Crypto Winter’s Coming
Dear subscribers,
Welcome to Bitcoin Onchain, Offchain, and Beyond.
In the last forecast (BTC price: $36.5k), I pointed out it was time to be careful in the crypto space as neither demand nor existing participant sentiment turning bullish was showing, and both are needed for a return of bullish trend. Since then, we experienced one of the largest collapses in crypto history. With UST de-pegging, Luna dropped to zero in 4 days and $300b evaporated in total crypto market cap. It has been a tough week, and I hope you are okay.
Below is a summary for market conditions on May 15th 2022 (BTC current price: $30.2k):
Long term:
BTC will continue making all-time highs, but not this year.
It may seem like crypto is over, but we’ve seen other black-swan events (Mt. Gox, Ethereum hack, PlusToken, etc.) and Bitcoin survived throughout the hypes and depressions. However, for the remaining of 2022, crypto winter is officially here. Institutional traders have turned more bearish than retail traders for the first time since 2020 and whale holding has been impaired by the Luna Foundation dump. With Fed balance sheet trimming starting in June, I’m getting early 2018 vibes.
Short term:
Bearish.
The name of the game has now turned to “where is the relief rally”. As mentioned in the last forecast, any uptrend could be split into the following 4 stages.
Stage1: Market oversold (Downward/flat trend; great long-term accumulation level)
Stage2: Existing participant sentiment becomes bullish (Chop)
Stage3: More demand kicks in (Bullish Trend)
Stage4: Market overheated
Unfortunately, I think Bitcoin is in stage1. General sentiment remains bearish and price has a potential to re-visit the daily wick low of 27k.
Stay safe.
Phi
Institutions more Bearish than Retail
Coinbase premium has significantly dropped to the negative territory. With more institutional traders on Coinbase and more retail traders on Binance, the Coinbase premium over Binance’s BTC price has been a good gage of the institutional trader sentiments. Institutional traders have been willingly paying premiums throughout the past 2 years of crypto market boom and have just recently started trading at discounts. This is a sign that institutional traders are more bearish than retail traders in the current market.
While we could have relief rallies in the meantime, the return of institutional faith in the market is needed for any significant uptrend. In both the 2019 and Covid bottoms, the Coinbase premium turned significantly positive, which we have a long way from in the current market.
Similarly, driven by the UST and Luna black-swan, both exchange supply shock and number of addresses with balance more than 1k BTC have cliffed. When will whale interest recover? Only time will tell.
General Short-term Sentiment No Bullish Sign yet
The chart above shows whether short-term traders are selling in profit or loss. In bullish trends, profit taking decreases at the break-even price and the decrease in supply pushes price up. In bearish trends, selling increases at the break-even price, pushing price lower.
The weak-handed trading group has been in loss since April, and have been creating selling pressure whenever the break-even price level is hit. We are now approaching that level again (current price to 33k).
Short-term: Extreme Wick Lows Often Get Revisited
In BTC bottoms, the initial wick low often gets revisited. The market generally needs some time to “digest” the extreme events before recovering. Do expect some chop actions ahead to the 27k level.
Free Indicator Links:
Onchain Whale Demand:
https://www.tradingview.com/script/9Fhu9LGQ-BTC-Transaction-On-Chain-Volume-Basic/
Altcoin vs. BTC Season:
https://www.tradingview.com/script/95QlU7Uk-Altcoin-vs-BTC-Season/
Auto MACD Divergences:
https://www.tradingview.com/script/NvtunxPO-MACD-w-Divergences/
Auto RSI Divergences:
https://www.tradingview.com/script/CuB4Dgs0-RSI-w-MAs-Divergences/
Disclaimer
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