June 26, 2018 Market Update

During the past week the total digital asset market cap decreased to 245 billion dollars.  As I wrote about last week, this level is of the utmost importance.

The April low, was 244bb.  This week the cryptocurrency market briefly breached this level and traded below it for nine hours.  The market then had some buying which brought it above this key level by a few billion dollars, and for the past 48 hours, digital commodities have been trading near this 245bb level.  I mentioned that a break below this for a time period of more than 48 hours would be a potential signal that this is not the “w” bottom that I was looking for.  My belief is this is a major opportunity, but this is my opinion and based on my statistical analysis.

The cryptocurrency market was not the only asset class to experience some selling.  In a rather unusual week, Gold was down 1.7, the NASDAQ was down 3.3%, rates increased fractionally, and the Dollar was down 1%.

To find a week where Cryptocurrency, Gold, US equities and the Dollar index all decreased is a rarity in recent markets.

The last time anything similar to these markets moving in this fashion was in the beginning of April.  Cryptocurencies, US Equities and the US Dollar Index hit levels where major buyers came to the market.  The only piece that is out of place this time is the precious metals complex, as it too was lower.  After the April lows, digital assets rallied 91%, US equities moved higher by 16% and the dollar index was higher by 6% in the months that followed.

These next charts show the price movement which ensued after the early April lows in multiple asset classes.

 

NASDAQ after April Lows

 

Digital Assets after April Lows

 

 

 

Dollar Index after April Lows

 

 

In my experience, when the majority of markets start moving in tandem, it shows that funds and leveraged investors with large cross asset books are experiencing major balance sheet pressures.

My two major concerns now vs April are:  Gold is not near its highs, Crypto has fallen near the lows for the year while US equities are still quite elevated.

 

But …

 

Unless the 245bb mark is breached for more than 2 days in a row, I am putting new capital to work in the digital commodity space.  This is the retest of the April lows and if my analysis holds true, it will be a major low and will be the opportunity that those who wanted to enter the cryptocurrency market have waited for.

 

I am not one who believes in the buying theory of trying to catch a falling knife, but rather waiting for certain levels to both enter and exit a market where many others may be nervous and acting irrationally.

 

Bitcoin market share increased to 42.5% and as noted in my prior pieces, BTC “dominance” tends to increase in market selloffs.

In April BTC dominance reached a high of 45.5%.  it is currently well below this point, which I see as a bullish point for longs in digital assets.

The April lows for the cryptocurrency market were on extremely low volume.  When the lows were made volume was near multi months lows and was below the 10 billion dollar  per day mark for the first time in 2018.

When I look at the lows made just a few days ago, those too were on extremely low volume, near the 12bb area, and the volume numbers for today were pretty anemic too, briefly going below the ten billion dollar mark.  In the past ten days, volumes have been at or below 12 billion for more than 50% of the time period.  The lack of liquidity in the digital asset market has historically been a major opportunity on the buy side.  A few players are attempting to force some out, so they can take over their positions at favorable levels.

 

One year ago, Bitcoin was $2,600, with a market cap of 43 billion dollars with the total cryptocurrency market valuation being 110bb, and the btc dominance was 42%.

In the past year, BTC market share is nearly unchanged, while the price of BTC is up 134%, and the total market capitalization is higher by 123%.  For the longs in the market, the BTC price is still a major factor, in the price of other digital assets.

 

In times of market stress, many traders and investors simply hit the get out or close positions buttons to stop the proverbial balance sheet bleeding and once they are flat, they will re-evaluate the asset class and how they may choose to allocate their capital.  the reason I mention this is over the past week, $pac had two seemingly positive events.  The addition of two higher profile silicon valley gentleman joining the $pac advisory board, one from twitter and one from Facebook.  The other event was the beginning of trade on a top tier exchange, TOPBTC.

After browsing social media, and the $pac discord channel, it became apparent that many investors and traders of this coin were hoping for more volume and more price action to the upside.  I can say that I myself was as well.

BUT …

What needs to be considered is the fact the broader cryptocurrency market was being sold to a level right near the low of the year.  In my career, when an investor’s capital base is decreasing, he or she is simply looking to exit and will come back to the table at a later date.

The aura that when a coin begins trade on a new exchange it should have a massive rise, is something I do not subscribe to.  In some instances it may, but others it does not.  I look at the exterior factors when analyzing price movement.  Coins listed on the higher volume exchanges in Fall 2017 – Early January 2018, had a higher percentage of large scale increases in the first few days.  In contrast, coins listed in late March – Early April 2018, did not.  These circumstances  are random occurrences as the coins have little say on the exact date and time of the said listing on an exchange.

 

I awoke early in the AM the day $pac was first traded on TOPBTC, so I could take a look for myself and give my own summary.  There was not a lot of $pac available for sale in the first few hours, at or near prices it was trading on other exchanges, and the bids were few and far between.  I would note the broader market was under selling pressure, and in my opinion this could have been one of the reasons.

 

In closing, larger investors in any asset class tend to move towards the highest volume platforms.  The investors in $pac or any other asset class hold the keys to what exchanges will be successful and which will falter.  If investors want to bring volume to an exchange, those familiar with the product can lead by example.  In the world of $pac, if you like TOPBTC, and you put out an offer or a bid, you help increase the chances of bringing other there.

As I look today, $pac is currently trade-able on ELEVEN Different Exchanges, yet today 90% of the volume is in the BTC pairing on Cryptopia and Yobit.  Success breeds success, and volume increases on new exchanges generally start with current investors making some available on these new exchanges.  I fully understand coming from Wall St, that those with a day trading mentality go to the highest volume institutions.  But those with a more passive approach who put offers above the market and have the patience can help build up a book by doing a little at a time.

The results may surprise many, but in order to have a wider investor base, their has to be something for people to buy.  This does not mean that one need to hit a bid, but simply offering a small amount on those exchanges with lower volume increase the chances the volume increasing on that said exchange.

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