Market Analysis (9/25/20)

Market Analysis (9/25/20)

By mduchow | EW Price analysis | 25 Sep 2020


How’s it going my friends, it’s been awhile. I figured I’d stop by and provide my thoughts on the market - message to my followers below. After all, I do provide the most honest and realistic analysis available on the market. For anyone who has followed my TradingView that I’ve linked in the past, you’d know that on August 31st I posted my thoughts about a Bitcoin top at $12k and my thoughts about an Ethereum top on September 2nd at $470. 

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Both of which, have since, tumbled into the abyss. Has anything changed? Let’s dive in and analyze. 

Bitcoin:

Fundamental analysis:
 

1. Smart money action:

The on-chain smart money actions are now stable at a bullish level and are higher than the July level when we had the 10k break out. This not only is similar to the on-chain developments before prior bull runs, but also indicates a strong support at 10k. Institutional investors showed picked up interest in the crypto space as Grayscale raised $900M in Q2 (its ATH quarter since inception). The $900M won’t be available for exiting until at least October 1st this year. And small likelihood that this group will exit at all. Yes, $900M is not significant when compared to the mkt cap (let’s put aside the whole thing about how BTC mkt cap is inflated, for now). However, it does indicate a switch in accredited/institutional investors’ view on the crypto space – where the money comes from to push the next ATH .

2. Miner action:

Both hash rate and difficulty have recovered , and miner capitulation has ended. With miner capitulation historically marking market bottoms, this is a bullish long-term sign.

3. Market Sentiment:

Overall market sentiment is now overly bearish . For the seller group sentiment, this group remains in a bull trend, but the current price has already slightly dropped below the actively trading group’s purchase price. This means a decrease in willingness to sell, leading to a decrease in supply, which will ultimately increase price. Assuming bull market, we are in the golden accumulation zone.

4. Margin & Futures Market Actions:

Currently, the margin market is overly bearish, and open interest is picking up. As for the CME institutional traders’ positions, the trend remains bullish . Do note CME positions are for futures , and thus acts as a leading indicator rather than a coincident indicator. In early bull runs (and when there’s still time to the future maturity), it’s also in the whales’ interest to push the price down, lowering average cost. 

5. Global Market Impacts:

To ease the COVID impacts, the Fed is using all means to boost the economy, which means a continued rise in inflation . This will fundamentally push up the value of gold , bringing up bitcoin along the way as the main value proposition of bitcoin remains store of value rather than remittance.

6. CME Gap:

90% of historical BTC CME gaps get filled sooner or later (generally created by weekend BTC movements when the CME’s closed). Yes, we still have a $300 gap open on 7/25. However, after such a long time, the gap filling will be more of a result of general market movements rather than the cause. Many are now aware and talking about this opened gap, but the problem is the more people getting onboard means the less likelihood of the event happening.

 

Now from a technical perspective, Bitcoin has broken bearish. 

Technical Analysis:

Bearish momentum break:

I have my own technique and indicator when it comes to analyzing momentum, check it out in depth here: 

https://www.tradingview.com/script/XiQB0bg0-Traders-Dynamic-Index-RSI-w-Bull-Bear-Control-Zones/

In short, the vast majority of traders simply apply RSI has an oscillator to measure overbought or oversold conditions, buying when it’s oversold and selling when it’s overbought. However, this is the incorrect way to look at momentum - 95% of traders get wrecked after all. 

There are only two areas on the RSI that you need to be aware of:

  • Bearish Control Zone (30 - 45)
  • Bullish Control Zone (60 - 70)

During a bull market, the daily RSI will hold support in the bullish control zone and NEVER break below 45 - 50. During a bear market, the RSI will find resistance at 50 - 60 and NEVER break above it. 

What we have observed on Bitcoin’s daily chart is a breakdown into the Bearish Control Zone, indicating a breakdown of the bullish trend as well as a significant loss in Bullish momentum. 

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Volume:

From a volume perspective, the level at which Bitcoin rejected was an extremely Bearish indication. Visible Range visualizes levels where a great deal of volume has been traded historically. Ranges where there is less historical volume, are Thin, and are areas where the price will rip through with little Support or Resistance. 

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For obvious reasons, there is extremely little historical volume above $12,000 - meaning the price should have ripped to the upside, but instead it rejected. This indicates a significant loss in strength from the buyers side of the market. 

 

Elliottwave:

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For anyone who is not familiar with my previous work, I am primarily an Elliottwave trader. As I have expressed in the past, based on wave structure, I believe that Bitcoin has been in a correction from the run up in 2017 and is still in a bear market. However, I have revised my downside targets quite a bit. 

From what I have shared previously, I had believed that Bitcoin was in an expanded flat correction targeting anywhere from $12k - $16k then capitulating down to $2.8k. However, this would have required Bitcoin to move up in 5 waves - it did not. Bitcoin moved up in 3 waves, indicating a complex correction or a triangle. (Expanded Flat ABC highlighted in white)

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Within this triangle, I do not expect Bitcoin to return to or break past previous lows. I expect Bitcoin to print higher lows as well as Bullish Reversal Divergence before rallying up for a new Bull Market. 

However, if Bitcoin can break back above and hold $11.7k, there is a high probability that Bitcoin will climb towards $15k before coming down. 

Local:

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Locally, I am expecting Bitcoin to move no higher than $11.4k. Between September 30th - October 2nd, I'm expecting it to begin moving down to, roughly, $9,200 - $8,800.

 

To summarize, Bitcoin is at a crossroads between fundamentally Bullish but technically Bearish. As a result, I believe that a cryptocurrency Bull market is around the corner, but not before the end of this year at least - maybe longer. 

Moving onto alt-coins, I will be as brief as possible. However, many alt-coins are looking significantly more Bearish than Bitcoin because of the lack in strength behind them over the last two years in comparison to Bitcoin. 


Ethereum:

Macro:

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Compared to other alt-coins, Ethereum is in much better shape from a macro perspective. However, compared to Bitcoin, it leans more bearish - I do not believe that BTC will visit March lows again, but I believe that there is potential that Ethereum will. If Bitcoin makes a move for $15k, I have a count for Ethereum targeting $600 - $700, but I will only share it if that scenario begins to look more likely. 

Local:

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Locally, I am looking for ETH to make a move toward $355 - $370. I do expect this to extend past $400. Following this, I expect it to make a move down toward $300 - $250. 


Basic Attention Token: 

Macro:

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From a Macro perspective, BAT leans far more bearish with targets in the $0.09 - $0.16 range. From a local perspective, I am expecting upside to no higher than $0.27 before rolling over. 


Loopring:

Macro:

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From a Macro perspective, LRC looks very bearish targeting $0.01 - $0.003.

Local:

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Locally, I am expecting LRC to target $0.24 - $0.27 before making another move to the downside. 


DASH:

Macro:

710e77fbebccf86848c59828fae6fe7a0fe0cb2481c705c9ec5673a699c49892.png

In the macro structure, I am expecting DASH to make a larger move to the downside targeting $35 - $40. 

Local:

9f00c8de889c2f9ee60141a260adb039e941e8ce4ae2aad48cc450d72d5c428f.png

Locally, I am expecting DASH to target $72 - $78 before rolling over. 

Now the following two coins are in a pretty unique situation. Chainlink and Cardano appear to be the only high - marketcap coins with Bullish potential in the short term. 


ChainLink:

Local:

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Regardless if the structure is bullish or bearish, I am expecting Link to make a final move down to roughly $5.90 - $6.00 before a retracement toward the upside. If the retracement is bullish, I would expect Link to push further toward bullish targets. If the retracement is bearish, then I would expect bearish continuation toward the downside. 

Bullish Macro:

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Bearish Macro:

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Cardano:

Local:

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Similarly to Link, I am expecting ADA to have one more push down to $0.04 - $0.06. regardless if it is bullish or bearish. Following this ADA will have a retracement. If the retracement is bullish I'd expect continuation higher. Bearish, I'd expect lower. 

Bullish Macro: 

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Bearish Macro:

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Thanks for reading! I plan to get back into a routine of posting my analysis here and am planning to post at least once a week. If you would like updates more often, follow my TradingView that I will link below. I post there regularly and you would be hard pressed to find another analyst more consistent that offers his product free of charge!

Want me to add any pairs to my next analysis? Let me know in the comments.

To my followers, thanks for sticking around over the last few months. I've missed posting on here - but I certainly have been busy. My TradingView page has substantially improved and I've been grinding to make my analysis better and better. I'm excited to announce that three sponsors have reached out to support my content - linked below. I'm also excited to announce two major projects in the works: Covesting and a Trading signals channel/group chat. I will provide more information on both of them as we get nearer to the release of them, but the Covesting is a part of the PrimeXBT link below. Anyways, I really appreciate it if you stuck around, and I'm really looking forward for what's to come!


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mduchow
mduchow

21 y/o Economics major at the University of Northwestern, Chicago; Elliotician; Crypto Enthusiast; Blockchain advocate; Suspect of all things centralized


EW Price analysis
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