Decrypting Market Shifts and Trendlines S&P500, Bitcoin, and Altcoins

Welcome to the Onchain Edge newsletter, where we unpack the complexities of the global financial landscape.

Holding the spotlight in our analysis is the S&P 500 at a critical crossroads. It is attempting to retest its major resistance at $4,178 for the fourth time. However, one can't help but wonder if this attempt will finally be successful. Recent developments indicate shifts in market dynamics, but only time will tell if these changes have enough enthusiasm to propel a sustainable upward trend.

Meanwhile, we pay attention to the Dollar Index, which may hint at a market trend pivot as we delve into key asset technical and on-chain metrics.

Enjoy!

Onchain Edge

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Global market

The S&P 500 is at a pivotal juncture, retesting its main resistance at $4,178. This instance marks the fourth attempt, stirring the question among market participants, is the fourth time the charm?

Previously, the benchmark index seemed hemmed in at $4,119, suggesting a solid catalyst was required to break through. Now, as we observe the index tiptoeing around $4,178, it's evident that market dynamics are shifting. The question is, are these changes substantial enough to sustain an upward momentum?

Nonetheless, the broader economic landscape, notably the wave of layoffs from numerous companies, can't be ignored. In the latest economic data, U.S. initial jobless claims have come in at 242k, notably lower than the forecast of 252.5k and the previous figure of 264k.

This decline in jobless claims suggests that the U.S. labor market could be gaining strength. It's a welcome sign, indicating that fewer individuals are seeking unemployment benefits, possibly because they have found employment or are optimistic about their job prospects.

However, while this data point is encouraging, it's important not to read too much into a single week's data. Jobless claims are volatile and subject to revisions.

The Dollar Index (DXY) found support at $100.79, breaking above the crucial blue trendline. This price action signifies a potential pivot in market trends and warrants careful attention.

A sustained breakout above this trendline for the DXY could potentially imply a bearish outlook for both stocks and cryptocurrencies.

Technical Analysis

Global market cap with BTC

The global cryptocurrency market capitalization has now slipped to $990 billion, marking a new lower low on the 12th of May. This development indicates a shift from a bullish to a neutral trend on the daily timeframe.

To revert to a bullish trend, the market would need to rally and close above the $1.024 trillion mark either this week or the next. Such a rebound could rekindle investor optimism and potentially trigger renewed buying interest.

Conversely, a break below the significant support of $953 billion could spell trouble for Bitcoin and altcoins, potentially accelerating a market-wide sell-off.

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

The altcoin market capitalization has contracted to $459 billion, marking a neutral trend as it delves deeper into the Ichimoku cloud. It's positioned beneath several significant resistances, the most substantial being at $496 billion.

The performance of Bitcoin could influence altcoin dynamics, with the latter potentially facing more hardship should Bitcoin fail to recover its losses. The following key support level for the altcoin market stands at $435 billion.

A breach below this point could signal a transition from neutral to a bearish trend on the daily timeframe. Such a shift would usher us back into accumulation territory, possibly presenting a buying opportunity for discerning investors.

BTC technical analysis

Bitcoin currently trades at $27,470, having broken below the critical grey trendline offering support. In addition, it registered a new lower low at approximately $25.8k, just above accumulation range 1.

There's a possibility that we might witness a wick up to the lower edge of the distribution zone, around $28.2k. However, the current market dynamics suggest a higher probability of a breakdown towards accumulation range 1 and the first golden pocket, as opposed to a breakout above the distribution range.

We observe significant buying activity at these levels by analyzing the bar chart of the realized price of coins purchased in the $27,000-$28,000 range. This implies that if the price climbs back to this range, many investors may exit their positions to cut their losses, potentially creating selling pressure.

Conversely, the chart shows fewer UTXO realized price bars below $27k. The next notable support appears to be at $25k. Given these observations, Bitcoin's price is likely to drop further.

Ethereum TA

Ethereum's market position hasn't significantly changed since our last analysis and currently trades around $1,827. The previously identified accumulation levels still stand.

For those eyeing long-term holding, the first golden pocket buy area remains between $1,440 and $1,500. Meanwhile, the second golden pocket offers a potential buy area within the $1,269 to $1,300 range.

On-Chain Analysis

BTC onchain edge index

The current Onchain Edge index value is 45.44, which is Neutral or Medium Risk.

• A value under 40 is a good time to accumulate.

BTC on-chain metrics

Let’s have a more detailed look at this week’s onchain metrics.

Based on the latest data, the percentage increase week-over-week (WoW) for the week of 18/05/2023 is -0.37%, bringing the price down to $27,385.57.

The Relative Strength Index (RSI) remains at 45, indicating a balanced market condition, neither overbought nor oversold. The puell multiple (PM) sits at 1.32, suggesting a moderate rate of miner change.

The Net Unrealized Profit/Loss (NUPL) at 0.27 points to a steady state of unrealized profits or losses. The Market-Value-to-Realized-Value (MVRV) increased to 1.36, which suggests a modest change in the market value to realized value ratio.

The current on-chain index is 45.44, suggesting a generally neutral risk level.

Furthermore, here are some interesting trends that have been observed with the data:Price: Despite some fluctuations, the general trend seems to be downward since 12/04/2023, when it peaked at $30,024. By 18/05/2023, it had decreased to $27,385.57.

RSI: The Relative Strength Index (RSI) generally fluctuates within the range of 39.1 to 67.9 over the given period, suggesting a mix of overbought and oversold conditions in the market. However, the most recent RSI values have trended towards the lower end of the spectrum, indicating more oversold conditions recently.

NUPL and MVRV: The Net Unrealized Profit/Loss (NUPL) and Market-Value-to-Realized-Value (MVRV) ratios have been relatively stable, indicating that the overall balance of unrealized profits/losses and the market-to-realized value ratio haven't been experiencing dramatic changes.

Uptrend Downtrend Indicator reaches a value of -2.59 which is quite a bit lower than the yellow trendline.

The TCI quantifies relative confidence in an asset’s current price trend. Positive values are bullish; negative values are bearish. Values above 0 indicate that a current uptrend is likely to continue or that a current downtrend might be nearing its end. Values below 0 indicate that a current downtrend is likely to continue or that a current uptrend is likely near its end. The more extreme the TCI value, the more confidence the model has in continuing or nearing the current trend's termination.

TLDR; values above 0 = current uptrend is likely to continue

If we sort by TCI score, we can see that LTC is in the first place. This makes quite a lot of sense since the LTC halving is in a few months, on August 4-5, 2023.

Several other coins, like cosmos and helium, have a positive TCI score. It looks like algorand will flip very soon.

Trade Ideas

Quite a few trade ideas from the last two newsletters hit, which I’m pretty happy with, but there are also quite a few others where I’m waiting on good entries. If BTC drops, then alts will follow and give us some good entries, so check those two out.

LTCNarrative: LTC halving Price: $69-$77

TLDR;

The S&P 500 is testing a significant resistance at $4,178 for the fourth time, potentially indicating a shift in market dynamics. Despite numerous layoffs, U.S. jobless claims are decreasing, hinting at potential labor market strengthening. The Dollar Index has broken a critical trendline, possibly signaling a bearish future for stocks and cryptocurrencies. The global cryptocurrency market has slipped to $990 billion, moving to a neutral trend, while Bitcoin faces a potential further decline. Meanwhile, Ethereum holds steady, and our Onchain Edge Index indicates a neutral risk level. Lastly, LTC leads with a positive TCI score, highlighting the coin's bullish trend.

Cheers,

Onchain Edge