A clockwork FUD on Cryptos

avatar

The sentiment on financial markets is degrading in a sudden way inevitably involving also the crypto sector. Bitcoin has broken with the key level of $40K and the support in the range $38,000-37,500.
The main cryptocurrency has reached a local low at $34,000 where it is currently traded.

The volatility index is heading towards highs, suggesting the storm is not over yet.

What do the on-chain metrics tell us?

image.png

The exchanges are increasingly empty, what moves the markets are always derivatives, where gamblers open exaggeratedly leveraged trades, see chart below.

image.png

Look at the levels of sales and reserves in the spot and derivatives markets.

image.png
image.png

There is no doubt that the market is doped by derivatives. What occurs to me is that this structure has been set up for some time to burst at the most opportune time, i.e. now that there is high uncertainty related to the interest rate hike by the FED. As I have already stated, the increase has been announced but it is not a foregone conclusion that it will take place in March, also because the FED will not attack in a decisive way the weak recovery of the stock markets (which in these days have already discounted most of their value.

Look at the chart below:

image.png

The red arrow indicates STHs or short-term traders. When they are below the white dotted line it means they are selling at a loss. Whereas above in orange are the LTHs, long-term traders who are always selling at a profit but are going lower. What does this mean? That money is moving from the short-term, loss-making traders to the long-term, profit-making traders, but as they get to the dotted line, the selling pressure will decrease because there is no longer an intention to sell at a loss. The sharp movements we see are only triggered by the derivatives markets but it can't go on like this forever!

A buying strategy

image.png

In my opinion, we are in an already interesting area for buying. However, for those who still want to wait, the support at 30 K is the most interesting level. A break below 30 K would take us to $22,500, and this would be a great opportunity in my view.

##Clockwork FUD on Cryptos
The Fed meeting will be held on January 25-26 and I think until then the situation in the markets will not change significantly.

Another blow to the cryptocurrency market came from the Reuters news agency, which published a report on Binance.

The timing of the publication suggests that we are faced with a classic example of clockwork FUD.
The article contains nothing new, but the information is presented in such a way that the largest cryptocurrency exchange and its leader appear as a group of criminals deceiving regulators around the world and laundering money.

Ukraine and Russia are listed as countries where the risk of money laundering is extreme, and Binance is accused of working with customers from those very countries (as if other exchanges, brokers and banks in the financial system don't have customers from those countries).

Almost half of the investigation is devoted to the fact that the accomplices of the terrorist who carried out the November 2020 attack in Vienna were found to have a Binance account. From here, it is inferred that the platform was used to fund the attack (really interesting logic, no doubt...)
Note how the news was spread after bitcoin broke the important $40K psychological level, just after the close of the US session, in the weekend thin market.
The target was reached: bitcoin collapsed to $35K, with the possibility of reaching $30K if the topic is developed further in the coming days.

A few days ago news circulated about an alleged initiative in Russia to ban the trading and mining of cryptocurrency. In reality, the news was deliberately edited because it seems that it is simply a report of the central bank and not a bill.
So for the moment, there will be no particular consequences (if not further FUD on the market).

Practically everywhere one reads that in this context the markets are destined to fall further due to the tightening of the Fed's monetary policy.
Bloomberg talks about it, Arthur Hayes (former CEO of Bitmex back in the limelight after absconding and agreeing with the US authorities) and even representatives of the exchange Huobi say it.

Given that the level of fear in the market is close to absolute values, I would say we are close to a consensus phase, and we know what happens when everyone expects the same thing.
With the low volumes of the weekend, the support at 35K was held but I believe that this week with the markets reopening we will have a clearer picture of the extent of the event.

Of course, after such a violent downside break, the next key support is the one in the $30,000 region.
In the coming weeks, I will try to be more present, to share as much data and information as useful to navigate the stormy market.

Always remember that the best financial opportunities come during periods of violent declines.

Thanks for reading.

Posted Using LeoFinance Beta



0
0
0.000
1 comments