Is it Time to “Sell in May and Walk Away”?
The bear trap scenario turned out to be a cerebral derivatives-driven stop hunt. Crypto markets are weighed down by macro tradfi happenings yet simultaneously have entered high value areas of interest. Generally, support zones are not areas one contemplates selling.
Meanwhile, Fidelity revealed that it will begin to offer Bitcoin (and eventually other cryptocurrencies) for client 401k retirement accounts in the months ahead. This is a monumental development.
Let’s dig in.
The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is 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.
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Fidelity To Allow Investors to Hold Bitcoin in 401k Retirement Accounts
Fidelity Investments, the largest retirement plan provider in the United States, will allow investors to put bitcoin in their 401k accounts. The endorsement of the US’ biggest retirement plan indicates that crypto investing is moving further into mainstream consciousness.
Read the full article here!
Ethereum OBV and Price at Odds
Ethereum/Dollar is down -1.50% on the week, after having recovered from a correction to $2,770 on Wednesday.
As noted on Monday, Bitcoin is in a bit of a bind at current levels as tradfi-driven negative sentiment weighs on risk-assets (including crypto).
Since last week, crypto has behaved erratically, to put it diplomatically. Price-action has been characterised by false signals, fake-outs and cerebral reversals to either side, stemming primarily from futures trading within a relatively low liquidity environment.
Overall, altcoins tend to get slaughtered in this situation regardless of what happens. If BTC/USD rallies, alts would tend to sell off into majors (maybe ETH too), and if Bitcoin dumps vs. the dollar alts tend to nuke harder. There will be some outperformers as always, but that’s the general tendency (not to be confused with tendies).
ETH’s $3,000-$3,300 cluster of support turned into resistance on a back test. This technically opened the door to $2,000, which is by no means a guaranteed outcome. In fact, there appears to be a dislocation between price-action capital flows.
Presently, on-balance volumes (OBV) are showing a divergence between prices and capital flows. This indicates seller exhaustion. Still, price-action is the primary indicator, which so far is in contradiction to the OBV. In fact, quite a few metrics indicate upside as more likely besides the price. The negative sentiment, expectations and consistently negative funding lead me to believe that risk-assets (particularly crypto) have either entered a final leg down stage, or have bottomed entirely and are about to experience a jaw-dropping rally.
In my view, this is not the moment to become emotional. It is the time to aggressively deploy capital, double and triple down. The trope ‘sell in May and walk away’ is poised to be entirely wrong this year.
Polkadot Enters Bottom of the Range
Polkadot/Dollar is an asset I’ve been eying for some time, as telegram readers will know. DOT/USD has ranged between $10-$52 at the extremes, and currently sits at the low end of the trading range ($17).
Locally, prices have essentially traversed between $23–13 since February. On-balance volumes showed a consistent easing of selling-pressure, with a relative uptick in buy orders. Since the start of April, liquidity has dried up which is commensurate with the general apprehension of buying risk-assets. That doesn’t make it any less compelling though.
From the bottom of the range to the top, DOT/USD has a relative upside potential of 200% with a relatively tight risk/reward (20%-30%) on the downside at the time of writing. The question is whether the generally accepted thesis of ‘one more leg down’ for risk-assets is correct or not. In my view it is irrelevant. Many alt/usd pairs are at macro do-or-die support.
Litecoin Tests Monthly Support
Litecoin/Dollar continues to exist on the precipice, down -4% on the week. The coin tested monthly support this week, dropping to $96 before recovering on Wednesday.
LTC/USD retraced its reversal to $113 last week and was apparently rejected off the 200-weekly exponential moving average. Despite the rejection, and volumes falling off a cliff below $100, Litecoin remains at these bottom-out levels awaiting instructions from Bitcoin.
In 2021, LTC/USD witnessed a weekly 3-dive sell-off before finally bouncing for good. The current setup is eerily similar, and could not be more perfectly timed with the imminent launch of mimblewimble extension blocks (mweb) in the next couple of weeks. This launch is as big of a deal as Segwit was back in the day, and it is not priced in because it’s trendy to hate litecoin (for no other reason than to hate it).
There is no fundamental attack vector against Litecoin. Bear arguments do not stand up to scrutiny, and where do fundamental arguments matter most if not at macro support?
All in all, risk-assets stand on the edge of a knife, but the risk-reward at monthly support zones is palpable. If the floor gives way, then it would seem that the majority are correct — not something you see every day.
p.s. This is my opinion. It is not financial advice.
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