Crypto Alpha Report - January 7Happy Tuesday, friends! With the current AI Agent narrative likely leaving your heads spin as you scramble to deploy capital, let’s reflect on how to truly make money consistently in this market, regardless of what the meta is.
Well, what’s the secret? Scrolling X all day and night? Buying whatever your favorite influencer shills? Listening to every Bankless podcast to keep up on the current alpha?
While all of those things can sometimes get you into profitable positions, if you can’t define your strategy to me within 60 seconds, you are unlikely to achieve long-term success in this market.
Countless cryptocurrencies will go up and come down. You do not, nor does anyone, have the capacity to be involved in every successful project. You only have so much time in the day. You must narrow your focus. You must narrow your entry and exit conditions. You need, in short, an actual strategy.
Trading without a strategy is riding turbulent waves of emotions: utter joy when your portfolio goes up, utter terror and uncertainty when it goes down. Inevitably, you will make emotional, impulsive decisions on whether to buy or sell, often determined by others’ “alpha.”
There is no single successful trader out there who outsources their decision like this. Every successful trader I’ve met and interviewed can define their strategy within 60 seconds. That doesn’t mean the strategy has to be simple, but it has to be definable and actionable.
Example: “I monitor high-volume projects fitting the current meta-narrative. I then wait for a bullish MA cross on the 1H timeframe and go in with x profit target and x stop loss. My win rate is X. My average win per win is X. My average loss per loss is X.”
There could have been a few more sentences to describe the entry and exit conditions; some traders don’t use hard stops or profit targets and instead rely on alerts or technical signals. There’s nothing wrong with this. But your strategy needs to, in essence, be quantifiable like this. Otherwise, you’re just randomly buying and selling. Your strategy is luck. Unfortunately, this market does not reward those who depend on luck; it rewards those who put in the hard work.
If you know you’re just relying on luck, I challenge you. Spend one week trading a simple strategy. It can be on Bitcoin, on any timeframe, or Solana meme coins. I don’t care. Just sit down and define a strategy. If you can’t be bothered, I’ll supply you with one.
1H Timeframe: Bullish EMA Cross - 21/55. Your buy condition is active when the 21 EMA crosses over the 55 EMA. That’s your overall “we can buy” signal.
Entry Signal: 5-Minute Timeframe: Buy when the 5-minute RSI is oversold (below 30%).
Exit Signal: 5-Minute Timeframe: Buy when the 5-minute RSI is overbought (above 70%).
Sell at a loss if the One-Hour 21 EMA crosses below the 55 EMA.
It is a simple technical strategy that works very well in bull markets. I’m not promising you’ll make money, but you have a good chance to. But I want you to focus on your mental and emotional state over the week of this challenge. You will notice how in control you feel and how calculating you become. You will no longer be gripped by anxiety or a feeling of missing out. You will simply be waiting for your opportunities. Ultimately, you can reflect on what went well, what went wrong, and how you could improve. This is the mindset I want you to carry forward because once you start trading with a strategy, you’re unlikely to look back.
Onwards and upwards, friends!
Crypto Market Update
Stablecoin Dominance
There is a sizeable move up in this metric today, +4.80%. Daily Momentum returned to the upside after our momentum oscillator neared -2.00% conditions. This metric is still in a downtrend, and we need to see a significant market pivot to reverse that trend.
Bitcoin + Stablecoin Dominance
A movement up of 0.35%, so we know this movement is dominated mainly by the significant increase in Stablecoin Dominance. In other words, there is a big glut of profit taking on Bitcoin. It's still in a bearish trend.
Altcoin Performance Relative to Bitcoin
Altcoins are also taking a slight hit today, as this metric is down by -0.55%. Still in a bullish trend, so I still expect altcoins to perform favorably.
Bitcoin
Bitcoin is experiencing a lot of profit-taking today, as traders capitalize on the ‘Bull Trap’ zone above $100,000.
Trends
5M: Bearish
30M: Neutral
1H: Bullish
4H: Bullish
D: Bullish
W: Bullish
Significant selling pressure has caused Bitcoin to lose its lower timeframe bullish trends. Although the selling today was quite dramatic, there’s not too much concern for alarm technically. Daily and Weekly bullish trends remain intact, with trend support from $92,000 - $94,000. The 4H chart suggests ranging price action, oscillating around the 4H 200 SMA. A higher low above $94,000 would confirm a local bottom and a second push above $100,000 - likely beginning to form a bottom within the next few days.
Key Levels
POC: $93,637
VWAP: $99,514
Value Area High: $101,524 - $103,455
Value Area Low: $95,570 - $97,500
Next Liquidity Zone Above: $100,400 - $101,120
Next Liquidity Zone Below: $95,499 - $95,770
The bottom shelf of the Liquidity Zone Bitcoin currently trades in terminates at $96,331. There is a void in liquidity slightly below that at $95,900. The first group of buyers have stepped in on Bitcoin between $97-$98K.
Strategy:
Significant liquidity was just tapped, as stops below $97,500 support just got taken out. There is potential to see a short-term bounce to $99,000; however, that’s a much higher risk. Catching falling knives is dangerous, particularly with Bitcoin.
Big picture: a higher low above $94,000 is necessary for continued price appreciation throughout the next week in January. This is a bit early cycle-wise to expect a reversal in Bitcoin’s price; we currently estimate that early January should be bullish for Bitcoin - however, rules exist to be broken.
Regardless, our first limit fill at $97,000 was just filled, and we have an additional order at $96,000. Our target for BTC in January is $105-108,000.
