Reduce Exposure to Risk Assets | Navigator
Review Date: Friday, April 22nd, 2022
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Market Update: Reduce Exposure to Risk Assets
BTC 2-Week Chart
Looking at the 2-week chart of BTC, I see the following. A clear B-wave of an A-B-C correction ended at the neckline of the Head and Shoulders top near 446.7. 47k was also the 38% retracement of the November down move. With the decline in stocks and crypto this week, the C-wave down has started. We would estimate the downside target to be 28k.
This pattern is still the operative formation for crypto. Meaning there is still a risk of a big down move. The Bill Williams Awesome Oscillator has turned negative for BTC, confirming the idea that there is material downside risk. Said plainly, “Sell in May and Go Away” has started early.
ETH 4-hour Chart
On the ETH 4-hour chart, $2,964 is a level to watch. If ETH is below that level, the downside target could be $2,895 or $2,750. Based on new moving average work, $3,060 should be strong resistance.
BTC 4-hour Chart
Looking at the 4-hour chart of bitcoin, BTC could move to the bottom of a regression band at $37,000. BTC could drop sharply if U.S. stocks start to decline.
Total Altcoin Market Cap (TOTAL3) Daily
TOTAL3 is the symbol for Total Crypto market capitalization minus bitcoin and Ethereum. TOTAL3 could fall 12% to the bottom of its recent range in a worst-case scenario.
Bottom Line: For weeks, we have warned about the dangers of a failed rally. For the weekend ending 4/22/2022, we noticed two failed rallies in BTC and ETH intraday charts. This would put crypto in a very precarious position heading into May. We recommended moving a portion of portfolios into stable coins.
Charting Interest Rates and Stocks
The Fed has been too slow in addressing inflation. As a result, long-term rates (US30Y) may rise. US30Y is above resistance at 2.87% and could move to 3.5%. If such a move were to unfold, US30Y would return to levels last seen during the crypto bear market in 2018. Net-net: Interest rates will continue to rise until the inflation narrative ends. That could take a long time. Rising rates may continue to cap rallies in stocks and crypto.
The S&P 500 (SPX) fell after hitting the intersection of a major Gann line and the top of a long-term regression band. It seems that stocks are a few weeks away from a significant drop.
Bottom Line: We feel the need to repeat our view. Crypto investors may also be concerned about a decline in stocks. It seems prudent to use rallies to reduce risk in altcoins you no longer believe in and have stable coins available that you can deploy if there is a large decline. Sell in May and go away.
Coinbase NFT Beta Launches
On Wednesday, the long-awaited Coinbase NFT marketplace released its beta to a select number of waitlisted users. Those who weren’t lucky enough to get an invite to buy and sell on the secondary market can still browse Coinbase NFT.
With a waitlist of over 4 million people, Coinbase NFT has the potential to more than 10x the number of global NFT owners. Weekly NFT trading volumes are down over 60% from January highs. Traders and NFT speculators hope newcomers will give NFTs the jolt they need for a rally.
Coinbase faces a challenging task going after NFT marketplace titan OpenSea, which currently dominates 90% of NFT trading volume. Aiming to add value compared to its competition, Coinbase has added social features to its NFT platform.
Users will be able to upvote their favorite NFTs and downvote ones they don’t care to see. A comment section will be present on each collectible, and potential buyers will be able to chat with NFT sellers.
In the short term, Coinbase won’t charge a transaction fee to attract users from other marketplaces. Representatives at Coinbase said they would add fees in the future but have not given an exact percentage.
Ethereum being the dominant chain for NFT sales, Coinbase NFT is launching exclusively as an Ethereum NFT marketplace. They announced early plans to integrate Polygon and Solana in the future.
Bottom Line: Though it is not a decentralized solution, breaking up the OpenSea monopoly in NFTs is a win for the market. Coinbase NFT has the potential to bring a slew of new users into NFTs. Time will tell how they differentiate and try to take market share from incumbents.