A bit of a change from the usual articles on BTC with an excursion into the alts. As longer-term readers are no doubt familiar, I advocate a policy of trading alt volatility as a hedge to your longer-term hold in Bitcoin. And volatility to both sides we have seen, the expectation of which can be said to be the nearest thing to certainty we have in an extremely speculative market that cuts both ways. The aim of this article will be to compare a few of the more major alts, and see whether a good case could be made for them having found a base from which price could recover to new highs. A disclaimer of sorts for those that need it - the TA that follows [as always] is to be ‘weighted’, not to be superstitiously or naively thought of as a clairvoyant reading of the future [something postive dogmatists and negative skeptics get wrong on either side of the argument]. Rather, it is to be given the weight of rational [and hedged] hypothesis.
The more major alts I’ve chosen to focus on here are ETH, BNB. LINK and ADA. The list of course could be different and would no doubt depend to some extent on one’s preferences and perspectives. First of, a macro comparison of the corrections.
Notice that the general rule is a 38% real correction of the move up since the 2019 bottom [this fib, on the log function, measures ROI on the right/ vertical axis]. The odd one out here is BNB, which has proven exceptionally strong. As can be seen on the retained return, subsequent to the correction and measured off the bottom, BNB and LINK have been the outperformers of the group.
What we see is similar real corrections in very volatile assets, with also a solid retention of ROI [return on investment] off the bottom. Of course all this is dependent on one’s entry level. The relevant and objective point here is that as an instrument of investment it still very much looks like it is alive and kicking with good potential going forward. And so now a closer look at the individual charts to ascertain whether a new bottom or base has been formed, or is forming.
A shorter-term downward diagonal crossed, with price yet below the longer-term diagonal of resistance. Technically, a higher low, with a higher [local] high need to confirm the turnaround. Price holding the 38% fib retracement for a good five months now.
Once again, the multi-month sideward range with a good chance of a higher low being printed [no use of definitive language here as I don’t imagine TA to be clairvoyance]. Of significance, beside the extended sideward range also holding, is the breaking of the longer-term diagonal of resistance to the upside. Also of significance is the hoirzontal resistance [previously support]. A break of this could see a relatively solid move up as per the fib extension.
Visually, on the technical chart, you can see how well price has held up, with it currently looking strong.
Similar to BNB, the 38% retracement of the multi-year move up. A shorter-term diagonal of resistance crossed, with the longer-term diagonal yet to be crossed. An extended multi-month sideward range suggesting a base being put in. A move back to the upside could be explosive at the juncture of both horizontal resistance and diaginal resistance early next year. Such a move, on the basis of the fib extension, would give a shorter-term technical target of around $17.
Once again the 38% retracement followed on by a break of the shorter-term diagonal with price now coming up against the longer-term diagonal. ADA has been known to be explosive, so it wouldn’t surprise me to see a solid move to the upside on the breaking of this longer-term resistance followed on by the breaking of the more recent horizontal line of resistance.
And there you have it, nothing overly complex with the price action speaking for itself [complexity, with superfluous information overlaid on the chart, more often that not serves to over-awe the viewer]. ‘But’, the reader might object, ‘aren’t these assets still risky buys? And how can you be sure that the bottom is in?’ To which I’d reply that TA never ‘de-risks’ or eliminates risk from a trade or an investment. At best it can serve to minimize risk, where the entry [or exit] becomes a more reasonable one, based on a perceived trend [the longer, the better] and not simply on sentiment [something I touched on in ‘Hype or Hypothesis’]. Combined with a larger strategic approach in general, that focuses further on managing risk, this is the best one can do. If it were otherwise, if one had the powers of clairvoyance, one would soon swallow up the world.
Another objection might be as to why I choose to chart the alts against USD and not against BTC - ‘Isn’t the point of trading alts to accumulate BTC? But I think this may miss the whole point of trading and investing in the first place, where it is primarily about the realization of profits into real assets - real wealth as opposed to just financial paper wealth [or digital wealth these days]. It should also have hedging, based on the uncertainty principle, at its core, which is something I’ve written extensively on.
Lastly, those that incline toward Bitcoin maximalism might frown upon an article focusing on the alts. But the alts are in no way meant to replace Bitcoin as a longer-term investment in my opinion. Rather, the point of alts is their greater volatility [against USD], where a trading of that volatility [on the reasonable time-frame] enables one to hedge their core investment in BTC bought at lower prices in the buy zone preferably. And of course, we are once again in the buy zone. Though I do not consider myself a Bitcoin only maximalist, I do consider myself a Bitcoin centrist [keeping a core in BTC], a maximalism light if you will. Think os the alts as a supplement, not a replacement. A compartmentalization of Bitcoin and alts serves to further manage your risk in my opinion. Just as risk is managed in large ocean-going vessels with the single hull sub-divided into self-contained bulkheads, so too your Crypto trades and investments.
Until next time,
Stay [relatively] safe out there,
Dave the Wave.
For more on investing and trading the alt coins, make sure to check out my website at davthewave.com where all articles, alt charts and trades are to be found.