Altcoin Angst: Will the Crypto Market Rise Above the Clouds or Stay Stuck in the Mist?

Welcome to this week's Onchain Edge newsletter, where we will discuss the current state of the S&P500 and the global cryptocurrency market, along with technical and on-chain analysis for Bitcoin and Ethereum.

Despite indecision in the stock market, there is optimism as additional liquidity is injected into the markets, potentially bringing the S&P500 above the $4k resistance and continuing the rally. Additionally, the global cryptocurrency market is retesting previous highs, with BTC trading at $28.3k and ETH at $1800, with a bullish bias for long trades as long as ETH remains above the cloud on the daily timeframe.

Stablecoin dominance is dropping, which may indicate a potential move in the next rally. On-chain analysis for BTC shows that a range of $28-$30k needs to be broken before it can go higher, and metrics such as RSI, VMC, and Puell Multiple have decreased slightly. Still, significant support levels for NUPL and MVRV suggest that BTC will soon reach the $31k resistance.

Altcoins are waiting for a clean break above the $500B resistance, but the altcoin market has entered the red Ichimoku cloud, which may indicate an edge-to-edge trade to $718B over multiple months.

Enjoy!

Onchain Edge

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Global market

The S&P500 hasn’t moved much since last week. There is a lot of indecision in the stock market. However, with the additional liquidity injected into the markets, I anticipate a move that would bring the S&P500 above the $4k resistance, which would mean a continuation of the rally. We must assume that the bearish trend, which started in November 2021, ended with a bullish breakout above the trendline and a retest in early march.

S&P500 ES mini futures are at $ 4'037, indicating that futures traders expect the S&P500 open to be bullish.

The chart below shows how the USD Liquidity Index has increased substantially in the last month. This might have a short-term positive impact on the stock market.

This is how it’s calculated:

The formula for calculating USD Liquidity is as follows: USD Liquidity = Fed Balance Sheet - RRP Balances - TGA

The Fed Balance Sheet refers to the US Federal Reserve's total assets, including securities and loans. When the Fed increases its balance sheet, it injects more money into the financial system, which increases the supply of USD.

RRP Balances refer to the cash financial institutions hold in reverse repos with the Federal Reserve. When RRP balances decrease, financial institutions have less cash to invest in other assets, such as stocks and bonds, which can increase demand for USD.

TGA, or the Treasury General Account, refers to the amount of cash the US Treasury holds at the Federal Reserve. When TGA decreases, it means that the US Treasury is spending more money than it is taking in, which can lead to an increase in the supply of USD.

Overall, when the USD Liquidity increases, it can lead to a rise in asset prices, as investors have more cash to invest in financial assets, and demand for these assets increases.

source: blog.bitmex.com/teach-me-daddy/

Technical Analysis

Global market cap with BTC

The crypto market is now retesting the previous highs after a quick dip at the end of last week with the Binance fud. A break and hold above $1.03T would allow us to tackle the next resistance at $1.2T.

Global market cap without BTC (USDC + USDT caps removed)

The altcoin market is still waiting for a clean break above the $500B resistance. Even though we still haven’t seen altcoins follow Bitcoins rally, we can anticipate an edge-to-edge trade since the altcoin market has entered the red Ichimoku cloud. An edge-to-edge trade would bring the altcoin market to $718B. The timeframe would be multiple months.

USDT+USDC dominance

The stablecoin dominance retested the grey trendline, the primary resistance. This rejection is a strong sign that the stablecoin dominance is dropping further. Therefore, the expectation is that we can estimate the move of the next rally by looking at how far the stablecoin dominance can drop. The next area of interest begins at 8%.

BTC technical analysis

$BTC is trading at $28.3k in what could be considered a bull flag. Should the daily candle close above $28.3k, we could see $BTC attempting to reach the next resistance at $31.8k.

The good thing is that the market isn’t at extreme overbought levels since the RSI is 61.

Ethereum TA

ETH is trading at $1800 with the following two supports at $1’’707 and support 2 at $1’’613. So you can try placing bids there to catch some lucky wicks. Furthermore, as long as $ETH is above the cloud on the daily timeframe, we need to trade with a bullish bias meaning only looking for longs and not shorts.

By the way, for those that missed it (including me), Shapella is the new name for the Shanghai upgrade, as it combines changes to the execution layer (Shanghai), the consensus layer (Capella), and the Engine API.

On-Chain Analysis

BTC on-chain analysis

Here also, we can see the clear range that $BTC needs to break above at around $28-$30k before going higher. We must remember that a retest of the $24k support is possible. However, should that be the case, buying a spot might be a good opportunity.

Here’s the heatmap from this week. Even though the price of BTC is more or less the same as last week, the other indicators like RSI, VMC, and Puell Multiple have decreased a bit. So this is a relatively favorable sign.

The Puell Multiple dropped significantly after peaking at 1.5 and is now finding support at 1.05

NUPL is also finding support at 0.27, which is rather interesting as that was the level that the NUPL had right before the market crash on the 7th of June, 2022. The next significant resistance is at 0.35.

The MVRV is more or less in the same spot as the NUPL metric. If found support at 1.36.

From an onchain perspective, it looks like the metrics are at significant support levels, which gives us an indication that there is a possibility that BTC will reach the $31k resistance sooner than later. Therefore, a break below the support above levels wouldn’t be that bullish for BTC.

Trade ideas

Most of the trade ideas from this edition are covered in BTC and ETH section, where I go over the support levels that I think might be good entries.

Apart from BTC and ETH, I’m bullish on Arbitrum. Disclaimer I got the ARB airdrop, but I have accumulated some more

ARB (Arbitrum Token)https://dexscreener.com/arbitrum/0x92c63d0e701caae670c9415d91c474f686298f00

Mcap: $1.56B (FDV: $12.3B) Entry: <$1.10Stop Loss: none atm.

Conclusion

The current state of the markets is one of cautious optimism, with the potential for both the S&P500 and the global cryptocurrency market to continue their respective rallies. Technical analysis suggests a bullish bias for long trades in ETH and BTC, while on-chain analysis points to significant support levels for BTC and potential moves in stablecoin dominance. Altcoins are waiting for a breakout above key resistance levels but may have an opportunity for an edge-to-edge trade. As always, it is essential to carefully consider market trends and analysis before making any investment decisions.

Cheers,

Onchain Edge