The Crypto Comms #40; Bitcoin & Litecoin Meet Resistance
Bitcoin is consolidating below $24,000 and has yet to form market structure that’s typical of trending markets. Meanwhile, on-chain data suggests the window of opportunity for accumulating BTC is rapidly closing. At the same time, Litecoin’s network value model indicates that it’s even more undervalued than bitcoin in relative terms.
In this issue:
- Bitcoin analysis
- Litecoin analysis
- Latest happenings
- Listening material
Bitcoin/Dollar is testing long-term macro resistance following a bullish-engulfing monthly close for the month of January.
The crypto is consolidating between the 20-weekly exponential moving average ($20,525) and the 200-wema ($24,880) at the time of writing. This process of price consolidation or ‘coiling up’ of orders and liquidity could stretch into the end of March/early April before picking a direction. It’s not guaranteed and I continue to favour a melt-up scenario by mid-2023 until market structure indicates otherwise (which is entirely possible).
That said, it’s worth noting that bearish arguments now make some logical sense i.e., price is at resistance and a typical ‘trending’ market structure includes higher lows on the way to new highs. As such, caution is fully warranted.
On the daily time-frame, price hasn’t exactly tested the 20-ema ($22,500). Due to lower-time frame liquidity considerations (H4), it’s arguable that should this moving average fail to provide support on the first test, a deeper pull-back is in the works. A breakdown of support would be evidenced by a daily candle close below the moving average. Once liquidity is taken, local market structure (H4) would suggest a 3-wave correction after having created lower lows on this time-frame (H4).
These low-time frame speculations are less relevant than the high-time-frame liquidity blocs mentioned in a previous post (i.e., $30,700, $42,900, $57,700). The $30,000 mark also bears psychological significance, and is in the vicinity of the June high (pre-dump).
If the opportunity presents itself, buying bitcoin as close to $20,000 as possible is a ‘best-case scenario’ for side-lined investors. But the door is small and getting even more crowded by the day, per the latest on-chain data.
Litecoin/Dollar is in a similar situation as Bitcoin. The pair has rallied 116% since Nov. 7th and currently faces resistance at the 200-weekly ema ($98). The ‘ideal’ medium-term entry position would be a retest of the 20-weekly moving average ($78). This may or may not happen and is largely dependent on whether Bitcoin/Dollar experiences a pull-back.
As explained by analyst, engineer and LTC-advocate Shan Belew, Litecoin’s network value model (aggregated on-chain data points such as coin supply, the halvening, new addresses, transaction volumes, total addresses, active addresses and others) places the cryptocurrency’s current ‘fair value’ at a price of $881 — $3313. The on-chain data is publicly available and verifiable.
The base-case for Litecoin is fairly straight-forward. Besides being a proof-of-work coin, Litecoin is a high-integrity network which has produced blocks with 100% uptime since its inception (2011). All arguments applied to Bitcoin can only be more or less replicated when it comes to Litecoin (discounting the technical nuances and upgrades). The silver-to-bitcoin’s gold narrative also has formal tailwinds, in that there will only be 84 million LTC to Bitcoin’s 21 million.
This is by design.
More importantly, to think that a singular monetary asset, rather than a basket of assets, will attain mass adoption is to disregard the entirety of human history. There has never been a single global money. As such, it’s unlikely for something that’s never happened to happen.
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The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Tuesday. I am not perfect and this is not a science — nor is this newsletter analysis a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.
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