Crypto - Massive Re-accumulation or Total Collapse?

15 thg 12, 2021

It always boils down to this with crypto. It's a market of extremes, and this is reflected in today's volatility. Practically speaking I think any large whale preparing to take action on today's FED announcement has likely already sent their coins to an exchange and hedged accordingly. The market tends to price in future events, but cannot always foresee true paradigm shifts. Are cryptocurrencies part of a larger paradigm shift, or are they simply a bubble that has resulted from poor economic policy, rampant inequities, and globalization? If crypto is to collapse from here, it's going to be a massive retail exodus from the hyped altcoins of this cycle, and it would unfortunately put many established cryptocurrencies right back where they were in 2018-2019. Even Bitcoin could be pulled back to 14K or lower. So would big money really want this to happen, after the accelerated adoption and acceptance we've seen this year?

As I noted in my last analysis, many legacy coins are on long term support levels. Above, you can see XLM, NANO, LTC, and BTC. What do all these have in common? They are currency coins, and have less of a connection to other bubbles within the crypto sphere (NFT's, DeFI, etc.). Bitcoin has clearly done better than all three, though each of those altcoins has had significant improvements and hit major milestones over the last year. The amount of growth the Stellar ecosystem is experiencing right now is staggering. LTC is about to become the most liquid crypto asset out there with fungibility. NANO is being used to reduce costs associated with Ethereum mining payouts. I'm still holding these coins, for better or for worse. I do not want a collapse here because I think it would damage the space significantly in the longer term. I'd rather see evolution and maturity than complete erasure. It should be noted that institutions are likely NOT in a lot of the newer hyped projects. They're in Bitcoin, Ethereum, and to an extent other legacy cryptos like LTC and XLM. So these coins could be somewhat more indicative of where the big money is going.

I'm showing these charts in line form, rather than using candles or moving averages. This is to remove trader and trend bias. Moving averages for altcoins don't matter so much. It all depends on what Bitcoin (and to an extent, Ethereum) do. Based on these line charts, it is hard to tell the direction. On one hand, it looks like what we're seeing is just a smaller version of the 2017 bubble for these legacy coins. On the other hand, they're sustaining current prices for the longest period in their histories, and are maintaining a range higher than their previous range. This can be observed by looking at my horizontal levels on the charts above. If these new ranges continue to hold as support, these established coins can finally head to new all-time highs and exit these massive accumulation ranges. Below is an example of another coin that has mad significant progress this year (despite poor price performance). The yellow is what I'd expect to see form these other coins, should the current period turn out to be re-accumulation. The red is what I'd expect if Bitcoin has topped - new lows, even lower than 2018.

Here is actual Ethereum price action plotted against the speculative trajectory I drew back in February, 2021:

It's currently dipping below a trendline, and if it can't be reclaimed, it seems less likely Ethereum will see new highs. The next support would be back near 2k. If ETH manages to make a new high, I don't necessarily expect it to break 10k easily, and it may get stopped somewhere before then. All of this speculation is pointless if Bitcoin can't hold up here.

If Bitcoin cannot hold up here, it will likely pull down the coins shown on the main chart for this analysis, and they would likely have an extremely difficult time recovering. They could even be pulled down to 2018 bear market lows, especially if Bitcoin retests $9-14k. For these reasons, it's pretty important for BTC to hold these levels. Here is the current structure, as shown in my previous post. So, is this likely to happen?

The oscillator downtrend must be broken to confirm a "long" signal for traders, but here I'm really speculating on why things could play out in a certain way. My analysis is about understanding the nature of things and why they happen - not necessarily to predict. In the end, it's about not being surprised regardless of the outcome. Much of our anger comes from not understanding. Letting go can be cathartic. There are a lot of things we cannot control. I think understanding, empathy, and letting go are key to our happiness.

As for the market as a whole, TOTAL is still lingering near the highs from earlier this year. The fact that the market has experienced extreme fear while not being significantly down from ATH levels is honestly a little encouraging.

Let's see what happens! Over the course of writing this post, Bitcoin bounced to a new daily high within the local downtrend, so we could be seeing early signs of a reversal. A lot depends on buyer follow-through, and which narrative the media chooses to run with. Are cryptocurrencies the answer to inflation? Not so sure. If you correctly predicted high inflation and bought crypto a year ago, you'd be doing quite well at current valuations. But what about buying crypto DURING periods of high inflation? The demand for cash will need to settle as those who need the extra funds the most to pay down debt will sell assets first. But once that period ends...what happens? I actually think some of the stronger "currency" coins can see a resurgence in this environment, but I've been wrong about these coins plenty of times in the past.

This is meant for speculation and entertainment only - not financial advice.

On another note, there are a couple of projects I'm currently working on. Unfortunately I haven't had the time to put together a podcast yet, due to work and graduate school taking up most of my time. BUT, I have continued to work on my book, and I am also completing some historical chart-based artworks, which I plan to release in a very limited NFT collection. I believe there will be 25 in total, released 5 at a time. I figured some die-hard crypto enthusiasts would be into this sort of thing.

Thank you for reading!

-Victor Cobra