19 November 2021: The cryptocurrency market went through a rough week over the past seven days, with many coins falling over 10%. With the market now in a state of fear and bears celebrating, Bitcoin has already found support as of last night (18 November). This week we will be focusing heavily on the latest market correction and giving some insight as to where the market could be going next.
Weekly Markets 1.14
After a week of selling in the cryptocurrency market, many retail investors have been calling for the end of the bull market, much lower lows, and all sorts of bearish trends. In reality, this appears to be another typical pullback within a major bullish rise in the markets. While Bitcoin (-11%), Ethereum (-11%), Solana (-9%), and Cardano (-11%) have all seen steady declines, the market is already in a state of fear and Bitcoin has found support just above the $57,000 price mark.
Of course, the latest decline in prices hasn't stopped politicians and major media producers alike from shelling the cryptocurrency market for being "dangerous" to nations and too prone to volatility.
The main news stories of the week are available below:
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Taproot has officially been integrated into Bitcoin (RekTimes)
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Crypto.com inks 20 year, $700 million deal to buy naming rights of LA's Staples Center (ESPN)
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US Politician Hillary Clinton says crypto can "destabilize nations" (Market Watch)
- Binance US CEO says exchange to raise "couple hundred million" in funding (CoinTelegraph)
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India to repeal controversal farm laws that led to protests (Reuters)
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European countries set to enforce fresh wave of Covid-19 lockdowns (Washington Post)
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Pressure on US Fed rising as inflation continues to worsen (AP News)
- Turkey currently facing a "currency crisis" that could shake economy (Wall Street Journal)
Crypto Economy & Markets
Despite the negative press and recent correction towards the cryptocurrency market, crypto shows absolutely no signs of slowing down in terms of global outreach. US politician Hillary Clinton even came out and said that crypto could "destabilize nations". In reality, what is pushing the global populous towards cryptocurrency adoption is the unprecedented, radically dangerous monetary policy that many governments have turned to.
This is evident in many of the recent news articles that have come out in the past few weeks, including reports that Turkey is suffering from a currency crisis that could destabilize its own economy while the US Federal Reserve is facing mounting pressure as inflation hits a 30 year high.
Even better, major cryptocurrency exchanges have been investing hundreds of millions into sports venues and partnerships alike. This was shown again this week as Crypto.com bought the naming rights to the famous Los Angeles-based arena - StaplesCenter. This deal was reported to be valued at $700 million and last for 20 years. The crypto exchange FTX had already booked their own venue in Miami - now dubbed FTX Arena.
Below, we will cover the latest market correction and offer some guidance for the days ahead as the market continues to find its direction and footing.
Total Market
In the past week, the total cryptocurrency market cap fell roughly 9% after a moderate pullback. This isn't entirely suprising as multiple coins had been minting all time highs in an overall greedy market. Currently sitting at an estimated 2.55 trillion in value, the total crypto market cap has already recovered to its 50 day moving average.
Bitcoin
Over the past week, Bitcoin has fallen around 11% after it had hit an all time and been declining into our last weekly market release. Over night, Bitcoin had fallen below support in what looked to be a bearish candle. However, Bitcoin has since climbed back above support in what now has a higher probability of being a bear trap in a fearful market.
Analysis
In our release last week, we said that Bitcoin could fall to the $57,000 range and would still be in the terrority of a very healthy correction. That probability has played out here beautifully as Bitcoin sits right on top of support at that price mark. While this latest market development may look worrying to some, perspective is very important in this situation.
In the chart below, circled on the left is the price action at the beginning of 2021 as Bitcoin rose to its all time high at the time. Comparatively, similar price action is occurring on Bitcoin right now. The key difference here is that Bitcoin had previously been using the 50 day MA as support and this time around that is not the case.
The setup to pay attention to here is the last red circle followed by the black circle on the left. Bitcoin had again climbed up to an all time high but only slightly higher than the previous peak. Afterwards, a sell off was met with a small rally to the 50 day moving average that failed - leading to the major market correction in May.
The setup on Bitcoin is currently very similar to this one. So, over the next week the most important thing to watch is how Bitcoin reacts to the 50 day MA. That light blue line on the chart above should act as resistance if Bitcoin rises again. If Bitcoin is able to march past it and close, that would be an indicator of a high probability that higher highs are coming. If Bitcoin fails to break through the 50 day MA, a steeper correction may ensue.
So, we see two scenarios with moderate probability ahead:
- Bitcoin breaks through resistance at the 50 day MA (estimated around $60,000) and head to higher highs, potentially as high as $70,000
- Bitcoin fails to close above the 50 day MA leading to a further correction down to at least the 200 day MA (estimated at $46,000)
A fall to the 200 day MA would certainly create a bearish setup on Bitcoin similar to May. However, the market should not be considered bearish until that 200 day moving average is breached. Under $38,000 is the mark in which Bitcoin falls out of its upward price channel that has been established since the fall of 2020.
Alt Coins
The outlook for alt coins is very similar to Bitcoin. After falling off all time highs, many coins have found some support and have since stagnated in price action. The main difference here between Bitcoin and other altcoins is the steepness of the potential correction.
For coins that had risen substantially to all time highs, the corrections off those highs have obviously been larger. This is also true with altcoins that have underperforming against the broader altcoin market.
Some examples are:
- Polkadot (-13%)
- Litecoin (-17%)
- Chainlink (-18%)
- Uniswap (-17%)
For the chart analyis, we are going to focus on the largest altcoin - Ethereum. The ETH chart is shown below.
Analysis
There is a very important distinction between this chart and Bitcoin that we want to make clear here. Bitcoin is currently sitting below its own 50 day MA. Ethereum on the other hand has rallied back above this mark. The last time we saw a major stagnation or decline on Bitcoin, the altcoin market exploded for massive gains.
That rally is shown above in the large price rally around May 2021 on the chart. Should Bitcoin struggle over the next week, the probability of a full market decline is shaky. An equally possible scenario sees Bitcoin dominance continue to fall as altcoins see massive rallies, countering the growing fear in the broader crytocurrency market.
These are all trends to watch for over the weekend as we enter closer into the US holiday season.
World Economy & Markets
For the world economic outlook this week, there is one growing trend that needs to be addressed as far as cryptocurrency adoption is concerned. Of course, it is not breaking news that inflation has continued to get worse despite governments and the media declaring it temporary. What is interesting, however, is that countries are beginning to see major currency issues that are directly impacting economic growth.
This is really setting up the following:
- Some nations are doubling down on digital, state-controlled currencies (China, Russia)
- Certain politicians and governments are increasingly talking negatively on cryptocurrencies or moving to regulate them
- Inflation takes years to build
The last bullet point is the most important one. Inflation is going to continue to rise. This has been the case in many nations around the world despite efforts by central banks to raise rates and combat inflation. Here is the problem - inflation doesn't just form overnight. It takes years and years to build up.
This was the case for the hyperinflation scenario in Germany and othe countries that have dealt with such a scenario. Is that level of inflation guaranteed? Absolutely not. But what is becoming an obvious sentiment here is that governments and central banks are ill-equipped to combat the massive monetary expansion that has occurred since the pandemic hit.
The Key Takeaway:
Over the next 2-3 years, we are expecting inflation to potentially grow substantially worse. A lot of individuals, institutions, and even entire nations know it. The greatest hedge we see to counter this is still cryptocurrencies.
Summary
Despite the correction and the market being fearful, there is no reason as of yet to declare the bull market dead or jump to any irrational conclusions. We highly reccommend watching the price action on Bitcoin over the weekend (with specific price points of $57,000 and $60,000 to watch). Depending on your risk tolerance, it wouln't be a bad idea to move a percentage of your portfolio into trusted stablecoins. It all depends on your own sentiment currently.
Coming within the next week from RekTimes includes:
- Article on rising partnerships between major sports and cryptocurrencies (Monday)
- Article on Avalanche (AVAX) (Wednesday)
- RekTimes Weekly Markets 1.15 (Sunday)
Best of luck over the next week and have a great weekend! We will be back with our next weekly market release after the Thanksgiving holiday (plan for 28 November 2021). If you celebrate, we wish you a happy Thanksgiving!
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