entry point can suck. In any case, you are likely to be rescued by an imbalance in the inflow and outflow of capital. Dogcoins, memecoins, easy money everywhere.

In PvP markets, it's basically the other way around.Short, abrupt and awkward movements. Money flows from one (increasingly niche) sector to another in shorter periods of time. Short-lived trends or the complete absence of a pronounced trend. Liquidity is falling, sentiment is negative. Are you out of the game with your entry point? You will get the most one-way traffic you can imagine. Dogcoins don't work anymore, you're diving deeper into the layers of blockchain infrastructure and rummaging through a bunch of Discord servers looking for an edge. The order may not be optimal, but you get the idea.

In the PvP market, losers are the ones who buy junkhoping to be among the first in something (pretty ironic considering they often put themselves in that position because they thought they missed the rally).

In the PvE market, the losers are those who insist thatthis bubble will end in disaster and is looking for a failed breakout on every green candle. Or - our favorite version - those who think they are late because something has already grown too much.

But it is worth noting that the transition between PvE and PvP does not happen at the flip of a switch. It's kind of a spectrum. And we believe that the market is now much closer to PvP than to PvE.

When this will change is not obvious, but as soon as it happens, we will write a note to continue this topic.

 

BitNews disclaim responsibility for anyinvestment recommendations that may be contained in this article. All the opinions expressed express exclusively the personal opinions of the author and the respondents. Any actions related to investments and trading on crypto markets involve the risk of losing the invested funds. Based on the data provided, you make investment decisions in a balanced, responsible manner and at your own risk.

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