Crypto - Will Death Give Birth To Life? Or Is This The End?
Updated
One thing is for sure, this market is brutal. But look at all the gains from 2015-2017! That is INSANE. The cryptocurrency market is still worth roughly 100X what it was at the bottom of the bear market in 2015. And guess what? It's actually still on a long term upwards trend. I actually managed to call the move up towards 300B and above for the market earlier this year, and speculated on retesting the bottom of the trendline in the next wave down. It looks like mostly alts have lead the market on this move down, since they were unable to get above a very important horizontal resistance zone, where I spoke about many bagholders exiting at break even (around 140B, give or take). Those charts are linked at bottom (Bullish Projection For Cryptos/How And Why The Altcoin Market Is Testing Your Patience).
I'd honestly say sentiment is worse now than it even was at the bottom of the 2018 bear market for most of these projects. This tells you something about the current situation. Are many cryptocurrencies echoing Bitcoin's second (and final) bottom from the 2015 bear market? This is something I've been speculating about recently. But before we make any assumptions, we need to actually analyze what's going on in these charts.
We can see that after falling out of the bullish channel from this year (light blue), the altcoin market cap has headed towards a long term trendline. This trendline, interestingly enough, coincides pretty well with the trendline from our total crypto market cap in the main chart on this analysis. What this tells us is that altcoins may actually dictate further growth in the next part of the cycle, whereas Bitcoin led the charge in the first half. As I've been saying over and over again, I do not think it's healthy for Bitcoin dominance to remain this high, if the crypto sphere is going to continue seeing growth. This is because it doesn't financially incentivize anyone to develop anything. There must be a positive feedback loop for people to have confidence in building.
I also want to take the time to mention that, cryptocurrencies being a relatively new, niche, and risky investment, there is a distinct possibility that the crypto market as we've grown to love it (or hate it) will no longer experience any sustained growth. There are a few warning signs saying that this could happen. Anyone investing in this space at this time should always bear these things in mind. There is no guarantee you will make money in this market (or in any market, for that matter).
Let's take Binance Coin and USDT as an example. In my opinion, these two cryptocurrencies should not be in the top 10, in terms of market capitalization. I'm not going to go much into USDT, but compare its current market position with where it was at the end of 2017 and you'll see why this is concerning. Since Christmas Eve, 2017, the market cap of USDT has increased by nearly 400%. Now why would anyone into crypto buy and hold USDT over an inflation-resistant coin with a limited supply? Something doesn't quite add up. BNB also has a similar market share to USDT. Perhaps there's a relationship between the two that could be having an impact on other altcoins. It's possible that BNB deserves its place to some extent, but they've achieved their ranking by effectively cannibalizing other projects through what I believe to be market manipulation. Of course, this could just be a conspiracy theory, and a result of me wanting to blame my stagnating positions on someone. I'm aware that this phenomenon exists with new investors. Either way, BNB's top also coincided with the beginning of the slow breakdown for ETH.
There was a period of time when many alts were dropping on their ratios while BNB continued to climb. I saw this as a warning sign for weakness in the market (talked about it in my "Elephant in the Room" video analysis, linked at bottom). I've written/recorded a few analyses where I've mentioned BNB's hold on the altcoin market. Just notice what happened to Bitcoin dominance once they announced the closure of their exchange to U.S. customers. Also notice what happened to altcoin trade volume immediately following that announcement. It completely evaporated. Almost like a mirage. Additionally, note how the trend only grew more powerful once Facebook's Libra was announced:
These developments should not be ignored. it is clear that many sold, believing the altcoin mania to be permanently over. Most altcoins have begun medium term bearish trends, breaking their uptrends from earlier this year. Some others, like XLM, have ventured to new lows because they were never in a bull market to begin with. A few have remained relatively neutral (like NANO). As an investor in a highly speculative, emotional market, it's really important to remain skeptical at all times, and not stick to one narrative. It's clear that I was wrong about the direction of altcoins this year, and I'm very disappointed in the overall market performance. I don't think anyone is really satisfied with it, to be honest (except maybe some Bitcoin maximalists). Individual communities have become echo chambers and most have left. Even "expert" analysts on here have been baffled. Many of those traders whose egos were inflated by the bull run of 2017 are now having a serious reality check. This truly feels like depression, but is this really the end for the cryptocurrency market? One thing is clear: We need to see what effect the opening of the Binance U.S. exchange has on the market and what happens with regulation.
Based on the market cap trendlines which I noted above, there is no reason to truly panic....yet. One must be really careful with risk here though. There truly appears to be little to no demand. Prices moving lower and lower on decreasing volume is NOT necessarily a good thing. It means that there is no interest from market participants, and the natural supply is outpacing demand with minimal exchange of coins. This means that the "fair market value" of many of these projects could be substantially lower. We will know the direction for the entire crypto space most likely within the next month or two. This is due to how close we are to these long term trendlines. We can also see that Bitcoin is in a precarious position, but is still following the speculative trajectory I outlined for it back in May. It needs to hold this channel on Bitstamp to continue a bullish trend into the halving, in my opinion.
If Bitcoin cannot hold that channel (support in low 9K area), it can head all the way down to the parallel channel (pink) and retest anywhere between 5.9K and 6.8K (depending on how fast it drops). We really need to see how the overall crypto and altcoin markets react to their respective long term trends. It seems almost inevitable that they will have to be tested over the next few weeks. Regardless, I will not feel particularly bullish until Ethereum and others reverse out of the downtrends they've been in since the end of June. The ETH falling wedge here has the right volume profile for a breakout, but there is also chance for a breakdown, since the market has some room for further downside here.
Anyway, just wanted to provide a comprehensive written post on the market. This is mostly neutral, if not a bit bearish. In summary:
1. Bitcoin dominance has been partially influenced (in my opinion) by a speculatively nefarious combination of USDT and BNB. Dominance is still in a rising wedge, and has yet to break down.
2. Watch for the two long term trendlines on the TOTAL and TOTAL2 charts.
3. Be careful out there.
After this post, I may not write analysis for a while. I have a lot of other things going on in my life at the moment. I'm thankful for this every day. As always, this is not financial advice. What's written here is purely my opinion and should be used for educational/entertainment purposes only. Thanks for your support!
-Victor Cobra
I'd honestly say sentiment is worse now than it even was at the bottom of the 2018 bear market for most of these projects. This tells you something about the current situation. Are many cryptocurrencies echoing Bitcoin's second (and final) bottom from the 2015 bear market? This is something I've been speculating about recently. But before we make any assumptions, we need to actually analyze what's going on in these charts.
We can see that after falling out of the bullish channel from this year (light blue), the altcoin market cap has headed towards a long term trendline. This trendline, interestingly enough, coincides pretty well with the trendline from our total crypto market cap in the main chart on this analysis. What this tells us is that altcoins may actually dictate further growth in the next part of the cycle, whereas Bitcoin led the charge in the first half. As I've been saying over and over again, I do not think it's healthy for Bitcoin dominance to remain this high, if the crypto sphere is going to continue seeing growth. This is because it doesn't financially incentivize anyone to develop anything. There must be a positive feedback loop for people to have confidence in building.
I also want to take the time to mention that, cryptocurrencies being a relatively new, niche, and risky investment, there is a distinct possibility that the crypto market as we've grown to love it (or hate it) will no longer experience any sustained growth. There are a few warning signs saying that this could happen. Anyone investing in this space at this time should always bear these things in mind. There is no guarantee you will make money in this market (or in any market, for that matter).
Let's take Binance Coin and USDT as an example. In my opinion, these two cryptocurrencies should not be in the top 10, in terms of market capitalization. I'm not going to go much into USDT, but compare its current market position with where it was at the end of 2017 and you'll see why this is concerning. Since Christmas Eve, 2017, the market cap of USDT has increased by nearly 400%. Now why would anyone into crypto buy and hold USDT over an inflation-resistant coin with a limited supply? Something doesn't quite add up. BNB also has a similar market share to USDT. Perhaps there's a relationship between the two that could be having an impact on other altcoins. It's possible that BNB deserves its place to some extent, but they've achieved their ranking by effectively cannibalizing other projects through what I believe to be market manipulation. Of course, this could just be a conspiracy theory, and a result of me wanting to blame my stagnating positions on someone. I'm aware that this phenomenon exists with new investors. Either way, BNB's top also coincided with the beginning of the slow breakdown for ETH.
There was a period of time when many alts were dropping on their ratios while BNB continued to climb. I saw this as a warning sign for weakness in the market (talked about it in my "Elephant in the Room" video analysis, linked at bottom). I've written/recorded a few analyses where I've mentioned BNB's hold on the altcoin market. Just notice what happened to Bitcoin dominance once they announced the closure of their exchange to U.S. customers. Also notice what happened to altcoin trade volume immediately following that announcement. It completely evaporated. Almost like a mirage. Additionally, note how the trend only grew more powerful once Facebook's Libra was announced:
These developments should not be ignored. it is clear that many sold, believing the altcoin mania to be permanently over. Most altcoins have begun medium term bearish trends, breaking their uptrends from earlier this year. Some others, like XLM, have ventured to new lows because they were never in a bull market to begin with. A few have remained relatively neutral (like NANO). As an investor in a highly speculative, emotional market, it's really important to remain skeptical at all times, and not stick to one narrative. It's clear that I was wrong about the direction of altcoins this year, and I'm very disappointed in the overall market performance. I don't think anyone is really satisfied with it, to be honest (except maybe some Bitcoin maximalists). Individual communities have become echo chambers and most have left. Even "expert" analysts on here have been baffled. Many of those traders whose egos were inflated by the bull run of 2017 are now having a serious reality check. This truly feels like depression, but is this really the end for the cryptocurrency market? One thing is clear: We need to see what effect the opening of the Binance U.S. exchange has on the market and what happens with regulation.
Based on the market cap trendlines which I noted above, there is no reason to truly panic....yet. One must be really careful with risk here though. There truly appears to be little to no demand. Prices moving lower and lower on decreasing volume is NOT necessarily a good thing. It means that there is no interest from market participants, and the natural supply is outpacing demand with minimal exchange of coins. This means that the "fair market value" of many of these projects could be substantially lower. We will know the direction for the entire crypto space most likely within the next month or two. This is due to how close we are to these long term trendlines. We can also see that Bitcoin is in a precarious position, but is still following the speculative trajectory I outlined for it back in May. It needs to hold this channel on Bitstamp to continue a bullish trend into the halving, in my opinion.
If Bitcoin cannot hold that channel (support in low 9K area), it can head all the way down to the parallel channel (pink) and retest anywhere between 5.9K and 6.8K (depending on how fast it drops). We really need to see how the overall crypto and altcoin markets react to their respective long term trends. It seems almost inevitable that they will have to be tested over the next few weeks. Regardless, I will not feel particularly bullish until Ethereum and others reverse out of the downtrends they've been in since the end of June. The ETH falling wedge here has the right volume profile for a breakout, but there is also chance for a breakdown, since the market has some room for further downside here.
Anyway, just wanted to provide a comprehensive written post on the market. This is mostly neutral, if not a bit bearish. In summary:
1. Bitcoin dominance has been partially influenced (in my opinion) by a speculatively nefarious combination of USDT and BNB. Dominance is still in a rising wedge, and has yet to break down.
2. Watch for the two long term trendlines on the TOTAL and TOTAL2 charts.
3. Be careful out there.
After this post, I may not write analysis for a while. I have a lot of other things going on in my life at the moment. I'm thankful for this every day. As always, this is not financial advice. What's written here is purely my opinion and should be used for educational/entertainment purposes only. Thanks for your support!
-Victor Cobra
Note
Oh one thing I forgot to mention as a reason for the cryptocurrency market potentially not making new highs. There is a possibility that if the broader economy sees a major downturn in the near future that crypto will be exposed as simply an offshoot of the tech bubble from the last 15 years–––a result of such astronomical gains that people really had no idea where to put their money, so they created a digital currency market. As the free-flowing capital created by this astronomical economic bubble disappears, the crypto fad would vanish along with it, perhaps to be re-ignited at some later date. But maybe it wouldn't look much like it does today. Just a bit of extra rambling, don't mind me. But I've been thinking about this potential bearish scenario.Note
Nice move up for the total crypto market cap over the last couple of days. The market is still technically in a downtrend. The total market cap actually looks like it could be a descending triangle with some more upside from here (bearish). If the market is to continue up, I'd like to see that triangle resistance broken. And of course I'd like to see the altcoin cap break out of that wedge. Note
The altcoin market cap is trying to break out of the wedge today. ETH has made it back above 0.017 as well. It'll be interesting to see what happens. If ETH/BTC can break this downtrend, it would mean a lot of potential upside, I think. Note
The market cap has bounced before the trend line. Same with altcoins. What does this mean? Do we follow something like the pink? Or yellow? 
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