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The Low Volatility Blues: How to Wait for Good Opportunities in the Market

Intro

The low volatility is putting most investors to sleep. Zoom out and wait for good opportunities in the market and don’t let your position be chopped to pieces due to the low volatility. Most onchain signals are slightly overextended and are pulling back towards slower moving averages.

I’m mostly sitting on my hands, apart from some small narrative plays I mention at the end of this newsletter, and I’m waiting for a) market structure breaks that indicate a continuation of the bullish trend or massive carnage as well as long liquidations which would allow me to accumulate some longterm position at dirt cheap prices.

Onchain Edge

Global market

The S&P500 and Nasdaq haven’t moved much compared to last week and are trading in similar ranges as in the previous Newsletter.

Just recently, Powell surprised the markets by saying that if inflation continues to rise, they may need to increase the pace of rate hikes beyond what the market is expecting.

This led to a spike in bond yields and a repricing of stocks and crypto. The markets may see further volatility due to inflation and employment-related events in the next few months.

The US Dollar Index reached the first target from last week and is now trading at $105.72. The following price level to watch is $107.5

Technical Analysis

Global market cap with BTC

The crypto total market cap with Bitcoin dropped below the rising gray trendline I mentioned last week and is trading at $858B. I expect the global market cap to retest the blue liquidity area in the next two weeks.

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

The altcoin market dropped quite a bit, with a substantial drop in market cap for many altcoins. The price structure of the altcoin market is following the trajectory I mapped out last week, and I anticipate a retest of the gray trendline in the next two weeks. Sometimes it happens a lot sooner than expected.

USDT+USDC dominance

The stablecoin dominance rallied at the same time as the dump happened last week, which is understandable as investors fled to stables.

The stablecoin dominance, which is now at 11.84% , is now retesting the blue upwards-sloping trendline which is now acting as a resistance.

There hasn’t been a clear rejection from the resistance, so it will be important to keep a close eye on it.

BTC technical analysis

$BTC dropped below the distribution liquidity zone causing a lot of liquidations across the board. $BTC, which is now at $22k, is below the gray trendline which started in January at the beginning of this bear-rally.

Now that the trend has been broken, I anticipate a few retests of the accumulation range between $19k and $21k.

To be honest you can probably slowly start dollar cost averaging below the $22k price range if you want to increase your long-term position.

That is if you do not have any exposure yet. If you already have exposure and you want to get better prices for $BTC and alts, then you might want to wait for a break into the blue liquidity area I just mentioned as well as bullish on-chain signals.

Ethereum TA

ETH also broke below the distribution area and is now at $1’553. There is a chance that $ETH drops towards the accumulation zone which coincides with the lower trendline of the channel. Placing some buy orders in the accumulation zone might allow you to catch some capitulation wicks.

On-Chain Analysis

BTC on-chain analysis

The bollinger bands are constricting the price. The more it constricts the less volatility will happen in the market and the price will ping pong between both bands before breaking out.

The tighter the bands get to each other, the more volatile the breakout will be. It will be important to observe whether the breakout will happen towards the upper ($24k) or lower band ($17.5k).

Here is an overview heatmap of the most important technical and onchain metrics i’m observing at the moment. VMC (vumanchu cipher) as well as RPL are rather low compared to last week.

Furthermore, I’ve added a new exciting metric to the mix and that is the cycle top and cycle floor detector. When the local floor flashes red I will add it to the overview heatmap.

It makes sense to DCA a higher amount into the market when the floor detection flashes, and DCA out a higher amount out of the market when the Top Detection flashes.

I’ll let you know when this happens.

In the next few onchain metrics I will be mixing in some moving averages to show you the current direction of the trend.

The Puell Multiple had a golden cross on the 17th of January which market the beginning of this miny bear market rally. However, now the PM is cooling off and will likely find support around 0.8. The closer it gets to 0.5 the more profitable it is to buy for the long-term.

The NUPL didn’t manage to break above the 0.2 resistance. The blue moving average will likely move towards 0.0 over the next few weeks.

A retest of the red moving average might present a great buying opportunity for BTC.

MVRV is at 1.19 and is quite overextended after the recent rally. It’s likely that the blue moving average retests the yellow and red moving average in the next few weeks.

Should the the blue moving average move below 1.00 then that will also provide a good buying opportunity.

On a longterm timeframe the profit ratio of participants (0.8) is similar to levels from the 4th of September 2022. This represents the current resistance level the SOPR needs to break above.

Trade ideas

Here are a few trade ideas

Mcap: $63m (FDV: $113m)Entry: $0.27Stop Loss: 12h candle close below $0.23Narrative: Some smart wallets have been accumulating RDNT over the last two weeks and there is some speculation that it might list on Binance soon. Allocation: 1%

Mcap: $54m (FDV: $356m)Entry: $3.19Stop Loss: below $3Narrative: Gaming narrative. A lot of smart wallets that I follow have been accumulating prime.Allocation: 1%

Conclusion

The low volatility in the market has led investors to remain cautious and wait for good opportunities.

Most onchain signals are slightly overextended and are pulling back towards slower moving averages. The markets may see further volatility due to inflation and employment-related events in the next few months.

Overall, most investors should be cautious and wait for good opportunities to accumulate long-term positions at dirt cheap prices.I’m paying attention to the markets and want to making sure I’m not underexposed in case my current ideas are invalidated.

Cheers,

Onchain Edge