I'm back after a couple weeks of studying for my master's exam (which I passed!). I am officially almost a licensed social worker. Now, how that qualifies me to write about financial markets, I have no idea. Though, I certainly think they are related, as much of our social and system issues stem from poor economic policy and rampant exploitation in markets.
In any case, welcome to the first significant bounce, after months of downside! I consider this the first "real" bear market rally because it is the first big bounce after a lower low (breakdown from the support held during the 2021 slump). I have been speculating about some sort of multi-month relief rally leading up to the midterm elections in the U.S., as political interests do not want markets in upheaval when their political positions are at stake. In the last several weeks, Ethereum has increased by well over 100% since the lows. Back in January, I wrote about how I thought $800 levels for ETH were possible, given the loss of the bull market uptrend and a number of other warning signs. Here is the original post:
Since then, ETH perfectly headed down towards my "value zone." Now, I call it the "Dead Zone." I was still thinking I'd scoop some back up at those sub-$1000 prices after selling above 3k, but my long term stance on crypto has changed, and I don't really have any interest in owning any. I actually think continued price appreciation for these assets would be a net-negative for society. The more energy goes into intangible assets, the less goes into improving the physical world in which we live. Unless, of course, the goal is to NOT live in the physical world. Okay, you got me. That's clearly where the money is, baby. No more real world. Only metaverse. Only APE. APE APE APE.
No, this is only an absurdity a human could design. That's the irony of the "Ape" culture, isn't it?
Now, what's going on with ETH today? We've got pretty impressive volume off the lows. Whales seem to be manufacturing a rally leading up to the ETH merge and transition to proof of stake, while Bitcoin lags behind traditional markets. As I've written before, I think much of ETH's inflated value in 2021 had to do with the NFT bubble and the ridiculous fees (premiums) people were willing to pay. The fees acted as a gatekeeping mechanism, but it also served to increase FOMO, as people had to buy even more ETH to cover the cost of all their transactions and expensive pixel purchases.
I do think this rally will fizzle out, but the question is - when? The market seems to be treating this as a "buy the rumor, sell the news" event, which plays out in crypto fairly often. Other people are skeptical and think the rally is already about to fizzle out. This is possible, given that some indicators are showing signs of slowing momentum (bearish divergence on the oscillator, MACD looking precarious, etc.) Another camp believes that the rally will just keep going after the merge. Anything is possible! Ethereum can be particularly hard to trade. Just look at the ETH/BTC ratio:
It broke down from what looked like a huge distribution pattern, but rebounded with immense strength and is now testing the highs. This is something I honestly did not expect, since I wrote about a long term top for the ratio here:
I do still think it's possible ETH never achieves a new all-time high against Bitcoin, but it's starting to look possible that it will briefly make a new high in anticipation for the merge. There is one month left, supposedly. Since Bitcoin dominance has not really broken to the upside, and since ETH bounced with so much vigor, this reminds me a lot of the first major bear market rally in April 2018, which occurred off a big short squeeze. You can see the similarities here:
The above shows the 3-day chart, and a rejection at the 50 MA (red). If ETH fails here, I think it's very possible it'll head down to the "Dead Zone" and break the recent lows. Then, I think it would be unlikely to recover anytime soon and could simply fizzle out as the rest of the crypto market continues to implode due to lack of liquidity and too much leverage. I took a small short here from $1890, with a target between $1390-1450 (2017 ATH zone). There is room for it to first head higher towards the downtrend on my chart, but Moving Averages have proven to be a bit more reliable than trendlines during this bear market, and particularly during chop. Let's see if it gives a big pullback here.
As always, this is not meant as financial advice, but for speculative purposes only. I've been posting only periodically these days since I have other interests. I may wind down my posting even more. I am still working on my creative projects, including a sci-fi novel and my book about analyzing market behavior. That book is particularly hard to finish, because things are always evolving, and algorithms continue to become more advanced. Who knows? Maybe if I stopped posting entirely, a bot would take my place, as it would be able to perfectly imitate my writing and speech patterns. Maybe this isn't even me writing this right now.
-Victor Cobra
Comment
⋅
I think whether we get a large drop here depends on whether Bitcoin holds this wedge structure, and if it finds buyers on a breakdown.
Trade closed manually
⋅
Ended up closing my short for a slight profit. Possible ETH makes another attempt near 2k, and PA is really atrocious for day trading anyway.
Trade active
⋅
Re-entered short at 1824. Now it can bounce :) Would not be surprising as I stopped myself out of TRX near the precise top the other day. This is classic day trading for you.
Trade closed: target reached
⋅
I closed the short just below 1670 on Friday. Now in long from 1558 but might be short-lived.
VC, I appreciate you. Your perspectives are unique and valuable among analysts and traders I follow. However, I think you are too pessimistic about the innovation in the space. Yes, it's tainted by the same (arguably worse) players who continue to be a detriment to social good. Those who are in the space for solely personal gain at the expense of others. That can kill crypto, and maybe it will, but I'd venture to guess that there will be a renaissance in the function of this market before it is allowed to die. There are powerful tools here that can act as a superstructure to society if used correctly by benevolent actors. The systems of value upon which the world currently operates are not capable of advancing human development - a new paradigm will at some point be necessary. Maybe it won't be crypto, and maybe the Eurodollar will last another century, but I wouldn't discount the future of the tech.
VictorCobra
⋅
@Leefamer, I appreciate your comment, and your support! I would love to feel like my pessimism is extreme - if you've followed me for a while you'll know at one point I was somewhat optimistic about the potential for innovation in this space. Now I really struggle to see a useful application for it - mostly because it seems to be a product that the world could easily do without. Nothing would change if it ceased to exist. What do you imagine a crypto renaissance would look like? And what about the tech would improve our current condition, in the current context? Maybe there still IS something there, but I highly doubt it functions altruistically in the current socioeconomic context. I think the wealthy, greedy players will need to learn their harsh lesson first, as they dictate much of how our resources are distributed. We still haven't seen systemic deleveraging across all markets, which I think is necessary for significant policy and attitude change.
Resources include mental space and attention. The crypto market is a money, attention, and time vacuum for many who enter the space. It has taken up a lot of my time (as evidenced by the hundreds of pages I've posted on this platform). To be honest, part of me wishes I never discovered this market, but I think my interest and my writing about it has provided a pretty valuable education :)
The crypto dream is to be rewarded for holding on despite others being "forced" to buy in at higher prices once it becomes "the defacto unit of account." This is dependent on others being late to the game, which I think is inherently wrong if we're going to shift the narrative of human greed and conquest to something new. It's tantalizing to be "early", especially in a society where the ability of the average person to meet basic needs has continued to diminish since the 1970's. The thing is, I don't think we're early anymore, and the world has proven that it does not want to use crypto for anything. I think time has run out, and the market has made its verdict. You're right, maybe it won't be crypto. I'm optimistic that we'll make it out of the next few decades with some substantial improvements, but it won't be without some big growing pains.
Dav-
⋅
@VictorCobra, nothing would have changed if the internet ceased to exist in 1995
VictorCobra
⋅
@Dav-, I don't agree. Were you around in 1995? The internet had readily available daily use back then and provided near-instant text communication through email. This had pretty widespread usage by then. Those people would have had a difficult time readjusting to sending letters and telegrams. Crypto just adds unnecessary steps to a system that already functions well for everyday use. In fact, it makes it more daunting and dystopian because a recipient can see how much you have in your wallet, and transactions are not reversible. I argue that it's actually a step backwards. It's as if we had a large clunky database as our financial system.
There are certain cryptos that seem to have useful tech - like Stellar, for instance. It's pretty damn fast and pretty damn cheap. This doesn't mean their token will have value. But it does have some use. I'm pretty sure other tech will just serve the same role though, and it'll make individual cryptocurrencies mostly unnecessary for everyday use.
Zeke704
⋅
@VictorCobra, I think blockchain technology is the most important aspect of this crypto revolution. I agree a lot of the coins are useless. But we live an in age where it's all about cutting out the middleman Air BNB, Lyft etc... If nothing else this platform gives people an opportunity to solve a problem in society most of which evolve from having too many cooks in the kitchen. Developers will keep coming up with new innovation to ignite more bull runs. I do think gaming and NFT's platforms will continue to grow and do well and bring new people into this space especially the younger generation.
VictorCobra
⋅
@Zeke704, I strongly believe cutting out the middleman is insidious dystopian propaganda disguised as altruism. Middlemen are extremely important. Who do you go to in the airport when your flight is cancelled? What happens when you don’t know what’s going on? Who’s going to tell you?
This is all part of the bullshit American hyper-capitalist narrative - we’re responsible for our own crap. Pull yourselves up by your bootstraps. If we lose our private key, there goes our life savings. No one can help us now. Just think about it. Cutting out the middleman eliminates a very important human element - community. And with community comes trust. Crypto claims to solve the trust issue but just reinforces distrust. I’m sorry but I completely disagree.