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Crypto Technical Analysis Report | 20th-May-2022

The crypto market is in red as they felt the intensity of the meltdown in the financial markets. These unsteady waters have been pulling the crypto market sentiment towards fear. The flagship crypto Bitcoin witnessed a minor sell-off but its cousins altcoins faced heavy losses. The market is finally in the green after witnessing all the major coins crashing mid-week, with the market capitalization of $1.28 Tn up by about 3% in the last 24 hours. 

The fiasco of Terra (Luna) has pushed the whole crypto market into a doldrum and has wiped out $40 Billion from the pockets of the inventors. The rising inflation, as well as the slowing growth, has been a major reason.. especially in riskier assets. On this 17th of May Jerome Powell, the Fed chairperson told the Wall Street Journal that interest rate hikes would continue by 50 basis points until inflation is brought under control. Powell’s emphasis on aggressive policy suggests that monetary conditions are likely to remain tight in 2022, which could limit the upside for risky assets.

On-chain market data shows that  Bitcoin (BTC) has historically bottomed when the price fell below the realised price. However, with the exception of the 2019-2020 bear market,  Bitcoin’s price stayed below the real price for between 114 and 299 days in previous bear cycles. This suggests that unless the macro situation is favourable, a quick recovery is unlikely. For the past nine days, the daily closing price of Bitcoin (BTC) has fluctuated in a narrow range between $28,700 and $31,300. The May 12 crash of TerraUSD (UST), previously the third-largest stablecoin by market cap, weighed on investor sentiment. The path for a recovery in bitcoin price looks murky after the composite stock index Nasdaq dropped on May 18. It plunged headlong by 4.7%. 

Disappointing quarterly results from major US retailers fuel recession fears, and on May 18, shares of Target (TG) fell 25%, while shares of Walmart (WMT) fell 17% in two days. The prospect of an economic slowdown pushed the SandP 500 index to the edge of the bear market territory, a 20% contraction from its all-time high. Also, the crypto asset’s recent  price drop has been costly to exploit (long) buyers. Open interest for options expiration on May 20  is $640 million, but the actual figure will be much lower as bulls have been overly optimistic. Bitcoin’s recent drop below $32,000 surprised buyers  and only 20% of  May 20 call options were placed below that price level.

While the current crash in the US stock and bitcoin markets bears similarities to the March 2020 crash, the recovery may not follow the same trajectory as market conditions are different. In 2020, the Fed supported markets with unprecedented stimulus, but in 2022 the focus will remain on reducing inflation and tightening monetary policy. 

Technical Outlook:

BITCOIN:



BITCOIN has been mostly trading in red since the start of this month and the prices have plunged almost by 34.5% making the low of $25,338. The asset has made a ‘Long Legged Doji’ candle and has tested the support of 200-week Moving Average and showed signs of recovery. Currently, on a daily time frame, BTC is consolidating and trading in a range from $28,800 to $31,000 with declining volumes. The RSI is rising from oversold levels. To witness a rally, BITCOIN needs to trade and sustain above $32,500 whereas $28,800 and $25,500 will act as strong support for the asset.

ETH:



ETH witnessed a sharp fall after facing stiff resistance at 200 Day Moving Average, Horizontal trendline, and 20 Day Moving Average. The asset broke the psychological level of $2k and made a weekly low of $1,763. ETH has taken support at the key level of $1,774 (127.2% Fibonacci retracement level) and the horizontal trendline at $1,711 and has bounced back above $2,000. Currently, the asset is consolidating between $1,900 to $2,155 and is facing stiff resistance at $2,150.  Once the breakout occurs above the resistance with good volumes then we can expect some relief rally and can surge up to $2,400 levels.

SOLANA:

On a weekly Time frame, Solana was facing stiff resistance around $45-$50.

After giving a breakout and a weekly close above $50 it witnessed a massive rally and it surged up to $259. Post this move, SOL witnessed a sharp fall and the prices plunged to $37.37.  Currently, the asset is trading in a downtrend forming a ‘Lower Top Lower Bottom’ pattern. Solana is trying to take support around the same key level $45-$50. The lower longer shadow indicates that the bulls are buying the dip. If the asset holds, sustains, and gives the weekly close above $50 then we can expect a relief rally up to $80 whereas a close below $45 will lead to further downfall.

Weekly Snapshot:

USD ($)12 May 2219 May 22Previous WeekCurrent Week
CloseClose% ChangeHighLowHighLow
BTC$29,048$30,3144.36%$26,350$36,130$31,308$28,703
ETH$1,962$2,0182.89%$2,697$1,748$2,147$1,907
SOL$44.68$52.2116.85%$84.65$38.05$53.62$46.22
Cryptocurrency1w – % Vol. Change (Global)
BitCoin (BTC)-37.68%
Ethereum (ETH)-39.63%
Solana (SOL)-26.56%
Resistance 2$36,500$2,450$1.00$80.00
Resistance 1$32,000$2,150$0.85$65.00
USDBTCETHMATICSOL
Support 1$28,800$1,900$0.60$50.00
Support 2$25,500$1,750$0.35$37.50

Market Updates:

  • US President Joe Biden’s administration will press Congress to demand cryptocurrency exchanges keep their customers’ money separate from their own corporate funds, according to a person familiar with the plan that could constrain the way the industry does business.
  • Swiss-based investment product firm 21 Shares is launching two crypto exchange traded products (ETP) in the U.S. as the firm seeks to capitalize on global crypto investor demand.
  • Bitcoin has the potential to disrupt existing traditional payment networks, especially with the growing adoption of the Lightning Network, executives from payments company Block (SQ) said during its virtual investor day.
  • The Ethereum ecosystem is set for a “huge testing milestone,” with the Ropsten testnet Merge set to be conducted on June 8.

*Sources of charts: https://cryptowat.ch, https://pro.zebpay.com/trade/USDT-INR

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 cryptocurrencies 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.

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