All Star Charts Crypto Articles

Last week, we worded our letter in a rather dramatic fashion, arguing that Bitcoin was on the edge of the abyss.

Since then, we've seen equity markets make a decisive move to the lows, while currency markets have acted in spectacular fashion. The US dollar continues to strengthen, while the UK pound sterling printed at new all-time lows.

As far as risk markets are concerned, this is a rather treacherous tape, and caution is still advised over more substantial time frames.

Much of our job as technical analysts is to discover pieces that don't conform to the regular puzzle.

What's caught us by surprise is the resiliency of crypto markets in the face of this risk-off action. Bitcoin continues to defend its critical 18,000 support level even in the face of equity markets selling off.

Furthermore, our breadth metrics suggest that altcoins have been holding up better than individual equities.

Let's dive into this week's letter.

This is the video recording of our September 23, 2022, All Star Charts Crypto Weekly Strategy Session.

There's no denying our rather cautious approach to crypto markets as of late.

Bitcoin's hanging on by a thread. And the broader trend in risk markets has been lower, in a messy fashion.

So, given this backdrop, what's to be said about crypto-related equities?

Yesterday, we framed this market action in a rather dramatic tone, arguing that Bitcoin and cryptocurrencies are staring into the abyss.

With Bitcoin testing its year-to-date lows, there's little in the way preventing crypto assets from experiencing yet another significant leg down in the penultimate stages of this year.

So, alongside the commentary in yesterday's letter, we want to approach this market from two angles and let money flow dictate our execution.

Let's dive in.

Over the weekend, we've seen risk-off action persist following hotter-than-expected inflation data.

Following the Ethereum merge, most coins have sold off rather aggressively. Bitcoin now lies on a key level of support at its year-to-date lows, while a large number of altcoins have already made new lows.

For us to flip to a more bearish approach, we'd need to see Bitcoin confirm this internal weakness, which would manifest through a downward break of the 18,000 support band.

We were traveling this week and didn't hold our regular Crypto Friday Strategy Session on September 16, 2022. But we did prepare the usual chartbook.

Earlier this morning, the long-awaited Ethereum merge was finalized.

Ethereum has successfully transitioned into the proof-of-stake (PoS) model, leaving Bitcoin as the only proof-of-work (PoW) blockchain of scale.

This is a major turning point, particularly in an ideological sense. The debate between the PoS and PoW frameworks will only intensify following this transition.

Risk markets tanked yesterday after the release of CPI data for August, as inflation numbers ran hot against expectations.

Crypto markets especially felt the heat, with Bitcoin dropping 10% on the day and Ethereum posting an 8.5% drop.

With the CPI print behind us, yet another volatile event is on the horizon. That's the Ethereum merge, which is on track to happen in the next 24 hours.

In the past, we've mentioned that the merge is merely a narrative, as Ethereum is just tracking with the equity markets.

While this still holds true, it would be natural to expect a brief decoupling between Ethereum and equities, given the skewed positioning within the futures markets.

Yesterday, we talked about the likelihood that Ethereum funding would dip in parabolic fashion leading to the merge.

And, since then, funding has taken a dramatic hit.

We're a day away from the anticipated Ethereum merge, by which the network will transition from a Proof-of-Work to a Proof-of-Stake model.

Investors are clearly hedging their positions moving into this event, with Ethereum perpetual swaps trading with rather bearish funding rates.

And Ethereum quarterlies have been trading firmly in backwardation, pointing to a strong flight to hedging positions.

To close the week, we saw a remarkable rally that drove Bitcoin prices up more than 10%. This was the largest single-day gain going back to February 28.

This came after Bitcoin tested the shelf of support near 19,000, while equity markets bounced on an important inflection point.

In last week's letter, we pointed out that buyers needed to step up and defend these levels, which they clearly have.

This is the video recording of our September 9, 2022, All Star Charts Crypto Weekly Strategy Session.

It's been a pretty lousy market out there...

There's been so little to discuss in the way of data points that'd pull us from the doldrums.

Strazza sent a brief note in our Slack chat to ask how many cryptos were below their June-July lows. This is when things were at their worst -- 3AC just got margin-called, and there were mass liquidations.

Upon quantifying this, only 4% of our universe of 316 coins are below their closing June-July lows.

That's 13 coins, not a whole lot.