The Crypto Comms #4
Tumbling below the $1 trillion market cap, crypto is in the midst of the largest draw-down ever in dollar-terms. The market is haemorrhaging money, funds are blowing up, despair is in the air and capital is evaporating. We are in the throes of despair and it has all the markings of an ultimate bottom in my view.
In this issue:
- Contextualising the carnage
- Ethereum analysis
- Litecoin analysis
- Latest happenings
Contextualising the carnage
Key markets have moved lower (stocks). Inflation is still present and a great emphasis has been put on the Fed’s FOMC meeting later today, which will probably result in another interest rate hike.
Commodities are attempting to rally somewhat, funds’ balance sheets like that of 3AC capital are at the brink, DeFi-lending platform Celsius had to pause its withdrawals due to insolvency issues, and large players are having to sell their assets to plug holes in a collapsing market.
Terra’s multi-billion dollar implosion set off cascading events which perpetuated the insolvency crisis, creating more forced sellers. By definition, this is not a good thing for “number go up” technology. As liquidity dries up, badly collateralised players go under, and rushed selling begets more selling.
In the cryptoverse, Bitcoin and Ethereum have been hit hard. This is in part due to the fact that institutional forced sellers held them or their derivatives like WBTC, stEth on their balance sheet. Litecoin isn’t generally held as collateral. It rallied 13% in the last 24 hours.
Now to the analysis.
Since Bitcoin/Dollar is effectively testing prior cycle lows, it comes as no surprise that Ethereum/Dollar is fairing worse.
ETH/USD is down 21% on a weekly basis, and 79% since all time highs. Ethereum is below its 2017 cycle all-time high.
Considering Ethereum’s use-cases compared to the last cycle (ICO vapourware), the platform is now home to a range of financial applications, decentralised financial products, DAOs, NFTs, EIP-1559, and might finally transition to proof-of-stake.
Despite this vast difference, ETH/USD is below the 2017 all-time high. This is quite something, and unless Ethereum is itself vapourware, this suggests the market is hyperventilating and mis-pricing Eth.
Technically, ETH/USD needs to close the week and month above $1,160 in order to be a slightly compelling. Reclaiming $1,350-$1,400 would indicate a higher likelihood of a ‘v-reversal’. But don’t hold your breath.
Otherwise, a 3-figure ETH is certainly on the table. If $900 fails to hold, it’s air until $600 in my view.
That said, ETH/BTC has tested and bounced off the 200-weekly EMA (so far). The 0.05 Satoshi level also coincides with a long-term breakout trend for the pair.
Litecoin selling might give way to a realisation of its fundamental value, if a market-wide recovery materialises.
LTC/USD is down 6% this week, and has held its ground relatively well compared to Bitcoin and Ethereum. Mind you, LTC/USD dropped 90% from its peak so there’s that.
The reclamation level hasn’t changed since last week’s analysis. LTC/USD must trade above the 50-daily EMA ($71) before there can be any believable talk of a larger market reversal or relief rally to 3-figures and perhaps higher.
The coin’s recent resilience in the face of persistent selling pressure might be because it’s less susceptible to institutional liquidity problems (since it’s not held as collateral to the same extent as Bitcoin or Ether).
One way or another the carnage will end. While many projects are already there, ‘crypto’ is not going to zero. Stick around; there is light at the end of the tunnel.
- 3AC Capital Recovers Millions in Net Worth After Insolvency Scare
- Intelligence Report: Global Bitcoin Adoption to hit 10% by 2030
- Celsius Suspends Crypto Withdrawal Due to Volatile Market Conditions.
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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Originally published on Revue 15/06/2022. Subscribe here.