It’s Time For Risk On – Crypto Piece
Altcoins Look Ready
Bitcoin hit the $38k region last week and since then pulled back to the $35k region earlier this week. The $37.5k region was a level we had been eyeing for over a month, and had also highlighted it in the 27th October Crypto Piece titled “Bitcoin Is Gearing Up For $37.5k.” What’s next? This is the question on a lot of people’s minds. Let’s use Macro, Technical Analysis, On-chain Analysis, and Cycles to figure this out. As a Money Making bonus, we’ve also provided 2 attractive altcoin setups towards the end of this article.
AUD/USD Ratio:
This is a little known about ratio in the crypto world but has been a good indicator from a zoomed-out approach. Typically, USD outperforming Australian Dollar (risk-off move) has led to sharp drawdowns in Bitcoin (red lines), and Australian Dollar outperforming USD (risk-on move) has led to sharp rises in Bitcoin (green lines). Please note that this relationship is shown on a monthly chart because this relationship might or might not hold true in day-to-day price action, but is a good metric to consider when trying to understand the bigger picture for Bitcoin from a Macro standpoint.
Bitcoin Weekly Levels:
Bitcoin is currently consolidating between the $35.2k and $37.5k level. A close above $37.5k opens the doorway to $41.2k, which is looking more and more likely by the day. A close below $35.2k would likely end up with a sharper pullback down to the first support zone (in green) that sits at around $30.5k - $32k. While a pullback to this region would present a gift of a buying opportunity, max pain is for Bitcoin to either continue moving sideways to break and attempt the $41.2k level.
USD Indicates Risk-On:
The USD chart ($DXY) adds further confluence for the bullish bias. It has just signaled the green light for risk-on behavior. After breaking above the 105.58 region, USD has fallen back into the range of 100.95 to 105.58 indicating that the break above 105.58 was just a deviation. Remember how the earlier deviation to the downside ended? To refresh memories, it ended with risk-on assets declining sharply as USD rampaged higher. Now we have the same move (deviation) flash in the other direction suggesting downside for USD to at least the 103.32 region (mid-point of the range), and most likely the 100.95 region (lower end of the range). This gives risk-on assets ample amount of runway.
Low Liquidity = Bigger Moves:
Currently, the liquidity present in the crypto market is still low, which allows for big moves to occur with lesser amount of capital required. This chart (courtesy of Glassnode) shows the Dollar figure it takes to make a $1 move in Bitcoin’s market cap.
In late-stage bull markets (orange zones) more than $0.75, and often over $1.0 in capital inflows is needed to achieve a $1.0 market cap change for Bitcoin. This has historically been an unsustainable condition. On the other hand, during bear markets, this number drops to $0.10 to $0.30. This leads to more volatile price swings, as small capital inflows or outflows affects the price in a bigger manner.
This metric is currently close to the long-term median (in red) of $0.25, suggesting that a capital inflow/outflow of $0.25 is creating a $1.0 change in Bitcoin’s market cap. The current setup is primarily due to the historically low available supply, resulting in liquidity books being thin.
2nd Half Of November Is Here:
3 primary Cycles, namely, Cycles Composite (our “Secret Sauce”), Time & Energy Cycle, and Time Cycles, all point to a bullish bias for the rest of November. This would suggest that the $41.2k is likely the next level that Bitcoin is gearing up for.
Double Risk-On:
While Bitcoin is usually a risk-on play and is currently showing strong signs of more upside, there’s an even higher risk-on play for cryptos. Yes, you guessed it right, it’s altcoins! This chart shows the market cap of cryptos excluding Bitcoin and Ethereum relative to Bitcoin. In other words, when this ratio moves higher then altcoins (excluding Ethereum) outperform, and when it moves lower it means that Bitcoin is outperforming the other altcoins (excluding Ethereum). Recently, this ratio confirmed a bullish RSI divergence, signaling an incoming mini-altseason as altcoins (excluding Ethereum) are likely to outperform Bitcoin.
As for Ethereum, the ETH to BTC ratio has bounced from the value zone (in green) that we’ve highlighted for a few weeks at this point, indicating that altcoins are the more profitable bet in this market environment. The 2 resistance levels for this ratio to keep a close eye on are the 0.0596 and 0.0635 region. A break above the resistance zone (in red) would likely signal a reversal, but we can evaluate that if/when we get there. For now, it’s time to enjoy the mini-altseason that the crypto market is giving us!
2 Altcoin Setups:
In our previous Crypto Piece, from 5th November, titled “Bulls Remain Unstoppable”, we gave a bonus altcoin setup (Dogecoin, $DOGE) for those who missed our earlier setups from early October (on Chainlink, $LINK and Oasis Network, $ROSE). This was with the intention of helping our subscribers Make Money. This setup is still valid and in progress. Given the optimal environment for altcoins, here are 2 additional attractive setups that are currently at their macro downtrend line, but a break of this level should result in significant upside.
Polygon ($MATIC):
The key weekly level for $MATIC to break is the $0.98 - $1.00 region. A confirmed weekly close above would put the target of $1.18 and if that’s broken (very likely) then the $1.71 region into play, albeit with pullbacks along the way. These 2 important resistances can be profit taking zones. The mid-point of this range (between $1.18 and $1.71) around $1.44 should also act as slight resistance, another potential profit taking level. Aggressive stop losses can be kept below this week’s low (at $0.84) and more conservative stop losses can be kept under the support zone in green (at $0.75). These stop losses can be moved higher (below the macro downtrend line) once the break above this critical resistance is confirmed, but allow room for potential wicks.
Avalanche ($AVAX):
The key weekly level for $AVAX to break is the $20 region. A confirmed weekly close above would put the target of $27.36 and if that’s broken then the $51.93 region into play, albeit with pullbacks along the way. These 2 important resistances can be profit taking zones. The mid-point of this range (between $27.36 and $51.93) around $39 should also act as resistance, another potential profit taking level. Aggressive stop losses can be kept below this week’s low (at $15.60) and more conservative stop losses can be kept under the support zone in green (at $10.10). These stop losses can be moved higher (below the macro downtrend line) once the break above this critical resistance is confirmed, but allow room for potential wicks.
Remember to take profits along the way at logical resistance levels to ensure that the initial investment is secured as soon as possible. Cycles Edge hopes that our subscribers evaluate these setups based on their own risk tolerance and use these opportunities to Make Money. If you do Make Money from these setups, consider subscribing to our paid subscription since we’ll be sharing additional Crypto Money Making setups for our paid subscribers from the coming week. Until next time!
Disclaimer - All materials, information, and ideas from Cycles Edge are for educational purposes only and should not be considered Financial Advice. This blog may document actions done by the owners/writers of this blog, thus it should be assumed that positions are likely taken. If this is an issue, please discontinue reading. Cycles Edge takes no responsibility for possible losses, as markets can be volatile and unpredictable, leading to constantly changing opinions or forecasts.