Buying Into Fear, Part II

In my first "Buying Into Fear" analysis, I suggested that Bitcoin might have reached bottom back in January. That analysis is linked below. My "Selling Into Greed" analysis also perfectly timed the top, when Bitcoin was close to $14K not too long ago. We have a new puzzle in the market. Where is the bottom for the REST of the cryptocurrencies? I've been attempting to find the answer. I spent a lot of time in December-January trying to figure out what signs to look for, if the market was going to reverse. I was very attentive, updating my charts frequently (didn't have much else going on in my life at the time) and speculating about the bottom. If you have a lot of time on your hands, you can go back and read the numerous posts I made back then on Bitcoin. At the time, I was also looking for long trade setups on altcoins. Interestingly, my ETH, LTC, Nano, VET, ONT, and NEO purchases between December and February have all either done well or not lost value. XLM and XRP have continued to underperform, with XRP finally going below my average buy-in of $0.32.

Anyway, onto the analysis. Much of this is just a re-hash of a Reddit post I made today, but I already went through the work, so why not:

It’s almost as if the bitcoin market and altcoin market aren’t that correlated at the moment. Alts have behaved more like Bitcoin in 2015 (making second bottoms and extending the bear market).

Not much has changed since the video I made the other day. The market tried to move up a bit (Bitcoin actually moved first), but because alts were not able to break their downtrends on the move, Bitcoin also could not follow through. Let me emphasize - if alts aren't moving up with Bitcoin, I think the market-wide move is unlikely to sustain.

This is without a doubt the most painful part of the market cycle, if we assume long term continued growth for cryptos.

Arguably this is STILL part of the bottoming period for the market. Look at the similarities in RSI (circled). There are conflicting views on this obviously, but let's say we're assuming more growth until the trend is broken. So far, alts still seem to be repeating their 2015 bottom. Bitcoin has grown to a point where its recent bottom was much more short lived, surprising many and hammering alt ratios into the ground. Zoomed in:

There's possibly a liiiiittle more pain in store for the next two weeks. Or it can, you know, bounce now and hit that pink trend line at a later date.

The good news is, if the long term trend for the whole crypto market is to continue up, the next wave should begin within the next 2 weeks.

When everyone has fallen asleep or has given up, THAT is when it's time to look for massive trading opportunities. My perspective for alts in 2019 has been off, in the sense that I didn't think Bitcoin dominance would get this high, but I did a LOT of analysis when Bitcoin was in the $3K range and everyone had given up, as I mentioned in the first paragraph.

Both of those posts called for a potential move to test that BLX trendline, which it has done.

Based on the BLX chart there seems to be a lot of room for Bitcoin to consolidate and move down for many months if it wants to....but there's NOT much room for alts to go down from here to look bullish.

This leads me to believe that Bitcoin Dominance is very near a top, or has already topped out for now.

Either way Bitcoin goes, alts will need to bounce within the next two weeks to remain on their trend. That trend line is much steeper than Bitcoin's and represents a growth of about 1 Million percent (10,000X) from trough to peak (2015-2018). So I guess it wouldn't be the end of the world if it didn't hold, although it would be disappointing. By contrast, Bitcoin "only" increased by 12,000% in the last cycle. The trends for the total market cap and the TOTAL2 (altcoin market cap) have not been broken yet, but they could fall...if confidence evaporates from the space. These are the important things to pay attention to right now. And again, I think we should know within the next 14-18 days. It's interesting how that window of Sept 19-23rd could indeed coincide with some major news about U.S. exchanges (particularly Binance US).

If (god forbid) the established alts bounce at the trend line and start a new bull market, I don’t think the people who sold recently will buy back in time. We saw what happened with Bitcoin in April. And alts can move much more violently. I’m talking about Big caps going 30-50% in a day, and small caps going 100-200%. Contrary to most, I also think that if alts make a comeback, it won't be just a few coins. This is due to the fact that the crypto market is heavily influenced by bots, which are designed to maximize the amount of profit, while taking money from day traders.

I find it almost absurd how much control bots have over this market. Because the bots are designed to maximize profits, they will use these long term logarithmic trends to their advantage. It is not a coincidence that the market cap found resistance EXACTLY at the top of that channel, as I suggested it would. Likewise, I'd absolutely expect some sort of movement off these rapidly approaching trend lines. This is a painful time to hold right now, because money will just keep getting squeezed out of traders while a downtrend can easily be manufactured. Once the market hits these trends, some bots may reverse their strategies and start playing a bullish strategy. To trade with the bots, one would have sold when the market cap was above $300B and waited for this retrace.

A number of things are really telling me that we might be close to a major pivot point in the market. Anything is possible. We could see the entire altcoin market cap go down by another 90%, or we could see several months of altcoin gains while Bitcoin goes down, causing dominance to head all the way back to 30-40%. No one knows. All I'm trying to do is analyze what I see and try to figure out what's going on. That's what I love about this stuff. It's all a mind game to me. Speaking of which, something I'm really looking at is the price action of "dividend" coins like ONG. Why? They should have the largest amount of sellers, since these coins are primarily acquired not by buying, but by holding ONT, NEO, or VET. So, they should have pretty constant sell pressure without demand for their networks. What this means to me, is that IF those dividend coins like ONG start showing signs of bottoming out, it could be an early indicator of a shifting sentiment.

In the above ETH/USD chart, you can see a speculative pathway I've outlined. In orange, a few price points in a major support zone are given, in case it decides to test those levels. Below those supports, there's not much left until a new yearly low is reached. Downside potential is astronomical if ETH breaks down below those areas and the TOTAL2 does not hold its rend. On the right, I market a potential target for the next wave up in the market (close to the all-time high). If I hadn't already maximized my personal allowance for investing, I would be averaging in a bit more right around these levels.

This post is not financial advice. One should understand the risks of investing in highly speculative and volatile assets. Trade at your own peril, and consult a professional financial advisor beforehand. I'm simply here to provide education for some and entertainment for others.

-Victor Cobra

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ETH has finally broken out of the wedge, but I think it'll need to clear $180 for further upside. Otherwise, this rally can just get sold like the others. Interesting times.

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The total altcoin cap is trying to break out as well. Need some more convincing. We're still a ways from that pink trendline. It can always touch it at a later date if we break out now though. Perhaps buyers are getting impatient.

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Officially broke out of the wedge. Volume is increasing, as no one was really trading the slow down-moves. We might have to move sideways/slowly up for a while, OR many traders will get caught with their pants down, especially since many people moved their coins off Binance already.

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ETH is out of the downtrend it has respected since June:

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Since alts already broke out of the wedge sideways, I may have to revise my timeframe for a bigger bounce. They've bounced already (from the lows when I posted this analysis), but we may have even more boring weeks ahead for the market. As you can see, the TOTAL2 market cap and move sideways until late October/early November and still hold the trend line. The total crypto market cap (right) shows that it could also happen in mid-October.

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If the market decides to make a big move up already, I still think we'll have to test those trend lines relatively soon. Either way, these are the levels that I think opportunistic risk-tolerant investors would likely be adding. You never know when it might take off, but these trends show that time could be running out within the upcoming weeks.

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We also have the dividend coins like ONG and GAS starting to look weak again. This could be a sign of continued weakness in the altcoin market (for now). In this analysis, I mentioned that it might be a good idea to watch those, since they probably have more sell pressure than other crypto-assets.

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The dividend coins are actually holding up well now in sat value, and ETH has continued to move up against Bitcoin. Things are finally looking healthier for the altcoin market, as much of the FUD surrounding Binance and Libra is starting to leave people’s memories (for now). ETH is showing some strong bottoming behavior. Other alts have yet to catch up, but I had a feeling ETH would move first anyway (hence the larger portfolio allocation). We also have BNB and LINK continuing to correct on their ratios as the rest of the market recovers. This is a much needed rational development in the market. If you’ve been following me, you’ll know I’ve been concerned about BNB’s dominance of the altcoin market and what a correction in BNB woukd mean for other alts. An unhealthy market would have continued to crash along with BNB, but we’re not seeing that here.

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More sideways? Or did traders completely front run the trend here, meaning we won't get another chance at recent prices? These are two possible scenarios I'm seeing. Maybe it can even test the previous broken channel support (yellow X)

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Depending on how you draw the trendline, an argument can be made that we've already bounced off it.

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Zoomed out:

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This would actually explain the pretty move up for some large cap alts over the last couple of days.

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Either way, this bounce was within the timeframe I mentioned in this analysis . Can't be 100% accurate with this stuff.

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The market has found resistance again at the $80B level, and is now finding support at 75B. We should be careful here. What Bitcoin does will likely affect what happens to altcoins here, and Bitcoin doesn't look great at the moment. We need to get above this major horizontal resistance zone to consider further upside. We also need to find out where that long term trendline resides. It could still be moved a little to the right, compared to how I have it drawn now. What we don't want to see is a higher volume move down. This could end up creating a new downtrend channel and a longer and more brutal bear market.

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This current $75 Billion level is extremely important, since it acted as support for a while last year until it broke down and resulted in the November capitulation event.

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I'd like to see the altcoin market continue to move up from here, if things are going to start looking truly bullish for cryptocurrencies.