MaiCoin Digital Asset Weekly, Sep 12 2019

MaiCoin Digital Asset Weekly, Sep 12

Commentary

Digital Asset Weekly out early this week as Taiwan shuts down for the Mid Autumn Festival Long Weekend.

Digital Assets down -3% over the past 7 days with volume up ~ 7%. Breadth remained weak with just 30% of the top 200 coins and tokens ending the week higher. BTC -4% accounted for the bulk of declines. Gains were concentrated in EOS +13%, LTC +3% and ETH +2%.

Headlines this week were largely focused on institutional and infrastructure developments with 1. ICE publishing margin requirements for its Bakkt platform (and possibly executing a $1B BTC transaction), 2. Gemini launching a regulated custodial service, 3. Binance futures gaining to $150M / day and CME futures up to $370M / day, 4. Listed miner Hut 8 expanding capacity and 5. Coinbase considering an IEO platform.

Looking into next week, BTC is getting closer to the business end of the triangular price structure that has been playing out over the past 3 months. With volatility (Bollinger Band Width) down to a 5 month low, price is looking increasingly tightly wound. Typically, this type of scenario is resolved by a sharp move in price. The consensus view at the moment is that price is stuck in a descending triangle that will likely break lower. I remain optimistic though given we continue to ride the long term trend line higher (Chart 7). Near term resistance remains at $11,000. If we break that, $13,000 is in the cards. If we break $13,000 — given how little volume has traded above this level — outlook becomes very bullish. On the downside, the bottom end of the triangle puts support at around $9,300 — $9,500. Below that expect strong support at $8,500 (convergence of 50% Fibonacci retracementand the 2018 full year volume weighted average price).

Thoughts

Great chart this week from PlanB:

The chart suggests that we are just in the start of the latest bull market. Bull markets look to have pretty consistent durations of 130,000–140,000 blocks (1 block ever 10 minutes). The chart suggests that start of bull markets is marked by troughs in BTC mining difficulty adjustments (December 2011, May 2015, and December 2018). Working forward, that implies a top sometime between June and August of 2021.

Each cycle is characterized by smaller returns as Bitcoin market cap, price and volume grow. Extending the previous patterns into this cycle, the chart suggests a cycle peak of at least 1,000% from December’s low of $3,200.

Most investors have made money on BTC

There’s a narrative in the market that a lot of speculative money had their face’s ripped off by BTC’s correction from $20,000 to $3,000. Looking at BTC’s historic volume at price charts and it’s annual Volume Weighted Average Price, I would argue that the vast majority of investors have made money.

BTC’s 2017 VWAP was just shy of $10,000. 2018’s VWAP was $8,500. 2019 is already back above $8,100. Implying a pretty modest loss for most 2017 investors.

Likewise, only 20% of BTC volume has ever traded ≥ the $11,000 level. I think this implies that the vast majority of BTC buyers are actually pretty deep in the money. It also provides a reason why $10,000 and $8,500 have been seen as key technical support levels (2017 VWAP and 2018 VWAP).

It’s also interesting to note how little volume actually traded above the $12,000 level. Once, BTC breaks above this level — there looks to be very little historic resistance.

News

Charts

Chart 1. Price vs Volume
– Price and volume declines pretty much across the board
– EOS a big standout leading gains on big volume

Chart 2. 7 Day % Change

Chart 3. Major Thematics
– Platform tokens mostly higher. Huobi Token the best. BNB the worst.

Chart 4. Volume Z Score
– ETH. and EOS volumes starting to heat up a little bit

Chart 5. Average Daily Turnover, Month
– EOS +18% MoM and TRX +9% MoM Sep volumes on pace for MoM gains
– ETH very close to passing August average daily turnover as well

Chart 6. BTC vs Alts
– Alts continuing to dissapoint

Chart 7. BTC is a tightly wound spring…

– Support:
$10,000 (mid term trend line, 2017 VWAP)
$9,300 — $9,500 (bottom of triangle, lower Bollinger Band)
$8,500 (50% Fibonnaci, 2018 VWAP)

– Resistance:
$11,000 (top of triangle, 23% Fibonnaci)
$12,000 (August price peak)
$13,000 (June price peak)

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