September 2021, #4
We discuss the market-wide dip and the new levels we are looking at for both majors, intro to trading systems, Evergrande imposed sell-off and zoom in on Elrond (EGLD) and Trust Wallet Token (TWT)
This Week.
1. Majors retest support.
2. Getting your trading system right. (Intro)
3. Evergrande grounds the global market.
4. Zoom-In: Elrond (EGLD) and Trust Wallet (TWT)
Dear readers,
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.
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The eCoinomics team.
1. Majors retest support.
Bitcoin price crashed this week, seemingly out of nothing. While we had made a bearish case for September, the wicked red candles caught us by surprise. We expected $42000. $40000, not so much.
The price dump in retrospect was likely triggered by the risk-off attitude of traditional market traders following the Evergrande news. Bearishness in the traditional markets often carries over into the crypto market. Compounded by the “Gensler FUD.” Gary Gensler is the chairman of the SEC. Gensler is not a fan of defi projects as is and continues to call for tighter regulations.
The recent price action puts traders in a precarious situation, $40000 support held -for now. The best-case scenario is a reclaim of Bitcoin next trouble area around $45000. If sellers out-bid buyers at that level, then eyes peeled on the $38000 level. A weekly close below $38000 changes the macro market structure from bullish to bearish.
As far as R:R goes, it’s best to buy a reclaim of $45000, or wait till $38000. Below $38000, we will favour short entries on the first retest of that level as it’ll signal a more aggressive sell-off.
1.1 Ethereum.
Ethereum held our highlighted “max pain support” -$2600 from last week. Ethereum rebounded immediately and continues to trade around $3000. A new channel $2700-$3300 is forming for ETHUSD. So, short resistance and long support. A new “max pain level” at $2300 need to hold to maintain ETHUSD macro bullish structure. A weekly close below that level changes the market trend and we will favour shorting that level on the first retest.
But if our theory of Evergrande being the catalyst behind the market dump holds true, then we’ll be watching how the traditional market reacts to the dip this week. If prices recover across-board, then buying current level may turn out to be good business.
2. Getting your trading system right. Intro
It is possible to win only 30% of your trades and still be profitable overall and it is also possible to win 80% and still lose more money than you make. The difference is in trading systems. While both sentences above may seem counter-intuitive, they are the gospel truth.
A trader may take small gains without really seeing out their trade idea, the same trader may also adjust their stop loss lower to fit their bias when a trade goes wrong. Ultimately, one loss ends up wiping off all gains.
A good trading system does the opposite. One win wiping away every small loss.
So what is a good trading system and how does one build it?
There’s no one size fits all. But here are a few pointers.
1. Price action is the main alpha.
2. Don’t trade against the trend.
3. Replace emotions with procedures and rigid systems.
4. Dips are normal. Nothing goes vertical forever.
We will explain these pointers in subsequent issues. For now, we being mindful of the length of the newsletter.
3. Evergrande Grounds Global Market
The equities market price fell on Monday open and crypto followed suit as fear engulfed the global market on a likely repeat of the Lehman Brothers collapse of 2008 that led to a global market crash with news coming out of China.
The crypto market dipped sharply on Monday at the beginning of the weekly open during the Asia trading session as news filtered through mainstream media about Chinese real estate giant Evergrande Group troubling debt profile and liquidity crisis which sent fear into the crypto market leading to a sell-off and triggering bearish price action.
Bitcoin open price for the week started at $47200 and has fallen sharply losing support levels and is currently down to $40800 as of the time of writing.
Much is still left to be desired as retail investors and traders are waiting for the bleeding to stop and buyers to step in as the entire crypto market capitalization is currently down from $2.12T to $1.75T as the market has lost a significant amount in the last few days. A glimmer of hope may start to emerge if the equities market starts to recover during the week as many believe in the correlation between the equities market and crypto.
3. Zoom-In: Elrond (EGLD) and Trust Wallet (TWT)
if you have made it this far then you would have read how this week’s price action has been one of sell-offs, downtrend and bearish price action across the entire crypto market. Let’s not rehash what has been written already.
The coins that have we are paying attention to this week and think have room for the potential for growth amidst market-wide selloffs are Elrond (EGLD) and Trust Wallet (TWT) tokens. Both of these tokens are currently around critical high time frame support area which has held up pretty well and we have seen buyers step in so far. If Bitcoin stops the bleeding and we witness some recovery bounce we think these tokens will be among the first movers on the way back up.
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.
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The contents herein are for educational, informational and entertainment purposes only. It should not be considered financial or investment advice. We are not financial advisers and have no experience in the field. Please talk to trained finance professional before making any investment decisions.