The Crypto Comms #8
Prices are falling because insolvent funds are offloading whatever supply they have on the books to pay back margin calls (in a low liquidity environment). While we hear of another destressed company every other day, it’s crucial to note that hard times also come and go. This current state of affairs will not last forever.
In this issue:
- Market context
- Ethereum analysis
- Latest happenings
- Listening material
The market context continues to be a mixed bag, bordering on mediocre. The crypto credit crunch is real as large funds and firms are unable to meet their margin calls.
The latest iteration of this series of catastrophic events is CoinFLEX stopping withdrawals due to a big user’s account going into negative equity. Rumours are swirling about that it might be Roger Ver’s account. Meanwhile, Voyager defaulted on $650 million against 3AC.
There’s a scene in the Hobbit when one of the dwarves of Erebor asks Gandalf whether he could “do something about this deluge?”- to which the Wizard responds: “it is raining master dwarf, and it will continue to rain until the rain is done”.
The scene nicely sums up liquidity conditions in crypto right now, in part because it is simply impossible to know the real financial health of big players out there until the storm has passed. The supply of Bitcoin, stablecoins and other crypto collateral on distressed funds is unknown also due to the fact that most of these transfers occur OTC.
Also, it’s worth keeping in mind that global liquidity conditions are falling apart because of an ongoing international breakdown in the monetary system.
However, the good news is that we’ve already seen massive draw-downs and insolvencies. Additionally, the renewed effort from players like FTX, Bnktothefuture, and now even JPM to buy up cheap assets is certainly not a bad indication at these depressed levels.
The question investors ought to be asking themselves is simple: “do I want to be a buyer when large crypto funds are unwilling forced sellers?”
The answer is very straight forward in my view.
Ethereum/Dollar exchanges hands at $1,131 at the time of writing. The pair is down -5.7% week-on-week. ETH/USD did not even have enough strength to test the primary D1 trend (20-ema), currently sitting at $1,265. Until this moving average is taken out, I expect choppy cerebral pvp-trading to continue.
Locally, if ETH/USD breaks below the inverse head and shoulders structure, a move to retest last week’s low is probable. Since this is a pvp-trading environment, a sweep of the $1,070 — $1,041 order block would be the optimistic outcome. But if the market context really weighs in, a $1,000 Ethereum isn’t outside the realm of possibility.
Logically, if last week’s low gets swept, then it’s time to look for a sweep of last week’s high ($1,280). Would such a move result in a bigger picture relief rally above $1,400? Perhaps, and we’ll certainly discuss the possibilities in the telegram channel moving forward. A successful high-time-frame mean reversion would take ETH/USD closer to $1,600-$1,700 (200-weekly ema blue line).
Notably, both the Relative strength index and the Stochastic RSI suggest a local bounce is nearby on H4. A successful bounce from the inverse H&S structure or a swing-failure-pattern (SFP) off $1,041 seems probable given the overall context.
Any gift deviations below $1,000 are unlikely to last very long in my view.
Unless life as we know it is about to turn into unfathomable global suffering (on a scale we haven’t seen since WW2), there really is no reason not to take advantage of range-bound accumulation zones for a relief rally (if not for the next bull cycle).
- Russia Faces ‘Forced Default’ Due to International Sanctions.
- Report: Bitcoin Miners Empty Entire May Inventory.
- Intelligence Report: Global Bitcoin Adoption to hit 10% by 2030
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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