Everyone’s asking ‘is this the end of crypto?’ again. I love it when this happens - it’s a great contrarian indicator for a capitulatory bottom. There are several other things pointing to the current action potentially being a great buying opportunity.
To start today, I want to zoom right out and take a look at the super long-term picture, to remind us where we all are:
Here’s our long-term log uptrend channel (Bitstamp) dating back to 2011 and representing approx 300% y.o.y. growth in USD terms. This channel is the single most important thing I chart in crypto – if a break of this trend were to be confirmed via e.g. a failed backtest and/or heavy volume selloff, then we’d need to start to talk about a changing paradigm. Until that happens however the trend is our friend.
Note the similarity between the 2013/2014 bubble and the 2017/2018 – both had dual downtrends from the highs (blue/blue dashed, as discussed last week) – and the breakout above those downtrends triggered sideways movement. The one difference this time that it would be remiss of me not to mention is that MACD is lower and turning over – showing momentum remains low – this and the break below the uptrend channel over the weekend are an amber warning sign – however zooming in shows a different, much more bullish story.
Zooming into a daily chart on Bitfinex shows us daily RSI (topmost oscillator under the chart) is at an extreme low of 16.8. I went all the way back to 2012 and the only other time it’s been this low was in the 2015 post-breakout flashcrash (circled) when it hit 16.2. This move confirmed the lower bound of the uptrend channel at the time, and I suspect we’re in the process of seeing a repeat of this.
Zooming in further still, let’s rewind and talk through the last few days. BTC was challenging the top of the purple bullish descending wedge on very low volume, tracking a gentle uptrend (blue dashed). This crunch point/apex coincided with the BCH hard fork, which unfortunately caused some Y2K-style jitters and a move towards safety. The result was ultimately a break of the dashed-blue trend and a decent-volume cascading selloff.
Last Thursday (15th) the descent was halted by a high volume hammer off the bottom of the purple wedge – showing strong support here and reconfirming the wedge and the main channel bottom...
Since then we’ve done a further small leg lower, straying out of the wedge and slightly below the channel bottom – which is where we find ourselves, with daily RSI of 16.8.
This is a contrarian trader’s dream setup – when RSI is this overextended and we overshoot key resistance, that resistance frequently acts like an elastic band for the action – and the band is currently pulled taught. In short: I’m expecting a strong countermove upwards back into the channel.
Conclusion: despite the hysteria, this is all still noise at the end of our bullish wedge, and our main uptrend remains in play until proven otherwise. My feeling is calmer heads will prevail.
ETH, like BTC is oversold (RSI) – and is probing below the support at $158. Like BTC volume is waning a little as it descends – I see no cause for panic in this chart yet given the RSI. Probability favours a bounce at some point soon.
Despite straying slightly out of the bullish ascending triangle it was in, XRP has held up valiantly, clearly outperforming everything else here. This bodes well on a turnaround from BTC. RSI remains bullish.
LTC is below support and back below its downtrend, however RSI again points to a probable bounce in the near future. The $55 level (which I’ve marked as ‘major support’) is likely to be decent resistance, so gives us an interim target on a bounce.
I scratched my head this morning about which BCH to chart, Spartacus-style. A few exchanges are still apparently quoting a sum of the BCHABC and BCHSV prices, and each of the forks alone has too little history to yield useful signals, so I’m sticking to this amalgamated price today, reflected in Bitstamp’s pricing.
This shows us that despite the furore, BCH is still within the bullish descending wedge it’s been in – so, while turbulence has been high there remains no change to the underlying technical picture for now, other than that the recent attempt at a rally was negated.
Ultimately I suspect the current plunge may prove to be a superb spearfishing opportunity. Here’s hoping – good hunting all.
BCB Group has no position or opinion on the price of Bitcoin or any other cryptocurrency and this article should not be construed as analysis of or advice regarding the current or future market price of Bitcoin or any other cryptocurrency. No analysis of the price movements of BTC or any other cryptocurrency or any other asset provided by BCB Group should be construed as an invitation or inducement to buy, sell or otherwise to trade BTC or any other cryptocurrency.
Strategy and Execution Partner
Jon is BCB’s head strategist, with an emphasis on market intelligence. An expert in behavioural science and highly experienced chartist, Jon has been providing BCB’s clients with crypto and macro technical analysis since 2017, and has quickly gained a reputation for accuracy after correctly calling the December 2017 top and August 2018 bottom.
Jon is also MD of British music production company Poseidon. He began studying technical analysis in 2000 due to its overlap with behavioural economics – much used in Poseidon's international marketing work, which has seen the company achieve three iTunes US number one albums among other notable successes.