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11 juillet 2019

Crypto Broker Weekly Rotation Report Week 28

Patrick Heusser

Patrick Heusser

Trader chez Crypto Broker AG

A propos de l'auteur

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

The speed of the sell-off has accelerated.

There are also a few interesting indicator changes we need to highlight – all of which point to the last leg of the altcoin bashing: the capitulation leg!

The first indicator can be found on Table 2 of our report: our correlation matrix. We see here the fast spread out of correlation numbers across all coins. We have mentioned it in the past that this is one of the signs we need to see to know that a proper capitulation wave has taken place. On the very extreme side, we have EOS with a negative correlation, and ADA (Cardano), which is near the zero level. It is worth noting that all correlation numbers have moved away from 1 toward 0.

On our MACD tables (Figure 5), we see further pressure on the sectors 2-10 and 11-50. Especially the sector 2-10 was hit hard. It is not over yet, as we mention several times in this report. But we might see some kind of consolidation after this last sell-off wave. Nevertheless, there are absolutely no signs out there pointing toward a turnaround in altcoins.

One important point also worth mentioning is our take on the behaviour that might possibly happen once we finally do see a recovery of the altcoin sector. We do not believe that there will be an altcoin season similiar to the ones we have experienced before. The market is more mature now and new players (institutionals) either have or will enter the market. In the past, altcoins amplified BTC$ movements or cycles. This was due partly to the effect of their illiquidity. Currently, BTC is in bull mode and altcoins are not amplifying those gains.

It is for this reason that we believe that the following scenario is more likely than just a widespread altcoin rally (this is not nothing new and has been discussed on Twitter by various analysts).

With crypto, we have strong network effects. The largest capital seeks the largest liquidity. The most mature infrastructure, the oldest asset that continues to perform. In areas that have network effect, an obvious sector is social media: in the are beginning there many competitors such as Bebo, MySpace, Orkut, Facebook, Twitter, etc. It is not clear who the winner will be in the early adoption phase. At a certain point, however, the winners that get ahead of the competitors by just enough experience the so-called « hockey stick ». It becomes apparent when users jump platforms to the winners.

Now, in the case of BTC we see a good chance of it experiencing the « hockey stick » moment. If true, then in this cycle most altcoins will not amplify BTC’s gains. Value will be sucked out of the altcoin sector and pumped into BTC. There will only be a small set of survivors (altcoins).

We believe that this small set of survivors will mainly be found in the large cap alt sector and maybe a handful of smaller altcoins that have a solid project under their belt.

 

2 Altcoin Futures Basis Analysis

Our bearish view on altcoins is finally pushing through to the futures basis

First, we have seen pressure building up on the perpetual swaps across the board: not only altcoins but also in the BTC\$ sector. The pressure then deviated to the altcoin futures basis. We saw bigger swings in the September 2019 contracts compared to the front contracts (July 2019) on Kraken.

On the BitMEX front, we are in the red across all contracts. The worst performer is LTC/XBT with a whopping -2.95% performance over the past 7 days. It is also the first contract that switched from contango into backwardation. To get the proper last leg of this bear market in the altcoins (the capitulation leg), we need to see those bases turn into backwardation.

The BTC$ (or XBT in this particular table) basis is still in contango. It still indicates that the market is suffering a USD shortage, which is reflected in higher term future prices.

 

 

3 Top Ten Comparison

 

 

4 Volatility and Correlation Comparison

 

 

5 ETHBTC 4h Technical Chart Analysis

The break-out of the descending triangle has been confirmed!

The price has pushed through with decent volume. We also managed to print a daily closing below the 0.024000 level and have stayed below it since then. There was definitely some fighting going on after the break-out. We had seen some wild intraday swings over the past 48 hours.

I am still expecting a more convincing retest of the break-out level. Please bear in mind that this is a very long-term pattern. It has formed over the course of 18 months. So you should not expect that we will reach the target in a straight line.

This chart shows further weakness that supports our overall view that the altcoin sector is still in a bearish mode.

 

6 Market Capitalisation Overview

 

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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