ETH Displays Relative Strength: Have Altcoins Bottomed?
Ethereum is showing relative strength and has maintained the $4,000 level on a closing basis. Meanwhile, Litecoin is on the precipice of being selected out of the crypto industry unless strength materialises in the coming weeks.
Still, the open interest purge typically signals market bottoms. Is this time different?
Let’s dig in.
Dear readers,
The purpose of this newsletter is to provide context to cryptocurrency markets. This analysis takes time to write-up and it’s released every Monday and Wednesday. I am not perfect and this is not a science — nor is this newsletter a signals service. While I cannot promise perfection I do my best to be honest and transparent. I am also working on keeping my wording simple and to the point. Please bear with me.
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ETH Retests $4,000
Despite a liquidity event flushing out the market, ETH/USD held $4,000, closing above the 20-weekly EMA with accelerating relative strength to Bitcoin.
The liquidity event was engulfed by buying pressure, resulting in a 15% gain moments later. So far, ETH is consolidating above $4,000 and remains bullish on both the weekly and daily time-frames.
Relative Strength indicators have cooled off and ETH/USD is still a buy opportunity provided $4,000 holds.
Still, assuming that Bitcoin continues to range below $53,000, then ETH/USD is unlikely to print new all time highs. Instead, a ranging scenario could also be at play with a degree of relative strength to bitcoin.
In short, Ethereum held $4,000 despite the market-wide nuke. This is a compelling signal of strength, not just for Ethereum but potentially for altcoins which tend to follow in its footsteps. On the flipside, weakness below $4,000 would be bearish.
Litecoin has turned into an unpredictable train-wreck. While such a strong flush is typically indicative of a bottom, it isn’t at all clear when the coin will recover.
Technically, LTC/USD is oversold after revisiting the 2019 high ($137). If this high is lost, one can expect the coin to traverse close to double-digit territory.
On the other hand, recovering the 200-daily EMA would indicate strength and therefore opens the door to all time highs above $414 — pending another characteristic pump and dump.
If Litecoin continues to under perform it likely means that LTC is being selected out of crypto, in which case I will cover it less and less. Naturally, this would mean that I was wrong about the coin. Price is the strongest predictor of market maturity and adoption, ultimately, and Litecoin participants appear to have low conviction or are more inclined to think in terms of fiat, rather than scarcity. Thin books, market makers and open interest play their part too, of course.
Regardless, the first signs of LTC/USD strength would be a reclaim of $184, and $200. Whether that happens is largely dependent on adoption and hodler dynamics on a macro perspective. I have laid out the arguments as to why Litecoin is a strong contender for sound money, which remains true at the time of publishing. In the meantime, liquidation events will continue to wipe out over-leveraged markets.
If the coin loses the 2019 high then it’s time to look elsewhere. If Litecoin can reclaim the 200-EMA, then we can be bullish again.
While crypto is certainly not at its best, one chart continues to confer a sense of optimism for the weeks ahead — for now.
The crypto-cap chart, compiled by trading view, which includes the total crytpocurrency market cap including bitcoin and altcoins is currently hovering above the 20-weekly EMA ($2.3 trillion).
Holding the EMA would mean that the market is bullish, and that Bitcoin is becoming less relevant to industry capital dynamics (though still dominant). While this goes against historical precedent, Ethereum’s relative strength could change market dynamics — at least temporarily.
All in all, the sell-off and choppy price-action has wiped out open interest across the board. Ethereum is strong, Litecoin is weak, and while several altcoins appear to be bottoming out — nothing is guaranteed. Regardless, leverage purges are typically followed by ranging and then a strong recovery. This is probably a good sign to Dollar-cost average into crypto.
Check out the telegram channel for the long-and-short of altcoin coverage.
Catch you later.
p.s. This is my opinion. It is not financial advice.
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Christopher Attard
Founder of Chris on Crypto
Contributor to www.cityam.com
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Originally published at https://mailchi.mp.
