Smoke signals, where are they coming from and what do they mean?
Markets remain turbulent, but what is the data saying in regards to accumulating or waiting?
This year markets have been rough.
Now is the time to touch grass, take a deep breath and reassess exactly why you’re in this game.
Aside from Bitcoin price ping-ponging around in its 90-day range ($17,600 - $25,400), not much has really changed and for a long-term investor this is a good thing.
When everything, including your positions, keeps slipping to the downside, it’s a good time to review the investment strategy and determine whether the wisest move is to stay the course or make some adjustments.
My general approach for the post Luna Terra, Celsius, 3AC crypto market has been price agnostic, dollar-cost-averaged longs based on higher timeframe market structure, fundamental analysis and technical analysis.
Consolidation, confluence and continuation has been the core theme of previous analysis and while the market selected continuation to the downside, in theory, the dynamic is still in full effect.
Before firing this thing up, there’s a bit of positive news:
Big Smokey is now the author of a weekly, free Friday newsletter at Cointelegraph.com. You can subscribe clicking “Markets Outlook & Altcoin Roundup” and entering your email. Here’s the link!
The Cointelegraph newsletter is more of a thematic, quick roundup, whereas this twice-per month Substack will remain free and a bit more detailed.
Alright, let’s review some of the positions from the last few months to see if the ship remains afloat.
These hams cooked for too long
The Avalanche “whistleblower” FUD which accused Ava Labs of paying lawyers to bring litigation against competitors and keep regulators “distracted” was a factor in AVAX falling out of its rounding bottom pattern and currently the price trades near the bottom of its 124-day-long range.
Ideally, a breakout above $31 to pursue an initial take profit target at $42.50 (200-MA) and continuation above this level would aim for the second take profit target at $62 near the 38.2 Fibonacci Retracement level.
While AVAX’s price might look compelling due to it trading 88% down from its all-time high, there are other metrics investors should consider before opening positions in the token.
As shown below, Avalanche’s fully diluted market capitalization compared to its total revenue over the past 180 days leaves reason for concern.
Trading volumes from the network are also still down and ideally, investors would want to see a reversal of this trend as either a sign of accumulation or some proof that capital inflows and daily active user activity have returned to Avalanche.
Active users of Avalanche-based DApps and DeFi protocols have also failed to recover since falling off a cliff in early May. A bump in daily active users should result in increased revenue and generally, increased revenue translates to an increase in the ecosystems’ token prices, along with the native token (AVAX).
Until some trend reversals take place with these on-chain metrics, it’s hard to make a solid investment thesis for building a long position in AVAX.
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Like AVAX, Fantom (FTM) has also shown similar price action. FTM price failed to complete its rounding bottom pattern and data from token terminal shows the protocol facing the same challenges as the Avalanche network.
As the charts below show, price versus protocol revenue and daily supply-side revenue versus protocol revenue over the past 180 days leave a lot to be desired.
Again, potential Fantom (FTM) investors should look for drastic improvement in these metrics before considering adding to FTM longs. Even in the event of bullish price action, the move would likely be short-lived if the network is seeing a continual decline in active users and revenue.
These are still smoking low n slow
Not everything has been trading in a rut.
Plain and simple, Polygon (MATIC) has been straight ballin for weeks now and from the perspective of fundamental analysis, more upside seems likely.
In the last few months, Polygon has inked a major deal with Disney, seen some former Terra Luna projects port to the network, and this week, Starbucks announced that it would build its NFT platform on the network. These are major developments and depending on the details, perhaps it will bode well for MATIC price.
MATIC’s daily chart shows the altcoin holding an uptrend of daily higher lows and the price is inching toward the 200-day moving average. Securing a daily close and higher high above the 200-MA (black line) could eventually see price move toward $1.36 before encountering resistance.
So far, since July 2, purchasing dips to and below the 20-day MA (blue line) has proved to be a good accumulation strategy.
Apes enter the Cosmos
In the last month, crypto Twitter and institutional investors have fallen in love with Cosmos (ATOM) and the altcoin has staged a nice 172% rally since June 9. Delphi Digital, VanEck, Twitter influencer traders and a handful of other retail and non-retail investors are now pushing a bullish narrative about the project. A few points to research would be Cosmos Hub 2.0, liquid staking and the forecast prevalence of IBC.
From a technical analysis point of view, ATOM continues to trade in its ascending channel and looks en-route to retest the midline support at $14.45, or even the 20-MA at $13.15 if the wider market begins to correct.
The current pullback seems perfectly natural, given that price broke above the ascending trendline, tapped the 200-MA and now appears en-route to confirm a lower support retest as swing traders take profit and price meets expected resistance at a key moving average.
Barring a market-wide meltdown, if ATOM were to flip the 200-MA to support, steady continuation to $20.50 and $27 remain longer-term price targets.
To merge or not to merge; that is the question
There’s been a ton of talk about Ethereum (ETH) lately so I’ll keep it simple. Price continues to carve a path to the upside, but there’s resistance at the long-term descending trendline at $2,000, which is also aligned with the 200-MA.
The Merge is less than 3-days away and at the moment, nobody is certain about the event’s short-term price impact. What we have seen is backwardation in ETH quarterly options, and record-high open interest on ETH futures (perpetual contracts).
Essentially, many traders are spot long on ETH, hodling in the event of BCH-reminiscent hardfork tokens and hedging by holding shorts. Eventually, this short-leaning open interest has to unwind and it’s likely to create buy pressure on spot ETH. Ideally, this unwinding will translate to price smashing through the $2,000 level and rallying as high as $2,500 to $2,800.
Late shorts and stubborn shorts could get squeezed and things could get really interesting.
Like $3,000+ interesting, but this is one of many potential outcomes so readers are encouraged to DYOR.
The Big Kahuna
Well, I wanted to outline 3 possible price action scenarios for Bitcoin, but this thing is getting a bit long in the tooth. So I’ll just leave this chart here and allow you to speculate your own outcomes.
Trade safe and see you after The Merge!
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The views expressed here are not intended to serve as trading advice. The author is not paid to analyze any of the assets mentioned above and know that I may or may not hold positions in the mentioned assets. Please be safe and DYOR.