Crypto Technical Analysis Report | 16th-December-2022

On Friday, crypto markets were under pressure, mirroring the action in the equity markets following the Federal Reserve’s hawkish comments. The Fed’s action provided a reality check for riskier assets, including cryptos, and wiped out the buoyancy seen in digital tokens earlier this week, which was boosted by in-line inflation numbers. After a long consolidation, Bitcoin was trading above $17,500, while Ethereum was trading below $1,300. Except for Shiba Inu, all of the top crypto tokens were trading in the red. Litecoin, Bitcoin, and Ethereum fell by 2%, followed by Binance Coin, Dogecoin, and Cardano. The global crypto market cap was trading around $850 billion, down more than 1% in the last 24 hours. The total trading volume fell by approximately 27% to $33.7 Billion. 

Bitcoin’s spot trading volumes on crypto exchanges have also fallen significantly, approaching 2020 lows. According to data, the seven-day moving average of exchange trading volume has dropped to $67 million, down from $1.4 billion near the peak of the 2021 bull market. Due to low liquidity and a cloud of uncertainty over the market, there’s a strong possibility that the bear market is far from over. Bitcoin’s realised volatility has also fallen to two-year lows of 22% (one week) and 28%. (two weeks). Moving forward, volatility is likely to remain subdued, with more sideways or slow downside price action. The realised profit and loss metric of long-term holders dropped to all-time lows, indicating possible oversold conditions. Long-term holders experienced comparable losses only at the bottom in 2015 and 2018. The accumulation trend among institutions and whales, which had been negative for the majority of the year, reversed in mid-November. An increase in these investor cohorts’ holdings fueled the bear market rally in the third quarter of this year. Data shows positive accumulation among Bitcoin whales, which are addresses with more than or equal to 100 BTC (worth approximately $1.7 million at current prices). While these whales’ holdings have increased from their yearly lows in a similar fashion to what was seen in July and August, the BTC price is yet to reflect this positive addition.

On December 13, Ether rallied 6.3% to $1,350, mirroring a similar failed attempt on November 10. According to two key derivatives metrics, despite reaching the highest level in 33 days, the gains were insufficient to instil confidence in traders. Traders are relieved to see Ether trading above $1300, but the rally was mainly driven by the November CPI, which came in slightly worse than expected at 7.1% YoY. More importantly, the US Federal Reserve is scheduled to decide on the latest rate hike on December 14th, and analysts expect the pace of rate hikes to slow after inflation appears to have peaked. Data shows that derivatives traders are still in the “Exchange Mode” afraid because the Ether futures’ premium is below 0%, indicating the lack of leverage of buyer demand. However, this data does not suggest that traders are expecting more adverse price moves. For this reason, traders should analyze the Ether options markets to understand if investors are pricing at higher odds for unexpected negative price moves. The odds favour the Ether bears as the bankruptcy of the FTX exchange raised the possibility of tighter regulation.

On the macro front despite underperforming in the wake of FTX, crypto assets remain remarkably correlated during times of macro volatility. This week’s CPI push was no exception, with stocks initially gaining on CPI numbers and then subsequently falling due to rate hikes. The next day, the Federal Open Market Committee (FOMC) meeting ended with a 50 basis point rate hike, lower than the previous hike. Nevertheless, a subsequent speech by Fed Chair Jerome Powell did not bring the desired result. The initial CPI hype died down and on December 15, stocks began falling sharply, taking crypto assets with them. At the same time as stocks and crypto assets fell, the US dollar took the opportunity to regain lost ground. After hitting its lowest since June this week, the U.S. dollar index (DXY) is busy establishing a multi-month floor. DXY is currently realigning to 105 after falling below 103.5 on FOMC day.

Technical Outlook

BITCOIN:

BTC after making the low of $15,476 showed good signs of recovery and was trading mostly above $17,000 over the past 2 weeks. After the CPI data of the US was released, it rallied up to $18,387. The asset failed to sustain above $18,000 and witnessed some profit booking and dropped to $17,275. The higher longer shadow indicates selling at higher levels. To witness a rally BTC needs to close and sustain above $18,000. $15,500 will act as a strong support.

ETH:

ETH taking the support at $1,075 started moving up slowly and surged almost by 25% and made the high of $1,352 but with low volumes. The bulls failed to push the prices above the key resistance of $1,400 and the asset witnessed profit booking and dropped to $1,260. ETH has strong support at $1,250 and $1,000. To further rally it needs to break, close and sustain above $1,400.

BNB:

BNB has been very volatile over the past 45 days. From the highs of $398 the prices corrected almost by 35% and plunged to $250. The asset took support at the key level of $255 and rallied up to $315 within five trading sessions. Post this move, BNB started  trading in a ‘Falling Channel’ and has made the weekly low of $255.5. The asset has taken support at $255 multiple times. If this time too, it holds the support then we can expect the bulls to resume the up-move whereas a break below this will lead to further downfall. To witness a rally, it needs to give a breakout above the pattern with good volumes and close above $336.

Weekly Snapshot

Market Updates

• According to Bahamian court records filed on Dec 14th, Ryan Salame, the former co-CEO of FTX Digital Markets (FDM), told the Securities Commission of the Bahamas (SCB) on Nov 9th that FTX was sending customer funds to its sister trading firm Alameda Research.
• The incoming United States House Financial Services Committee chair, Patrick McHenry, wants the Treasury to delay implementing a section of the Infrastructure Investment and Jobs Act that deals with digital assets and tax collection.
• On Dec 15th, Stellar Development Foundation announced that it has formed a partnership with the United Nations High Commissioner for Refugees (UNHCR) to offer USD Coin on the Stellar network as a form of cash assistance to Ukrainian refugees.

Disclaimer: This report is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation, or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. The Company has prepared this report based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness, or reliability of the information, opinions, or conclusions expressed herein. This report is preliminary and subject to change; the Company undertakes no obligation to update or revise the reports to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Trading & Investments in cryptos viz. Bitcoin, Bitcoin Cash, Ethereum, etc are very speculative and are subject to market risks. The analysis by the Author is for informational purposes only and should not be treated as investment advice.