June 15, 2021

Technical Overview | June 2, 2021

The market is still trading within the range. In this issue Cred and DonAlt, mailing list authors Technical Roundup, discuss the weekly range in BTC / USD and talk about what DonAlt means by the "crab" market.

Ethereum looks a little more interesting. We will share our understanding of the technical levels, and also discuss the idea of ​​dispersing capital and weakening the connection between the ETH and BTC rate.

We don't have altcoin setups for you this week. Let's briefly outline why.

Instead of altcoins, let's answer some of the questions we were asked on Twitter. This may be of interest to beginners.


Bitcoin: the "crab" market

Chart executed in TradingView

Chart executed in TradingView

A BitNews reader hardly followed this, butDonAlt has been spamming Twitter with crab memes lately. And this is not just a cry for help from a dysfunctional young man. This is such a hidden statement about the state of the market.

The "crab market" here is a metaphor for contradictoryand unpredictable sideways price movements. This usually implies a narrow range, slow fluctuations and ambiguous (or useless) candlestick closings at technical levels.

The bitcoin rate to the dollar continues to trade inthe boundaries of the range we have indicated on the weekly timeframe. The boundaries of the range are formed by resistance at $ 38,200 and support at $ 32,300. These boundaries are complemented by overlapping daily structures with support at $ 33,100 and resistance at $ 40,700.

Ability to formulate a coherent trading ideausually appears either at the boundaries of the range, or when the price breaks them and consolidates outside the range. BTC / USD does not offer either one or the other to date. Support is sustaining, resistance is coming, and the market moves mostly around the middle of the range.

These are favorable enough conditions for losing money in an attempt to take revenge from the market for previous losses, but more, in general, for nothing.

As we have already said, of interest isprice behavior at the boundaries of the range or a breakthrough of these boundaries. Trading in the middle of a range is like flipping a coin. On one side of it there are megabyte values ​​of on-chain metrics, on the other - pessimistic fractals of a bursting bubble.

Ethereum: implied weakening of the bond with the BTC rate

Chart executed in TradingView

Chart executed in TradingView

Technical specifications

ETH / USD rate crossed out with one weekly candlethe previous multi-week rally from $ 2000, after which it bounced off this level. Unlike BTC / USD, ETH does not read clear resistance on the weekly timeframe. There is an upper border of the daily range at $ 2780. Once it is broken, we will get a larger maximum on the daily timeframe and, probably, a move to the previous support at $ 3240. The $ 2000 level remains critical support on the higher timeframes, with slightly less convincing support at $ 2440.

ETH / BTC still looks good.Ethereum has recently been leading in a bullish trend and continues to do so on a rebound after a fall. Against BTC, ETH is still within the weekly structure with support at ₿0.055 and resistance at шим0.084, which has not yet been tested.

On decoupling ETH from the bitcoin rate

Ethereum's relative strength has sparked talk ofpotential decoupling of its course from bitcoin. ETH certainly felt out of touch with the rest of the market in its multi-week rally while Bitcoin was trending sideways, but all that progress was erased by the market drop. What implications does this have for the thesis about the weakening of the connection between ETH and the BTC rate, and how should we, traders, approach this?

First, let's define the terms.By "decoupling" the ETH rate from BTC, we mean long-term trends in Ethereum that do not depend on Bitcoin trends. In other words, a world in which Ethereum can have long-term trends of its own, rather than replicating much of the movement of bitcoin, only amplifying their impact on the investment portfolio.

On this score, we have two considerations.First, based on the definition given in the previous paragraph, there is currently no conclusive evidence that ETH is unlinked from Bitcoin. Second, the closest thing we could see to a “decoupling” of the rate is short-term and medium-term dispersion, which is most pronounced when the entire market is in a bullish trend.

As for the first judgment, the lasttime the market has provided a lot of evidence of this. Although Ethereum bullishly split from Bitcoin just over a month ago, when BTC was in a sideways trend, a macro correction across the crypto market instantly erased all this progress. It seems that as of today, all altcoins continue to depend on the movement of the BTC rate, and Ethereum is no exception. For the thesis of decoupling ETH from the BTC rate to be valid, longer-term trends are needed, and ideally in both directions.

As for the second statement, from the periods inwhere the correlation turned out to be less close, it is still possible to extract some useful information. The ideal trading conditions for the ETH decoupling thesis is when the entire market is in a bullish trend, that is, both BTC and ETH are showing strength. The strength of BTC reduces the risk of a pullback (similar to what we saw a couple of weeks ago). For Ethereum risk taking, it is far more favorable when Bitcoin acts as a tailwind rather than a headwind.

In short, strong BTC + strong ETH = good.Weak BTC + strong ETH = not very convincing. Go bullish when BTC is showing strength. And be careful when anything but BTC looks bullish.

What about altcoins?

We have not included any altcoin setups in our report this week.

Even in the first releases, we promised not to pull the content by the ears just for the sake of volume. And this is just such a case: we simply did not see any weighty setups or interesting ideas in altcoins.

But we will explain why this is so.

First, not much has changed since the lastweeks. The market underwent a severe decline, in which the market structure on the high time frames was broken. Last week the market bounced back to previous support levels (now resistance) and in most cases failed to hold and gave back most of this rebound. The most reliable setups occur when there are clear rebounds after a breakdown downward or deeper moves to the next support levels. So far we have not seen either one or the other.

Secondly, the correlation in the crypto market is extremelyhigh. Altcoins move unidirectionally with BTC and ETH. BTC and ETH are currently trading in ranges, and in many cases, range boundaries in altcoins are far less clear from a TA perspective than in major cryptocurrencies.

Finally, and in addition to the previous point,Ethereum looks stronger than most of the market. If we get a trigger for positioning on the strength of ETH, then we will have clear levels for working with an incredibly liquid instrument. In other words, from our point of view, upward trends are still best expressed in Ethereum than in any of the high-cap altcoins (and in this weekly review, we are only looking at them).

Let's hope that by the next release wewe get more clarity in this regard. If not, then we will try to offer some reasonable alternative: for example, the best potential retests of support or resistance with levels to pay attention to, or something like that.

Answers on questions

Could you share your knowledge of the factors that influence your decision to hold or exit a position when you go to bed in volatile markets?

Cred: In my short-term strategy, I do not leave positions open overnight, unless I intend to monitor the market at this time. I usually leave spot trades open.

DonAlt: The higher the timeframe on which the position is based,the more likely I will leave it open overnight. If a position has a stringent invalidation condition that is likely to be met, most often I will close that trade before leaving.

What is the best (learning) way to trade the market when you can only spend 15-30 minutes a day doing it? There is always a huge amount of "noise" on the crypto market 24/7 and the same amount of fears and doubts.

Cred: Use 4h and daily time frames on a small number of markets. Later you can expand the list and trade more. Try to get more experience on the weekend or whenever you have time.

DonAlt: Low time frames are for peoplewho sit at the computer all day. High time frames are what you need. Zoom out, check the weekly and daily charts, come up with an idea for a swing trade, and relax while others panic.

Are you into cryptocurrencies by conviction or mainly to trade and make money?

Cred: I see value in being earlya supporter of a relatively new asset class. So we can say that by conviction. But I try not to let such beliefs affect my trading.

DonAlt: I'm here for the money, but I will be glad if the cryptosphere does well. I am not sure that this will happen, and if not, then I can still live quite well.

I am new to cryptosphere and cannot get it yetexplanations (or confirmations) of why support and resistance levels, called by crypto twitter users, are sometimes so different. Even on different timeframes. What can you recommend to deal with this, in addition to what you already wrote about in the "White Paper"?

Cred: There are no “iron” rules here.I mainly focus on candle bodies on high timeframes. You need to find what works for you, but it's a pretty solid foundation, so I recommend you pay attention.

DonAlt: Support and resistance levels are veryindividual story, there is no right or wrong way to draw them. If the levels you define help you formulate a working trading idea, then they have a right to exist.

Why trend lines often break just then,when is the public ready to trade on them? Second touch: "It may be a trendline forming." Third touch: "Ok, the trendline is confirmed." Fourth touch: "Now I will reject her." -> Line breaks -> Loss.

Cred: I totally agree. I wrote somewhere about the same.Must have been in one of my study materials. I don't often trade trendlines, but the third touch is usually a good trade. As for what you are talking about, it probably works with any trading level: if you are waiting for a million touches to confirm the level, you are probably already late.

DonAlt: Whenever the price reaches a levelsupport, a lot of buy orders are executed. The more the price tests this level, the fewer orders from the buy side remain on it. This means that when the “public” is confident enough to buy out this support, it is already weakened, making such buyers an easy target.

What would you say to yourself five or ten years ago?

Cred: Become aware of where you are on the risk curve.If you are trading several thousand dollars, it doesn't make sense to be a conservative trader with an expected return of 1-2%, like all the rich guys you are targeting.

DonAlt: Don't be impatient, let the market give youWhat do you want. And if not, then take that too. There is no need to chase the market. The market is not going anywhere and there will be new opportunities, unless you lose your capital.

I often mix my investments with trading ideas, and as a result, I take investment returns too early. Do you have any practical advice on how best to proceed?

Cred: See DonAlt's answer.

DonAlt: This must be separated.When it comes to investments, don't touch them until your ultimate goal is achieved. If about trade, trade. By mixing your investment portfolio with your trading portfolio, you get the worst of both worlds: the high risks of trading combined with an investment idea that is too tough to trade.

How do you deal with a situation where you are not too sure about the macro direction of the market?

Cred: I mainly trade from level to level, soI usually don't have this problem. If I don't see a suitable setup - nothing I can lean on - then I try to stay away from the computer altogether.

DonAlt: Nowadays I just take a break more often. I used to cut position sizes in such cases. Both work.

How do you change your risk management during periods of high and low volatility?

Cred: When volatility is high, I reduce the sizepositions and increase the frequency of trading. When volatility is low, I don't really change anything, but focus on my short-term strategy (it does not require a lot of volatility).

DonAlt: The higher the volatility, the greater the opportunity.This means that in relative terms, when the market moves strong, I will risk more, even though the stop losses may be much wider. This is all relative and it is simply not easy to answer this question. But generally speaking, it seems reasonable to reduce position sizing when the market goes berserk.

The article does not contain investment recommendations,all the opinions expressed express exclusively the personal opinions of the author and the respondents. Any activity related to investing and trading in the markets carries risks. Make your own decisions responsibly and independently.