Beginning of Freedom – Issue #93

Everyone was praying for volatility and, well, looks like we got it—just not in the direction that people were hoping to see. As for what caused the dump on BTC, there were many narratives going around, but the most important one was, unsurprisingly, about Elon Musk: on Thursday, SpaceX revealed that it had sold all of its Bitcoin holdings. This sounds like a good enough reason for the dump, especially since it happened in the same week that Prime Trust (a fairly large crypto custodian) filed for bankruptcy.

But in reality, it’s not just about Elon, and the Prime Trust bankruptcy is about as surprising as Gensler refusing to answer a simple question on whether something is a security. Instead, there are two other factors that are even more important. First, trouble has been brewing in equities. We all know that a lot of people treat Bitcoin like a highly volatile tech stock, so how does that sector look?

$XLK Tech sector ETF

As you can see, the chart doesn’t exactly instill confidence, so it’s no surprise that it didn’t take too much to start a sell-off on BTC. If we add to this the second relevant factor, namely the fact that open interest on BTC was getting extremely high, that gives all the conditions that are necessary for a small news-driven dip to turn into a liquidation cascade.

Bitcoin

Bitcoin Weekly

Bitcoin Daily

Not so much boring price action anymore as Bitcoin crashes ~9% in a 15 min candle.

Now that we discussed the potential reasons behind this sudden dump in the fundamental section, let’s dive straight into the Technical Analysis.

On the Weekly Timeframe, this move wasn’t entirely out of the blue, as we’ve been hinting at in several past newsletters. It looked like a Swing Failure Pattern, the market was coiling, and a significant move was expected. At the time of writing, Bitcoin is hovering just above its higher low at $24,800. Interestingly, the $25,150 mark, which Bitcoin briefly touched during its descent, has historically been a robust level. It’s been tested and held multiple times, often leading to sharp reversals. This sets the stage for a new trading range, provided $25,150 remains support.

Switching to the daily TF, Bitcoin seems to have taken the bearish route we outlined last week, breaking down from the trendline. This isn’t great news for the bulls, signaling more potential pain. BTC also fell through the crucial daily support at $26,500. If it doesn’t claw its way back above this level soon, we could be eyeing the next supports at $24,300 and then $21,890.

SPX, Gold and DXY

S&P 500

Gold

U.S. Dollar Index

Stocks are on a slippery slope.

The SPX has dipped below the equal highs we discussed last week, bouncing near the pivotal 4325 breakout level. If this level crumbles, bulls might want to brace for a rough few months ahead. Some traders are saying that this entire rally was built on shaky data, and the retrace began as ratings took a hit.

Gold – no surprises here.

Gold’s much-anticipated breakdown is here. The formerly strong 1916 level has given way, leaving a big gap before the next significant support. What’s more, Gold’s recent dip into lower lows confirms its bearish structure. I’ll be keeping an eye out for any potential retest of the 1916 mark, which could offer some short opportunities.

U.S. Dollar Index continues to show strength.

With risk-on assets taking a hit, it’s no surprise to see the Dollar Index thriving. It’s surged to that all-too-familiar 103.66 level that we discussed in past newsletters. This point is a confluence of resistance and the descending trendline. If it breaks out, it could spell further doom for both crypto and stocks.

Ethereum

Ethereum/USDT

Ethereum/USDT

Ethereum mirrors Bitcoin’s breakdown.

With a staggering ~16% drop on the weekly candle, Ethereum dipped below the $1600 mark. This downturn wasn’t exactly out of the blue, given that ETH had already lost its trendline a week ahead of Bitcoin. The $1768 level barely put up a fight, and now Ethereum seems to be ranging between $1591 and $1768. But, as we’ve pointed out before, Ethereum has been shadowing Bitcoin’s moves for a while, and this trend is likely to persist at least until an ETH ETF gets the green light. With the SEC potentially approving an Ethereum futures ETF by October, it’ll be intriguing to see if this narrative gains traction.

This week, I’ve also thrown in the ETH/BTC chart. Interestingly, Ethereum seemed to weather the recent storm a tad better than Bitcoin, but it’s still glued to the 0.065 BTC resistance. The descending trendline is inching closer and will soon be in confluence with this resistance. Could the buzz around the ETF push ETH past this barrier? Time will tell. But one thing’s for sure: if it does break this level, there’s a big gap up to 0.077 BTC, and I’ll make sure we enter and catch the move.

Blood’s content recap

The Name of the Game

“They want you to Die from boredom and from Fear.

And guess what, it’s working. Most of you are bored of this market or feared that we’re going to multi-year recession where there is no place for Crypto.

If you find yourself in this, please place bids here and around 20k if gap will be actually closed, and come back in One Year.

This shit ain’t scarry for me. Week by week I’m adding more to increase BTC and some altcoin exposure.

One year will pass by Fast and then I’ll be called Lucky again.

Life changing investements are done right now. Add more when there is absolute agony when it’s so bad you try not to vomit in your mouth. That is the best time to go all in.”

Concluding notes

With the price action that we’ve seen over the past weeks, until the downside resolution, it’s no surprise that a lot of traders have been turning to on-chain low cap tokens to get a hit of that sweet drug called volatility. There’s nothing wrong with that—memecoins can be extremely lucrative, and you don’t need me to tell you that—but what’s problematic is the way people on Crypto Twitter (I’m still calling it that for the time being, until we decide on a name that doesn’t sound like a porn site that has a token for some reason) are talking about it lately. Worst of all, it’s as if shilling sub-100k market cap coins suddenly became acceptable, which it didn’t and never will—if you see an account with a huge following blatantly shilling something that they can pump 10x with one tweet, then all it tells you is that they’re really desperate for money. Just ask yourself: why would a good trader, who is supposedly profitable, ever need to share a “trade idea” on something with less than $100k of total dex liquidity?

Again, I don’t have anything against degen-style on-chain trading, but throwing away one’s integrity and reputation just to make a few ETH is disgusting. Besides, all the talk about “Onchain Summer” is ridiculous; there’s absolutely nothing going on right now that could be compared to DeFi Summer or anything of the sort. If you look at the total market cap of crypto without BTC and ETH prior to the recent dump, you’ll see that it has barely budged from the yearly open, and it’s even down a bit since early May, when memecoins really took off. What does that tell us? Simply put, there’s no new money entering the space and pumping all of our bags, unlike in 2021, when the total market cap excluding BTC and ETH went up almost 10x. Instead, it’s just the same pool of capital moving around from one memecoin to the next. In that environment, shilling memecoins isn’t exactly the responsible thing to do.