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.
News from the Past Week
The crypto markets this week has been a roller coaster ride. While last week the markets were hovering around the highs with Ethereum at an all-time high, and the altcoins making new hires, hints of a possible reversal have actualized this week.
The week before Elon Musk took to Twitter to announce his sentiment’s on Bitcoin’s energy risks which garnered a lot of negative reactions towards the market. Nick Mancini reacts to these stories.
(02:20) “The sentiment was generally weakened over the previous few weeks, even after Bitcoin peaked…and that is typical for something that is generally seen as overbought on the technicals, MacD-RSI extremely overbought,” Nick stated.
However, the spark that lit the bush was the “regulatory bush” Nick continued. It was probably one of the worst weeks we’ve had since 2017 in terms of news.
(04:11) This is a chart of checkouts that illustrates a downturn in sentiments. As shown, the price and sentiment have been somewhat co-located in terms of the daily sentiment. They seem to be much closer when you compare them on an hourly basis, but overall there is a downturn in both price and sentiment.
“What we are noticing about our special blend of sentiment analysis is that we are also creating technical analysis within sentiment analysis. So, when you look at this chart, you’re going to see a hump on the left. You’re going to see a head on the bottom, and you’re going to see a bump on the right. And to me that looks like an inverse head and shoulders. If I’m seeing that form on the sentiment charts, and I look at price actions, that to me is a leading indicator. We can see sentiment is beginning to turn bullish. You can see the arrow is going green and we expect price action to follow that. So, sentiment and price have been very close and we can glean a lot of really good insights from the sentiment analysis chart,” Nick explained.
How Fast Should People Expect a Turnaround?
(05:45) Although with crypto, things can happen in a blink of an eye, generally with sentiment analysis, it is not immediate — prices slightly lag with sentiment, Nick said.
According to Nick, there are two options as this trend forms early; place a bet now to get a good price or wait on more price action to confirm
“In this scenario, we are at the cusp of price action, meaning price could dump or increase. So, if you’re going to place a bet, this is the time to do it. And we’re thinking bullish based on sentiment. So if I’m placing a bet, probably doing it either in the last hour or now that I’m seeing sentiment flipped bullish, I want to see price action follow that as well,” Nick explained.
Critical Levels on The DownSide
(07:01) Right now, we are seeing 40k be the magic but 39k seems to be the solid support after it broke through the 40k range, Nick said.
“That is going to be the easy number that whales and market makers use to define as support and we have seen it bounce off support twice. I have a feeling we may see a third balance, but then we will eventually lift off. So that 40k range is very key and we are seeing a lot of liquidity at that level, meaning the order book is very thick at the 40k level in terms of buys and sells, which further indicates support,” Nick explained.
The 24-hr sentiment is good for short term trading whereas the seven-day chart may be better for something like a swing trade or something longer, Nick stated.
If you visualize a line across the tips of the blue lines, you would form an ascending triangle and that means there’s an equal percentage of price action going up and down.
(08:53) “It is important to pay attention to sentiment because technical analysis (TA) predicts that it is a 50-50 battle, so it is sentiment that is going to tell us what the next eight to twelve hours are going to look like,” Nick stated.
“What was happening on in the 24- hour chart previously is that there was a lot of red than there was green; sentiment was bullish like we had just discussed and now things are generally starting to flip bullish, just like we just saw on the seven-day chart. So, this leads me to believe that if I’m placing a bet on a 50-50 TA chart and things are generally pushing more bullish than they are bearish in the 24-hour chart, I am going to believe that price is generally going to push more bullish than it will bearish. So, the price should go up instead of going down. That is the bet that I’m placing based on this chart,” Nick noted.
(09:59) This is a bit of a longer-term chart compared to the first two which goes a few weeks back. It focuses on the range from the 30k dip to where it was consolidating around 40k.
“We had that massive wick going down to that support line that I drew. So anytime you have a giant wick (and I think that wick is about $7,000, – that is massive), meaning a bunch of people bought in that candle. There were more buyers themselves, a great sign for support. Looking at the green arrows, that indicates bullish RSI divergence, which is one of the most textbook signals that you look for a reversal… MacD is the lowest it has ever been in Bitcoin’s history…this just further backs up what we’re seeing on sentiment,” Nick explained.