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02 April 2020

Crypto Broker Rotation Report Week 14

Patrick Heusser

Patrick Heusser

Senior Trader bei Crypto Broker AG

Über den Autor

This is our weekly Crypto Broker Rotation Report, directly from the Crypto Broker trading floor, with extensive insights into the crypto asset market, including quantitative data analysis, macro market comments, technical chart analysis, and rotation (sector) analysis. A PDF version of the report can be found at the bottom of this page.

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Contents

1 Rotation Analysis

2 Altcoin Futures Basis Analysis

3 Top Ten Comparison

4 Volatility and Correlation Comparison

5 ETHBTC 4h Technical Chart Analysis

6 Market Capitalisation Overview

Glossary


1 Rotation Analysis

BTC was created during a financial crisis. Will it come of age during this one?

Governments and national banks are still busy injecting massive amounts of cash to stabilise and improve the economic situation in the short run. So far, the market has treated them as one of the winners, but the question still remains how the long-term scenario will look. China’s economy has already reported positive data after its now near recovery from COVID-19.

There will be a block halving in BSV and BCH in a couple of days. Block rewards after the halving will be 6.25 coins. BTC will follow suit in 41 days.

The short-term support levels for BTC are 6,000 and 5,500. The resistance lines are 6,900 and 7,200.

In the charts below, you can see the technical analysis for the Alt/Mid/Shit Indices. Attached you will also find our short-term view on support and resistance levels for all three indices:

Alt: Support 65.00 | Resistance 75.00 | Alt (4h)

Mid: Support 58.00 | Resistance 65.00 | Mid (4h)

Shit: Support 69.5 | Resistance 78.0 |  Shit (4h)

Alt, Mid, and Shit Indices are trading within the trading range against BTC. The quarterly rebalancing performed by FTX went smoothly last Friday.

One noteworthy coin within the entire rebalancing process is HBAR. Hedera Hashgraph has gained 220% since the beginning of the year. It is a public ledger built using hashgraph consensus.

After Q1 2019, Exchange has developed into an interesting sector. The exchange coins have outperformed the index by far. In general, the exchange coins behaved very strongly during the market turbulences.

First of all, the exchange traded volume is constantly rising, and secondly, the exchanges are granting reduced transaction fees using their coins.

MACDs have not changed since last week. BTC is still showing strength, and is in an overbought zone. All other coins remain oversold, with the potential for positive performance.

BTC is currently correlated to the equity market, with some potential indications to decouple in the short term. Most of the other coins require a more stable market environment to start performing again.

Figure 1: Sector Rotation

 

2 Altcoin Futures Basis Analysis

All future contracts are still trading in slight backwardation. The BTC and ETH bases have recovered from the lows. Other future contracts are trading with a larger discount between 2% and 3%.

In general, the implied volatility in BTC and ETH dropped massively over the course of the last few trading days. The term structure for both coins looks similar: the front month is trading lower than the back month. The options traded most are the April and June contracts.

According to analysts, the BTC out of the money options market is being accumulated, whereas the at the money options market is being sold. The expected bull run, driven by many factors, e.g. store of value, upcoming halving, etc. is currently not reflected in the options market. The calculated probability indicates that the chance is low.

Figure 2: Altcoin Futures Basis Overview

 

3 Top Ten Comparison

Table 1: Data source: Coinmarketcap; change to last week in parentheses

 

Table 2: Datasource: Coinmarketcap; change to last week in parentheses

 

4 Volatility and Correlation Comparison

Figure 3: Volatility Comparison; Datasource: Coinmarketcap

 

Figure 4: Correlation comparison; Data source: Coinmarketcap

 

5 ETHBTC 4h Technical Chart Analysis

Figure 5: Data source: Bitfinex; Chartsystem: Tradingview

Some bottom building in the making

If you just look at the price, it would seem that nothing has happened. But I believe there is a possible bottom in sight. There are several indications that point to this.

First and foremost, we have not been able to print new lows. The 0.020 level has not been breached. It will be my invalidation level for any bullish setup. Secondly, we have seen some strong volume pick up at around the 0.02050 price level. The volume bars on the right-hand side of the chart also indicate this. I zoomed in to the specific date (March 27, 2020) and saw that on Bitfinex over 100k ETH had been purchased in under 15 minutes. Other exchanges saw some good volume at around that date and time as well. The price did not move much when the ETH changed hands, but it could be that the weak sellers ran into a strong buying wall. The last indication comes from the Ichimoku cloud. We have started to penetrate the „baseline“, which is the blue line. In a bearish environment, this is the first resistance point. Additionally, the closer that „baseline“ is to the actual cloud itself, the weaker the resistance has become.

The 0.0215 level I mentioned last week now looks even more important. It will mark a nice break level into the cloud, plus it would mark the first higher low and a new higher high.

Please bear in mind, there is no need to rush into a long position. But it is definitely a potential set-up that could mark a very nice entry level if my aforementioned triggers materialise.

 

6 Market Capitalisation Overview

Figure 6: Market capitalisation overview; Data source: Coinmarketcap

 

Glossary

Advance Decline Line – the Advance Decline Line shows the ratio of coins for which the market cap increased relative to the market cap of BTC for each day.
ATH – all time high (maximum lookback period of 730 days).
Data source – tables and charts are based on daily close prices provided by Coinmarketcap.
EWMA – exponentially weighted moving average.
MACD – moving average convergence/divergence is a popular technical indicator to identify trends in the underlying instrument. It consists of the MACD and signal line, and the area shown in the background. The MACD line (strong) is the difference of two exponential moving averages, which are defined by the first and second parameter of the indicator. The signal line (weak) is the exponential moving average of the MACD line defined by the third parameter. The area in the background illustrates the difference between the MACD line and the signal line.
Pearson Correlation – quantifies the linear relationship between two variables.
Spearman Correlation – quantifies the monotonic relationship between two variables. As such, the Spearman Correlation is based on the ranked values of each variable and is used to detect non-linear relationships between the two.

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Download the Rotation Report as a PDF here.

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