Jul 1, 2022

The Window of Opportunity is Narrowing - White Paper May 25, 2022

This week, Cred and DonAlt, regular contributors to the Technical Roundup, are talking about narrowing the window of opportunity for recovery. BTC and ETH are above the defining levels, and at the end of the review, they present the author's commentary on the structure of the altcoin market cycle.

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

Bitcoin Still Below Key Levels

BTC/USD on higher timeframes is still trading below support.

On the monthly chart, the price is below the lowrange ($35-37 thousand). And since there is only a week left before the close of the month, in the absence of a strong rally in the coming days, it will be possible to ascertain the breakdown of the macro range down.

Even if the market rises after the close of the month, this rally would be correctly viewed as a bearish retest of resistance (former support) in the $35-37k area.

On the weekly chart, another candle closed below the $32,000-34,000 support.

As we wrote last week, in terms ofTA BTC price chart on higher timeframes does not show any signs of strength. It will be possible to talk about them only in case of recovery above $32-34 thousand.

So far, there is neither a downward wick on the monthly timeframe (and there is only a week left), nor a close in the previous range on the weekly chart.

In the event of a further decline in the market, our targetthe level in the medium term is in the area of ​​$20k (the high of the previous cycle, coinciding with the 200-week moving average) on the weekly timeframe and, apparently, up to $14k on the monthly timeframe.

In general, only some wonderful rally no laterthan this week, the market will be able to refute what threatens to be a breakdown of support on the weekly and monthly timeframes. Unless such a miraculous recovery occurs, any subsequent rallies into the $32K-$34K area should be seen as bearish retests and further declines become much more likely.

Ethereum also needs a bailout

The ETH/USD chart needs a saving rally in the last week of the month just as much as Bitcoin.

We wrote about these levels in our last issue, and it's becoming more and more obvious that May is about to close with a breakdown of the $2,300 support.

The weekly chart looks a bit better, holding the range low at $1940 for now, but that's not very convincing on its own since it doesn't align with the monthly timeframe.

The BTC and ETH vs USD charts are very similar tomonthly timeframe. There is a macro range that is more and more likely to be broken down by next week's closing results. A break of support is a bearish signal unless it is refuted by a strong price retracement above the break.

In the case of ETH/USD, this requires closing the month above $2300.

As for target levels in case of further declines, strong support in the $1000 area (round number, 200-week moving average, monthly support) can be assumed.

In general, although the next week closed above support, it is difficult to remain optimistic if, by the end of May, the price confirms a breakdown of support on the monthly timeframe.

On the other hand, a clear show of force withrestoring back to the range in our understanding would look convincing. A clear discount to the target levels on the monthly timeframe could also be an attractive buying opportunity. At the time of writing, the market offers neither.

Altcoin Market Cycle Structure

Cred here tweeted that the accumulationAlts in a bear market is basically a stupid idea. Let's use this information occasion to talk about how altcoin market cycles work in general terms.

  1. BTC and ETH are rising. Interest in cryptocurrencies too.
  2. Market participants want to get more profit.BTC and ETH are "boring". Generally speaking, smaller-cap coins need fewer dollars to gain a larger percentage gain. The big players have a lot of capital to place, especially in venture capital deals on favorable terms.
  3. The market finds (or creates) a narrative around altcoins: DeFi, GameFi, Layer1, whatever.
  4. A reflexive cycle is created: prices rise → fundamentals (based on price) look good → buyers increase → prices rise → and so on.
  5. The pump gets stronger:market momentum, expectations of improvements in fundamentals/positive feedback cycle, runaway optimism, holders and traders in constant profit and so on.
  6. Traders and investors (with a colossal "paper"profit) close their positions. The price is falling. Or maybe BTC and ETH are forming a top. Or maybe it's just a later phase of the cycle and the whole market has already switched to something even more brilliant. It doesn't matter. Prices stop going up.
  7. A reflexive cycle is created: prices fall → fundamentals (based on price) look bad → sellers increase → prices fall → and so on.
  8. Dump amplifies:market momentum, deteriorating fundamentals/negative feedback cycle, pessimism, traders and holders at a loss, narrative fatigue, and the burden of opportunity cost (holding assets that don't make big losses at best while other instruments rise).
  9. Convinced supporters buy and hold (usually the entire decline) and become more committed to the project; it becomes their identity.
  10. The project is dying. Or maybe not dying.In any case, it is likely to enter a long-term downtrend against BTC and ETH. And almost certainly inferior in profitability to any new hot crypto projects of the next cycle, whatever they may be.

TA-dah!

Cynically, but in general terms, this is something like thisworks. EOS, Zcoin, Dragonchain, Stellar Lumens, IOTA, OmiseGo - remember these? We don't either. That is, we remember, of course, but not at all because they have real growth prospects or they are especially relevant.

With rare exceptions, in the next cycle overyou will be laughed at for falling behind the market and continuing to hold the “old” 2020-2021 altcoins. If you want a recent example, take a look at the yield of first generation DeFi projects (Aave, Synthetix, Compound, Uniswap, yearn.finance, etc.) over the past year - in dollars and against ETH.

In bear markets, it makes sense to buy only proven assets with a high probability of survival. For us, these are BTC and ETH.

Then, when new trendy projects appear (usually after the biggest cryptocurrencies find the bottom), trade them at your pleasure. Just do not forget to reset and forget in time.

And so cycle after cycle.

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