On this episode of our Friday Market wrap, Nick Mancini, Chief Community Officer of Trade the Chain, joined our host, Gordon Paul Nick to review a volatile week in the crypto markets and what sentiment might be indicating for future price action.
Highlights of the Week
This week has been less news heavy as compared to last week where there were lots of sentiments driving market activity. The biggest of them was the IRS and the new rules around transactions greater than $10,000. There is also a new regulation on how to pay 1099 contract workers as well. As these stories emerge, it is evident that the IRS wants to clamp that on regulation, but regulation is not necessarily bearish, Nick said. Regulations give more individuals clarity about diving into this space.
Also, notable this week was Elon’s meeting with Bitcoin mining and Raul Paul’s tweet on the strength of the DeFi market even in the correction against its expectation to implode. Goldman Sachs also published a report finally classifying cryptocurrency as a separate asset.
Bitcoin 7-Day Sentiment Chart
(03:52) The chart this week reflects more greens, translating into the narrative of the price action in the market.
(04:14) “Beginning on the 25th of May, we had a head and shoulders form on sentiment. You can see sentiment dipped along with price. Now we’ve got a bit of an inverse head and shoulders forming on the sentiment charts and we’re expecting price to catch along with sentiment at the 35k level.”
Coincidentally, both Ethereum and Bitcoin have similar charts, except that sentiment on Ethereum had already gone up. This is a good sign for sentiment for the large caps heading into a US holiday weekend, Nick said.
The previous chart (a man upside down, with a head and two shoulders), is generally is seen as a bullish formation.
(05:36) “If the liquidity levels on the order book are solid enough to keep us around the 35k level, we should begin to push up. And I built the chart that you’re looking at, you know, probably 45 minutes ago, price a Bitcoin price is up to $1,000 into 36 K range. Since I created this chart there, we’re already seeing the price action that we wanted to see based on the sentiment chart. And this is very positive going into the weekend,” Nick explained.
Price Indications from Chart
(06:42) For an inverse head and shoulders, especially one that’s been forming for over a week, the longer the formation, the more bullish the explosion or bearish explosion would be.
“We’re going to perceive it as bullish, even though volume is decreasing because we have other strong indicators like sentiments, order book, liquidity etc. What we want to see with a clean inverse head and shoulders break is that 41k level flipped into support. Right now, 41k is at what we call the neckline…If the price breaks that neckline, which is 41k and turns 41k into supports, that is extremely strong for a continuation,” Nick said.
Nick suggests that if you are going to play this, play up to the neckline. If you want to go for a more bullish manoeuvre (a big spot or long trade), wait till the 41k threshold turns into supports.
Impact of Bitcoin Dominance
(08:56) Sentiment on Bitcoin impacts the general crypto market, affecting the movement of price and altcoins as well. Generally, when Bitcoin skyrockets, alts perform neutrally or fall a little, as Bitcoin picks up market share and liquidity.
(09:37) Although the correction led to a general fall in assets, Bitcoin gained more market share meaning that alts took a stronger hit for the most part than Bitcoin overall.
(11:15) “With Bitcoin dominance sitting at about 44%, and resistance at about 45%, if dominance goes above 45%, then it will be perceived as a bullish continuation, which means Bitcoin will continue to get stronger against the broader market. If we see this trend go bullish, then alts will likely have a suppressed US dollar value. Meaning if Bitcoin does 50%, alts may not 50%, or if even if Altcoin USD values are going up incrementally, their BTC value will not go up in proportion to their USD values,” Nick explained.
DeFi Sentiment Chart
(12:10) Because DeFi and Ethereum are almost intertwined, a similar pattern is seen for both of them. DeFi net-value locked for example looks very similar to that of Ethereum.
(12:22) In just a short span of three months, even with the correction, DeFi has grown in terms of net value locked 80%, more than any that dropped so low at 40%.
(12:54) “…DeFi did not imploded worked. CFI (Centralized Finance) has imploded multiple times in the past two decades…even though Bitcoin dominance is rising, DeFi is still going to be a strong main state in the market because of this narrative. Everyone is realizing, I can put my money into DeFi because if everything drops 50%, I’m not going to lose everything…And I think we’re going to see a lot more DeFi growth coming, even if Bitcoin continues to grow,” Nick said.