Examining Sell Pressure On Altcoins
Updated
Despite my long term bullishness on several cryptocurrencies, I'm going to write a post here about the continued sell pressure on altcoins. As such, this will be a lot more bearish than my long term view. This is meant to be as objective as possible, without being too hopeful about what the future could bring. Here we go. A lot of people are still asking the question, "When will alts start rising again?" and if they're not, they've already become Bitcoin maximalists or given up on watching the price entirely. The crypto space as a whole feels rather dead. It's noticeable chart-wise, indicator wise, and sentiment wise. Only the die-hards remain bullish on most crypto projects, aside from Bitcoin. As I've said recently, there is a point where I think altcoin growth needs to happen in order for even Bitcoin to remain bullish. That's because of the psychodynamic nature of market cycles. An increase in altcoin prices gives people confidence in continued growth for the crypto space. If the only coin that's growing is Bitcoin, people will become skeptical of future advancements in the technology itself. There needs to be some positive feedback (a reward for hard work) in order for people to want to continue making progress in the space. If positive achievements aren't rewarded, then I think it will cause a lingering resentment that will be very difficult to shake off. This resentment could then bleed over to Bitcoin itself.
There are several factors I've been looking at over the last several months. If you recall, I made a video entirely about BNB and why its growth and subsequent decline in the midst of other projects failing was NOT a good thing for the altcoin market. Since BNB broke the long term uptrend against Bitcoin, other projects have done nothing but drop on their ratios. This proves that my worst fear about the market has actually been correct (for the time being): A loss of confidence in BNB (one of the only top performing coins so far this year) would lead to a loss of confidence in the ENTIRE space. As soon as BNB topped out on the ratio, everything else plunged into oblivion. In this case, the Binance exchange's hold on the market has been quite staggering (and disturbing). For a while, only the IEO projects were pumping in price, as fickle investors jumped ship from established, improving projects, to newer "better" ones with no negative price history (yet). The amount of money actually being exchanged within the altcoin market has declined astronomically since then. By all accounts, the market really appears to be dying out. In a sense, it's good that a lot of altcoin trading volume has died down on Binance. It leaves the playing field open for other exchanges to step up, and for the U.S. to speed up with regulatory clarity.
These are the times when the savvy and risk-tolerant investor will go on the hunt. "Dumpster diving" some may call it. Now, to finally get to the charts I have on this analysis. Above, you can see the XLM/BTC and the ONG/BTC chart. These are two of the worst performing coins of the last several months. Neither of these is guaranteed to increase in price in the future. What I'm just showing here is that there is constant, relentless selling pressure. On the XLM chart, you can see that the RSI has always reached the current resistance level as it neared the wedge resistance. If it can't break out here, it can fall all the way to 400 sats. You can see that marked as the top of the red bottom zone on this chart. For ONG, it is no surprise that the market is continuously dumping it. The ONG generation far outstripped the divided payout for most proof-of-stake cryptocurrencies. It was only a matter of time before people caught on and took advantage of the high rate of ONG generation. But even NEOGAS is on the decline. I believe the lack of demand in these specific tokens says something about the market as a whole: People have wisened up and are now taking advantage of ANY extra money they can squeeze out. This is NOT a good thing. This is what causes relentless sell pressure.
With all that in mind, I think it's important to pay attention to these two coins that have an endless supply of sellers and little to no demand. if we see a change in trend for these two coins, I think it would strongly indicate that the altcoin market will reverse. No one knows if and when it will happen. All one can do is look for potential signals. ideally, I'd like XLM to break out here, but it has failed every single time. There's no reason to bet that it will succeed this time. If XLM did break out here, it would be extremely bullish, because it would mean that a macro higher-low is in. You can see that on the support levels marked on this chart. If you gaze at the XLM/USD chart as well, you can see that it has still respected the downtrend, but has found support just below the previously held 7 cents zone. A drop in Bitcoin would likely send it much lower, towards the 4-5 cents area. As you can also see, XLM remained stagnant for much of the previous bull market as well. What we really need to see (if cryptocurrencies like XLM are to remain on a long term uptrend) is a bounce back above 7 cents and a break of the downtrend. If we have seen the lows, perhaps we can even begin to form a bit of a channel (purple).
Let's also compare the price action of XLM/USD with that of Bitcoin in 2015. If XLM behaved similarly, we could see a spike all the way up towards the $0.27 area by this November. That's barring any negative news for Stellar.
In any case, it's time to wait and see. This is a dormant stage for the market. Fear is at extreme levels, and the global economy looks on the brink of a large move (either a final blowoff mania phase or a breakdown, beginning a recession). Exciting times, to be sure!
This is not financial advice. Just wanted to write about how I'm viewing things at the moment, without being to exuberant or irrationally hopeful. Skepticism is important in investing.
-Victor Cobra
There are several factors I've been looking at over the last several months. If you recall, I made a video entirely about BNB and why its growth and subsequent decline in the midst of other projects failing was NOT a good thing for the altcoin market. Since BNB broke the long term uptrend against Bitcoin, other projects have done nothing but drop on their ratios. This proves that my worst fear about the market has actually been correct (for the time being): A loss of confidence in BNB (one of the only top performing coins so far this year) would lead to a loss of confidence in the ENTIRE space. As soon as BNB topped out on the ratio, everything else plunged into oblivion. In this case, the Binance exchange's hold on the market has been quite staggering (and disturbing). For a while, only the IEO projects were pumping in price, as fickle investors jumped ship from established, improving projects, to newer "better" ones with no negative price history (yet). The amount of money actually being exchanged within the altcoin market has declined astronomically since then. By all accounts, the market really appears to be dying out. In a sense, it's good that a lot of altcoin trading volume has died down on Binance. It leaves the playing field open for other exchanges to step up, and for the U.S. to speed up with regulatory clarity.
These are the times when the savvy and risk-tolerant investor will go on the hunt. "Dumpster diving" some may call it. Now, to finally get to the charts I have on this analysis. Above, you can see the XLM/BTC and the ONG/BTC chart. These are two of the worst performing coins of the last several months. Neither of these is guaranteed to increase in price in the future. What I'm just showing here is that there is constant, relentless selling pressure. On the XLM chart, you can see that the RSI has always reached the current resistance level as it neared the wedge resistance. If it can't break out here, it can fall all the way to 400 sats. You can see that marked as the top of the red bottom zone on this chart. For ONG, it is no surprise that the market is continuously dumping it. The ONG generation far outstripped the divided payout for most proof-of-stake cryptocurrencies. It was only a matter of time before people caught on and took advantage of the high rate of ONG generation. But even NEOGAS is on the decline. I believe the lack of demand in these specific tokens says something about the market as a whole: People have wisened up and are now taking advantage of ANY extra money they can squeeze out. This is NOT a good thing. This is what causes relentless sell pressure.
With all that in mind, I think it's important to pay attention to these two coins that have an endless supply of sellers and little to no demand. if we see a change in trend for these two coins, I think it would strongly indicate that the altcoin market will reverse. No one knows if and when it will happen. All one can do is look for potential signals. ideally, I'd like XLM to break out here, but it has failed every single time. There's no reason to bet that it will succeed this time. If XLM did break out here, it would be extremely bullish, because it would mean that a macro higher-low is in. You can see that on the support levels marked on this chart. If you gaze at the XLM/USD chart as well, you can see that it has still respected the downtrend, but has found support just below the previously held 7 cents zone. A drop in Bitcoin would likely send it much lower, towards the 4-5 cents area. As you can also see, XLM remained stagnant for much of the previous bull market as well. What we really need to see (if cryptocurrencies like XLM are to remain on a long term uptrend) is a bounce back above 7 cents and a break of the downtrend. If we have seen the lows, perhaps we can even begin to form a bit of a channel (purple).
Let's also compare the price action of XLM/USD with that of Bitcoin in 2015. If XLM behaved similarly, we could see a spike all the way up towards the $0.27 area by this November. That's barring any negative news for Stellar.
In any case, it's time to wait and see. This is a dormant stage for the market. Fear is at extreme levels, and the global economy looks on the brink of a large move (either a final blowoff mania phase or a breakdown, beginning a recession). Exciting times, to be sure!
This is not financial advice. Just wanted to write about how I'm viewing things at the moment, without being to exuberant or irrationally hopeful. Skepticism is important in investing.
-Victor Cobra
Note
If we look at the linear chart, XLM is finally out of the wedge. It's just barely poking out on the log chart as well. It was really the linear chart falling wedge breakout for Bitcoin back in February that told us it was reversing. It'll be interesting to see what happens. XLM could just ride down on the wedge support or fail, but this is a technical buy signal. Risk management should probably be used for active trading.
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