In this issue:
- Ethereum analysis
- Litecoin analysis
- Latest happenings
- Listening material
Ethereum/Dollar gained 14% week-on-week so far. Prices not only took out the pivotal $1,280 level, but extended upwards to the 200-weekly ema ($1,630) before sellers stepped in. The ‘mean reversion’ play is in full swing. But will it continue?
ETH/USD broke out of its consolidation range before BTC/USD, leading to an exacerbated thrust on the ETH/BTC pair which reached 0.071 Sats before cooling off. Meanwhile, BTC has yet to test the 200-weekly EMA ($26,700). This suggests a game of ping-pong capital rotation between the two top cryptocurrencies. If prices rally hard enough, the game of musical chairs will involve more and more altcoins. As you know, it takes less capital to move less liquid coins compared to majors.
Since this is a range breakout trend-market logic applies. This means expecting higher lows, higher highs, shallow retracements and more reliable moving averages (until the trends break down).
On the daily, both the 50-ema (orange) and 20-ema (white dotted line) are converging. Provided price-action can successfully bounce off these moving averages — which may register a bull cross by the end of July — a move to $1,800 is on the table.
However, bull and bear crosses are notoriously unreliable and tend to be accompanied by the opposite of their supposed effect — i.e. bull crosses result in a dump; bear crosses results in a pump. It doesn’t mean prices will fall once (if) the cross takes place, but moving average-crosses should be considered as a cautionary mechanism in one’s toolbox, rather than a signal to join in.
But at which point is the bull trend invalidated? The line in the sand for ETH/USD is $1,337 (Monday open). Losing this level instantly opens the door to sub $1,000 again.
Litecoin/Dollar is lagging majors (as it does), gaining just 3.4% week on week. The upside potential for LTC/USD is substantial given that both Ethereum and Bitcoin have broken out of their respective ranges and Litecoin hasn’t (yet).
Litecoin’s story is precisely the same as majors. It’s time to play catch up. If price holds above the primary trend (20-daily ema), a higher time-frame mean reversion is likely in play. The weekly 200-ema rests at $108.
Noteworthy clusters of support rest at $55 and $53, respectively. Beyond that, ranging is back in play, in which case last week’s low ($46) and new lows have to be considered once again.
The question as to whether the rally is a ‘deviation fake-out’ is a pertinent one given how bears have dominated the market since November 2021.
But in my view, now is not the time to think too hard about a range breakout given the context. The entire industry has been more or less liquidated and there is no such thing as a one-way market. Practically all on-chain data points to bear-overextension too.
Still, it remains to be seen whether this relief rally will turn out to be a mean reversion or something else entirely. As you know, my 6–8 month outlook is summarised by this falling wedge chart.
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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 or financial advice. While I cannot promise perfection I do my best to be honest and transparent.
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