Navigating the first major correction in this bull market.
1 March 2021
We're starting today's newsletter with a quick recap of February.
Overall, this was a strong month for the majority of the cryptocurrencies and quite rightly so. In my previous newsletter I mentioned that February is historically a good month for crypto and six out of the last 8 years have seen a positive market performance in February and this year proved a good one too.
At the peak of the February bull run, we printed a record ATH for Bitcoin at $58,860 and then we started the currently ongoing correction which took us down to $43,300 last week but today we opened the new month with a promising breakout towards the resistance of $48k. All in all, despite the correction we closed February with more than 30% gains and this is quite in tune with previous Feb performances.
Is March going to be as good as February?
It's a tough question to answer but my personal opinion is that it probably won't be.
Best case scenario will be to see another huge institutional investor buy a whole load of Bitcoin and drive the next leg up in the bull run, but historically, March and April are tricky for Bitcoin. April is typically better than March, but this could also be due to previous strong February bull rallies that went into correction mode through March. Is this going to play out the same this year? I don't have the answer.
Today we opened the month on a high note, breaking out of a falling wedge pattern that we've been forming for the past week. This is usually a bullish signal and one that should give us optimism that we've bottomed and on the way up already but there are a couple of warning signs.
First, let me finish the bullish scenario and then we will look at the bearish one.
So, we have a breakout that is now testing the closest resistance level of $48,800, the next price level I'm looking at is 52,300 and then 55,500. From there upwards we have the biggest challenge - the current ATH around $58k and if this is conquered, we can move up to $62k and $66k with ease. But first, we have to first stay above $50k for a while, because this is a strong psychological resistance level. If there is a rally above $51k, then BTC can squeeze shorts to $54k. Another bullish indicator is that we see a falling price with a falling volume since the correction began, so this is a good, but the volume has been decreasing since the beginning of February, so it's giving me some doubts.
On the bearish side of things, I see a very low volume (again) supporting today's breakout, which is not great. Also, we have a bearish looking MACD indicator on the 1hr timeframe and we never completed the C wave of this current ABC correction if we look at the Elliot Wave structure. The C wave should have taken us down to $40k and below. Most likely $38k or even $34k if we had to follow the Elliot Wave correctly. This didn't happen, so it is still a possibility. The good news is that $45k is acting as support. If $45k doesn’t hold, then a move to $38k will be likely.
This is of course, in the short term. In my next newsletter (which comes out in mid-March) I will give you my projection for the rest of the month.
February also gave us a few more record-breaking figures to be proud of.
As Bitcoin jumped above $52k, its market capitalization reached 1 trillion US dollars for the first time in history.
This is a huge milestone for Bitcoin as it cements its role amongst other, more established assets or equities and it becomes more appealing to investors.
Sadly, too many institutional investors are not exactly the crowd that Bitcoin was invented for, but at this point, for us, who are already invested in the coin, their price action is helping gain value, so in the short term it is a positive. Once they own too much of it this could become our worst enemy, but we can't change that, so I won't worry about it right now.
With the correction taking Bitcoin all the way down to $43k, the cryptocurrency had lost more than $200 billion in about a week and is down to $830 billion now.
Are we going to see Bitcoin at $1 trillion mcap again this month?
I think so.
Data from CryptoQuant reveals that the latest price slumps could be attributed to miners realizing profits following the several month-long bullrun. The analytics company followed massive outflows from their wallet into exchanges right before the initial dump from $58,000 to $45,000, and more recently – from $50,000 to below $45,000.
Altcoins’ Bloodbath - Altseason Paused.
As it usually happens when BTC goes down, the altcoin market’s pain is even worse. Ethereum leads this adverse trend and prior to the correction it was traded above $2,050 just eight days ago. It has lost 35% of its value since then.
Cardano (ADA), which was among the best performers lately, has declined by more than 12% to $1.20. Binance Coin (BNB) (-10%) is down to $210, Polkadot (DOT) (-9%) to $31, Ripple (XRP) (-6.5%) to $0.41, Litecoin (LTC) (-10%) to $160 and Bitcoin Cash (BCH) (-9%) struggles at $450.
Further losses are evident from lower and mid-cap alts. PancakeSwap has lost about 25% and is below $9. Polygon (-20%), Ravencoin (-20%), Enjin Coin (-20%), Huobi Token (-19%), 1inch (-18%), IOST (-18%), Pundi X (-17%), Holo (-15%), and NEAR Protocol (-15%) are some of the examples that follow with massive price drops.
Ultimately, the cumulative market capitalization of all cryptocurrency assets has lost more than $400 billion in a week to $1.350 trillion.
This is why I always remind everyone to keep a close eye on Bitcoin, even if you are trading altcoins only. We see that BNB, XEM and ADA are doing better than the rest of the alts (due to their own upgrades coming up very soon or in the case with BNB - their Smart Chain launch just days ago) but overall, we know that when Bitcoin drops a lot (like it did last week), it drags the whole market down with it and alts tend to drop more than Bitcoin.
Such was the case this time too. Bitcoin dropped by 6% first, alts dropped by 10-11% (some more). Then Bitcoin dropped another 12%, alts dropped by 18-20% (some more). The recovery can be random. Today Bitcoin is up 12%, while many of the alts are up 6-7% (ADA, XRP, XLM, DOGE), others are up 14-15% (ETH, LINK, AAVE) and some even recovered 20-30% (BNB, SOL, BAT, CAKE, ENJ).
Everybody who bought ETH during February is now at breakeven or is losing money. We see ETH continuing to correct. Target levels on the downside are $1325, $1200, or even $700.
If ETH does move lower, the selling could be worse than people think. ETH would have to rally above $1777 to invalidate the bearish outlook.
Litecoin has to hold above $175 to continue the uptrend. This chart doesn’t look terrible, but it would be nice to see buyers step in with conviction.
If DOT breaks below $34, it could go to $20 which is a strong support and I expect it to hold.
$1.5 is a major resistance for ADA. A rally to $2 is possible in the wake of their latest protocol upgrade, but this is also a speculative rally, so a drop shortly after the upgrade date (15th March) is to be expected.
BNB had a great run to $300+ throughout February but the euphoria is subsiding now that the correction crashed its momentum. It could fall to $180 or $100. BNB is not a replacement for ETH (not even close yet).
In tomorrow's episode of the Crypto Corner Video Podcast I will share with you my top altcoins for March, so make sure you catch that one.
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With that said, I'm wrapping up today's report. Keep profitable and trade responsibly.