Market Volatility Surges: Banks' Bankruptcy and Crypto Rally

Intro

Last week I was complaining about low volatility. Look at where that got us this week. The weekend was stressful since I thought my positions were safe in usdc. Luckily I managed to convert with minimal losses. The markets are flip-flopping from bearish to bullish, which no longer makes sense. Furthermore, banks are dropping like flies, and the crypto market is still rallying. It’s a fascinating timeline.

I’ll review the Macro, $BTC & $ETH levels and look at what scenarios might play out over the next week.

I’m viewing this rally somewhat cautiously because a large part of the rally was due to market makers hedging their positions and shorter getting liquidated.

The macro-environment makes me think that we need to be cautious.

Enjoy!

Onchain Edge

https://twitter.com/onchain_edge

Global market

The S&P500 experienced significant volatility at the start of the week, likely caused by several banks' bankruptcy, with SVB being the largest. The S&P500 has retested the downwards-sloping trendline and is now valued at $3.9k. Two possible scenarios could unfold, and the upcoming candle closes will be critical in determining which one.

If the S&P500 breaks below the downwards-sloping trendline, it would indicate a bull trap and continue the bearish long-term trend for stocks. On the other hand, for the bullish scenario to come to fruition, the S&P500 must rally higher and remain above the downward-sloping trendline.

The Nasdaq is trading at $12.1k and trailing behind the S&P500. So it may probably retest the blue downwards-sloping trendline at around $11.5k. That would be the bearish scenario.

Technical Analysis

Global market cap with BTC

In a spike of volatility, the crypto total market cap with Bitcoin retested the $947bn blue resistance. It even managed to wick way past the resistance up to $1.04T. Last week I mentioned that it was highly likely that it would retest the blue accumulation range. But, unfortunately, the dip happened a lot faster than expected.

The next few candles will let us know whether the market can break above the $1T resistance. Should the global market cap fail to do so, then it is highly likely that we will revisit the accumulation range. That will give you ample opportunities to accumulate more crypto.

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

The altcoin market recovered a considerable amount and is now at $469B after experiencing a considerable dip due to the correction over the weekend. Interestingly, the second retest of the downward-sloping trendline is a positive indicator.

However, for the rally to sustain, the altcoin market must surpass the resistance level of $500B.

USDT+USDC dominance

The stablecoin dominance spike to 13% and abruptly dropped to 10.54% as most investors fled USDC due to the depeg.

The next few days will tell us if the stablecoin dominance found support on the gray trendline. A break below will show investors shifting from stables to crypto.

BTC technical analysis

BTC is trading at $24.6k after a turbulent week. Yesterday, BTC spiked up to $26k, primarily due to market makers wanting to hedge their positions to maintain delta neutrality. Unfortunately, this meant they had to buy (see this tweet), and short traders were caught on the wrong side of the trade. Consequently, many short traders were forced to buy back as their positions were liquidated.

BTC retested the gray, upward-sloping trendline that has acted as support since January and has turned into resistance. Generally speaking, a retest of resistance after a breakdown is called a "kiss&goodbye" and is considered a bearish retest. As a result, I anticipate that the price of BTC will consolidate in the distribution zone. The three critical levels to watch are $23k (support), $22k (support), and $24.7k (resistance).

To continue the rally, I would ideally want to see a few more green candles that will bring BTC above $24.8k.

The ideal accumulation range for BTC is still below $21k.

Ethereum TA

TH is trading at $1,699, just below the distribution area and the downward-sloping trendline. Although there is a blue buy signal, there is no guarantee that ETH will break above the distribution zone. However, the recent rally from $1,396 to $1,699 was already quite impressive.

I'm pleased with last week's call about ETH dropping down to the liquidity zone. Unfortunately, only two of my buy orders were triggered. I thought it would drop further and remain close to the accumulation zone for longer. However, the markets tend to move curiously, especially in crypto.

Place laddered buy orders for the coins you want to accumulate beforehand, as some candles last only a few minutes.

I’ll be looking for entries below $1.4k.

On-Chain Analysis

BTC on-chain analysis

BTC is retesting the upper band (24.4k). If BTC should manage to break out, then it could be a sign of a rally starting. However, a false breakout isn’t off the table, as it has happened numerous times.

Let’s look at the weekly heatmap with the most critical technical and onchain metrics. RSI is above 50, which is bullish and not yet at an overbought level. VMC is at -40, which is rather good. All the other metrics are steadily increasing with this mini-rally.

The Puell Multiple shows significant strength and is at 1.04, the same level as April 2022. Therefore, 1.2 remains the next primary resistance.

NUPL is back in the 0.2 resistance. The market dip from last week brought the NUPL a hair above the 0.00 line. Unfortunately, my alert didn’t trigger since my alert is below the 0.00 level. 😭

It’s good to see that NUPL levels can be used to understand where BTC might bounce without looking at the price.

MVRV is at 1.25 and also nearly retested the 1.00 level. It was just a hair above. We may see further retests around the 1.00 level if the market dips again.

Trade idea

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Conclusion

That's all for this week's market update. It's been a volatile week, with the S&P500 and Nasdaq experiencing significant fluctuations and the crypto market continuing to rally despite some major banks going bankrupt. So as we progress, we must remain cautious and monitor the macro-environment.

Regarding technical analysis, BTC and ETH experienced retests of key trendlines and support/resistance levels, with BTC consolidating in the distribution zone and ETH hovering just below the distribution area. As always, have a strategy, place laddered buy orders, and be prepared for quick price movements.

Cheers,

Onchain Edge