Here are some of the fundamental items we pay attention to:
One very elementary thing will look at is simply how far has this rally gone from its previous all-time high. In this case it's around 100%. While a lot of firms and people in the crypto space have price targets ranging from $100,000 - $400,000(Guggenheim). This doesn't mean the road to get there is going to be smooth. We imagine that there will be plenty of dips along the way. With the price of BTCUSD now DOUBLE from its previous all-time high. It is inherently , but it also means that everyone who has ever invested in bitcoin is profitable at this point to a large degree. While I know the target's people have are high, usually a target that high needs a spring board. A quick retrace back down to 20k would be a very good spring board and thus needs to be considered as a possibility from here
A core indicator we look at is . has now gone higher than any of the euphoric stages BTC was at during the 2017 run. This is generally an indication that a run needs to either cool off or correct down before resuming higher. We generally do NOT use being overbought as a SOLE indication that a particular security is in overbought territory and will correct. You can see in the past during the last bull run that was overbought the ENTIRE time. While it gave indications of pullbacks in hindsight, they did not offer much in the moment. There were roughly four 30% pullbacks. We have had a quick one, but not a pullback that has registered on the larger time frames yet. Regardless, has gotten elevated enough where it's worth a mention and to be looked at.
On a high time frame like this, we aren't seeing any real chart structure yet that would indicate the pullback is slowing down(IE, candles, etc...). However, we are starting to see some deeper candles forming from dip buying on the way up on smaller times frames. While the dip being bought is , the fact that we are getting more sellers means we are seeing people get anxious to book profits. We have also seen larger dips than we previously saw before.
Rotation into Alt coins.
We still have not fully seen this yet. Against a lot of other coins BTC is VERY over sold. As this begins to correct, this would lead to BTCUSD going sideways or starting to pullback if this were to happen. Here are a few examples of oversold Alt coins relative to BTC .
Counter points: Companies like MicroStrategy , Paypal, Square, and other major players are scooping up Bitcoin and will ultimately sit on them for some time. This shrinks the supply and thus we see the massive rally at hand with demand exceeding the supply as Bitcoin's get bought up. Will they sell right now? I doubt it. In all likely hood they are targeting Bitcoin $100,000+ and there is no reason for them to sell currently. This doesn't mean we don't get a pullback, but if we get one it's possible it will have to be very short lived if the bull market continues.
The thesis for a sideways move or pullback is that a lot of the major players who have been in the game for some time, Coinbase, Binance, early whales, , etc... Will began taking advantage of the massive amount of institutions driving up the price of BTC and begin to rotate into Alt -Coins to either diversify their holdings. This happened quite dramatically last time.
Foolish conclusion. It's too early to gauge whether or not a pullback will take place. However, we believe the indicators and coins we are watching set up key altcoins for a much larger push higher in the near future. We believe the possibility of Bitcoin moving sideways is high right now. Would we be surprised if we got a pullback as well? No.
How are the coins we posted about doing since writing this? Roughly:
Atom up 50%
Tezos up 40%
OmiseGO up 40%