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04 Juli 2019

Crypto Broker Weekly Rotation Report Week 27

Patrick Heusser

Patrick Heusser

Senior Trader bei Crypto Broker AG

Über den Autor

This is our Crypto Broker Weekly 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

No change in sentiment – altcoins are still very heavy.

The volatility in the advance decline line is mind-blowing. From one day to the next, we jumped from 0.0 to 1.0, and this behaviour has now been going on for a full week. Nevertheless, the overall trend remains down and depressed. The smoothed out advance decline line did not cross the 0.5 level and the MACD lines from both sectors are still well under water.

The bitcoin dominance is continuously increasing. We are close to the levels we saw at the top of the crypto currency hype in December 2017.

On the correlation side (Table 2), I have always pointed out that we cannot see a rally in alts as long as correlation sticks to levels just below 1.0. Now, they are starting to move away from being highly correlated into more normal territory. However, this does not mean that we are seeing a rally in those altcoins. In case we see a proper capitulation, those correlation numbers will do exactly that. It works both ways.

To me, the indicators we are tracking in our rotation report are all looking bearish on altcoins. Additionally, if you connect them, our theory of a major altcoin capitulation is garnering further support. We highly recommend you stay out of altcoins and that your portfolio be overweight BTC.

 

2 Altcoin Futures Basis Analysis

The future rolls are through – and the sentiment remains bearish.

We are still focusing on the levels of the September 2019 contracts. The numbers speak a clear language. Almost every basis came in over the past seven days (negative change).

Those altcoin futures basis only trade in contango due to the fact that BTC\$ is trading heavily in contango. Liquidity in those altcoin futures has dried up as well. Maybe capitulation is just around the corner and we are seeing a last lethal washout. This would go hand in hand with our ETHBTC analysis and the possible resolving of the descending triangle.

Unfortunately, the altcoin futures basis does not give us additional hints as to where altcoins might be heading.

 

Figure 1: Altcoin Futures Basis Overview

 

3 Top Ten Comparison

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

 

Table 2: Data source: Coinmarketcap; change to last week in parentheses

 

4 Volatility and Correlation Comparison

Figure 2: Volatility comparison; Data source: Coinmarketcap

 

Figure 3: Correlation comparison; Data source: Coinmarketcap

 

5 ETHBTC 4h Technical Chart Analysis

Figure 4: Data source: Bitfinex; Chartsystem: Tradingview

Possible descending triangle becoming more likely!

We are not getting any positive momentum whatsoever. This comes as no surprise given the possible pattern we are trading in. We mentioned it last week, too, that when looking at the daily chart we are seeing the potential of a massive descending triangle, with a possible target down to 0.0050. This scenario is not painting a pretty picture at all for altcoins. However, looking on the bright side, it does show the strength and power of BTC.

The 0.024000 level is crucial for the pair. I think that if we break it with high volume and manage to print a daily close below that line all hell will break loose. You can see there is a liquidity vacuum between 0.024000 and 0.011500. This indicates that we might possibly plunge down to that level very quickly. The first support comes in at around 0.011500, which was a high trading volume area in 2017. After that level there is nothing left holding the pair. The projected target of this descending triangle is 0.00500.

Before you get overly excited and ready to short the hell out of this pair, consider the time frame. This possible pattern can only resolve if it happens sooner rather than later. Triangles should not trade into the apex.

There are no positive signs coming from the 4h chart either. Last week we bounced off of the lows, but could not print a new high to break that bearish structure. Now, with the pair again close to the lower trendline of the descending triangle we are in the danger zone!

For the daily chart click here.

6 Market Capitalisation Overview

Figure 5: 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.

More information about and contact details for Crypto Broker AG are here.

Download the Rotation Report as a PDF here.

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