October 2021, #2

This week we discuss the Bitcoin and Ethereum price action, part 3 of our trading system series, why alts are losing momentum to Bitcoin and spotlight Binance coin (BNB) and Polkadot (DOT)

ecoinomics

Oct 13, 2021

This Week.

1. Bitcoin retests weekly resistance. Ethereum price action

2. Getting your trading system right (Part 3)

3. Alts bleed

3. Zoom-In: Binance Token (BNB) and Polkadot (DOT)

Dear reader,

Thank you for subscribing to eCoinomics. We appreciate your readership and hope you are here with us for many more issues.

When we thought about writing a weekly newsletter, we weren’t thinking about an audience. It was more about reminding ourselves to stay the course and not act against our sober minds once money was on the line.

It’s a reminder not to FOMO or be afraid to take a trade because we fear price might dump past what would have been a good entry. So in a way, that’s exactly what you get by reading eCoinomics.

We discuss macro technical and fundamental analysis away from low time frame noise that helps build a long-term trading mentality. You also get news and we discuss the projects we are looking at for the week in the Zoom-In section.

These are essentially letters to ourselves and we hope you can gain some useful insights every time you read them.

You may contact us for any reason at ecoinomicsweekly@gmail.com. We host a twitter spaces session called #CryptoRoundUpAfrica with some of our best buds on Twitter every Thursday at 10 PM WAT. Follow us @avogroovy, @oloye__ If you missed any of the Twitter live sessions, check out the podcast at https://linktr.ee/cryptoroundupafrica

The eCoinomics team.

Bitcoin retests weekly resistance.

The Bitcoin rally continues.

Sliced through last week’s charted NTA like butter, but stopped short of weekly resistance. There are different theses for the strong buy pressure we have seen from Bitcoin all month but the leading narrative is that traders are front running the futures-based Bitcoin ETF proposals. This reminds us of the Wall Street saying, “buy the rumour, sell - you what, never mind-.

-Does anyone remember the CME listing of Bitcoin futures in 2017?

- What about Coinbase direct listing?

- Bitcoin futures ETF may be in the same category. The only difference this time is, no new All-Time-High.

Anyway, this is us thinking out loud.

What happens?

More bad news for alts actually, at least short term.

Scene 1: ETF proposal gets approved. News gets sold, alts bleed.

Scene 2: ETF proposal gets approved. News gets FOMO-bought. More reallocation into Bitcoin. Alts bleed.

Scene 3: ETF gets rejected, Bitcoin sell-off. Alts bleed.

Scene 4: Approval gets dragged out into 2022, Q1. Bitcoin enters price discovery, bullish ETH signals an Alts season.

Plan accordingly. Might be wise to take some chips off the table.

Now to price action.

$58000 remains a supply zone and the next significant area Bitcoin has to flip to continue its journey to retesting the previous all-time-high. Local support at $53000 which was our NTA that was flipped last week. We expect this area to hold as support in the short term. If that level gets flipped back, we’ll be watching the $50000-$48000 zone. We expect buyers to step in at that level.

ETH/BTC

Ethereum remains weak v Bitcoin for all the reasons we have written about already.

The King of Alts lost its multi-timeframe support of 0.064 BTC, and that area is now acting as resistance. We look lower to the 0.057 BTC support as the area of support if more sell-off were to occur. We expect Ethereum price to have a weekly close above this area.

Market cycles historically go as such. Bitcoin-Eth-Large caps-Mid caps-Small caps.

This means Ethereum breaking and reclaiming the 0.065 BTC level may signal the beginning of the Alts season.

So this is something to keep in mind.

Ideally, Bitcoin goes into price discovery here, which allows traders to reallocate into alts and what better to signal this than the King of Alts?

Watch this space.

2. Getting your trading system right (Part 3)

…..contd

3. Replace emotions with procedures and systems.

As we have established, the only objective measure of a token is its price action. The market doesn’t care about your feelings.

In as much as it’s impossible to trade without emotions. Building and staying true to a trading system is a much better option. Also, if you understand your own destructive paths, it’s easier to keep them out of your trading by building a system that helps you succeed in spite of these emotions. Most of the decisions that go into building a system are made with a sober mind and if you trust this mind over your emotive state, usually it’ll result in a better outcome.

Forget, buying the bottom and selling the top. Because there’s no objective way to know this before it happens. It also implies that you know what other traders don’t. The chance of that being the truth is little to none.

Okay, maybe you get lucky and call a top. What this does is feed your ego which will most likely lead to future failures.

This is why understanding market trends in crypto is very important. Stay bullish for as long as the price is bullish and once the structure is flipped bearish, then go bearish. This means selling resistances and buying supports. This takes most of the stress out of trading.

Building a good trading system takes most of the emotionally charged decisions out of your hands as you simply follow your own predetermined rules.

So that when you’re wrong, your ego doesn't take over and when you’re right, your ego stays out of it. It’s just the system telling you when to enter and exit, when to long and short.

Here’s a good read I found on building trading systems. I hope you find it useful.

3. Alts bleed.

Bitcoin is back above $57,000 for the first time since the Market Structure Breakdown (MSB) in May and this time around its presence has come with delight for maxis and for altcoin holders; gloom as their coins bleed.

September was a bearish month as rightly predicted by eCoinomics. Since the turn of the new month, Bitcoin has been in an upward trend. Traders believe the current rally is sparked by news of Bitcoin futures Exchange Traded Fund (ETF) approval by the United States Security and Exchange Commission in the coming days/week.

In anticipation of the ETF approval, traders and whales seem to be front-running the news and spot buying in expectation of approval that may send Bitcoin price to an all-time high. Bitcoin ETF approval gives institutional investors exposure to bitcoin without the direct risk of custody and signals wider adoption. Extrapolating from on-chain data, exchange data and funding rates, current price action is majorly fueled by spot order buys which is a good thing as it indicates a healthy uptrend devoid of risky derivative buys using leverage. However, the downside is that capital is leaving other altcoins into Bitcoin.

As more capital continues to leave altcoins and flow into Bitcoin, the beta value trade at the moment is re-allocation into Bitcoin. Under the current paradigm, Bitcoin price pump means Bitcoin dominance will increase and most altcoins will continue to underperform v. Bitcoin. This will suck more capital altcoins as already evident in bitcoin dominance currently rising to above 46%. eCoinomics have a primer explaining the bitcoin dominance chart here.

Until Bitcoin enters price discovery, funds will continue to flow out of alts.

It is imperative to apply caution as nobody knows for certain how an ETF approval will bode for the crypto market. An ETF application rejection in March 2017 led to an instant 18% drop in price so that is historical precedence to keep in mind in the coming days/weeks.

4. Zoom-In: Binance coin (BNB) and Polkadot (DOT)

This week the entire crypto market has been in a sideways, choppy and down-trending price action without much upside movement for most tokens as Bitcoin Dominance increases. However, they are a few altcoin outliers holding onto their support levels.

The tokens that have caught our attention this week which we think will see potential gains and upward price movement even in current market conditions are Binance coin (BNB) and Polkadot (DOT).

Both BNB and DOT have been consolidating as other L1 and L0 protocols have seen parabolic moves. These lagging coins will have their turn soon. Binance coin (BNB) support sits at $400 (at the time of writing) which is also weekly open. Minor resistance at $450. The Next Trouble Area is the $500 psychological level of resistance which is a significant supply zone. If flipped, the price may retest the pre MSB of $600 that happened in May.

Polkadot parachain auction is launching soon and this could be a potential catalyst for the price. DOT price has to successfully break the $38 area of resistance, retest and reclaim it into support for further continuation with the target being the all-time high area from which price broke down in May. If rejected, significant support sits above $31 on the daily.

It is important to note that the altcoin market is still mostly dependent on what bitcoin does and the overall state of the market. If bitcoin remains relatively stable then we expect the spotlighted coins to perform well.