Token Metrics ‘All Exchange’ Index Moves To Cash | Market Update
Report Date: February 17th, 2022 |
Bill Noble, Senior Market Analyst, Token Metrics |
The Market Update is centered around using technical analysis to successfully and responsibly navigate the crypto market. It is not intended to be a trading calls newsletter. While technical analysis is an extremely powerful tool, please be aware that it can be temporarily disrupted by large news events.
As you can see below, we are shifting our charting techniques to take advantage of quantitative approaches used by Bill Williams and Tom DeMark.
Total Crypto Market Cap – Weekly Chart
Data as of 2/17/2022 – Past performance not indicative of future returns
The total cryptocurrency market cap (TOTAL) currently sits below $2 trillion, down roughly 50% from its all-time high of $3 trillion. For crypto to break out on the upside, TOTAL needs to rise above the $2 trillion level. If TOTAL does not rise above the $2T level, that will cause concern.
Total Altcoin Market Cap – Weekly Chart
Data as of 2/17/2022 – Past performance not indicative of future returns
Total crypto market cap excluding Bitcoin and Ethereum (TOTAL3) is currently sitting above the $700 billion level. The bearish head and shoulders pattern has moved back into focus. While the AVAX and MANA rallies have been impressive, AVAX and MANA can not be the only coins to carry TOTAL3. Over the next week, the best-case scenario may be range trading. The worst-case scenario is a sharp dip in crypto until Feb 20, followed by a bounce.
AVAX – Daily Chart
Data as of 2/17/2022 – Past performance not indicative of future returns
Last week we discussed AVAX as an altcoin that could outperform. AVAX outperformance may have reached its limit in the very near term. AVAX has hit resistance near $97. If you have been holding AVAX during this rally, taking most of your profits makes sense. The critical pivot point for AVAX is $90. If AVAX holds that level on a dip, then AVAX might have one more big rally left in it. If AVAX falls below $90 and stays below it, then the AVAX rally could be over, and crypto could drop sharply.
Bitcoin 8-hour Chart
Data as of 2/17/2022 – Past performance not indicative of future returns
Bitcoin seems to have reached a short-term top after failing at resistance near $45,000. If BTC dips, support can be found near $41,800. If that level does not hold, the next support is at $39,000.
Ethereum – Weekly Chart
Data as of 2/17/2022 – Past performance not indicative of future returns
Last week, we had a theory that Ethereum would be in a range between $3,220 and $2,845. That seems to have worked out. We believe that ETH will not be able to move very far away from $3,000 (up or down) until the end of February.
The reasoning behind this theory has to do with volume in the ETH options market. There is large open interest at the $3,000 strike price in ETH. That means bulls and bears in the options market have made big bets on whether ETH will finish the month above or below the $3,000 level. When there is large open interest or a large “battle” at a particular strike price, that price can act as a magnet. If this holds, ETH may not be able to get too far above or below the $3,000 before getting pulled back toward that point. Hence, the $2,850 – $3,000 range.
Ethereum 240-min (4H) chart
Data as of 2/17/2022 – Past performance not indicative of future returns
Using the work of quant technical analyst Tom DeMark, we see a strong chance of a move in ETH back to support at $2,845. A decline to that level could produce an overshoot of that point to $2,800 before ETH snaps back up to $3,000.
Legacy Chart of the Week: US Medium Term Bonds (IEF)
Source: Symbolic Data as of 2/17/2022 – Past performance not indicative of future returns
The legacy chart of the week will be a new feature of the market update. This chart shows an ETF for medium-term U.S. government bonds. So, as interest rates rise, the price of this instrument will fall. As you can see from the chart, IEF has been falling as fear of multiple Fed rate hikes has caused rates to rise and bonds (and IEF) to drop in price.
Even with high levels of fear over the Fed’s next steps, we see some bottoming signals from the work of Tom DeMark. The “13” and “9” in the bottom right-hand corner are signals of a bottom. So, if a quant-based system hints that bonds could rally, that might mean there could be a problem with risk assets. Stocks and crypto may decline because of geopolitical news or fears of a drop in stocks.
Key Takeaways:
- The Token Metrics daily “all exchange index” moved to cash on 2/17. This happened right before the last major down move in crypto. Crypto may be subject to pressure from fear of a decline in stocks.
- We still expect the NFT market to hold its value and prosper. Art and stocks have a very low correlation, according to a report published by Token Metrics in October of 2021.
- If there is a sharp decline in the coming, $41,000 and $39.000 are support levels for BTC. $2,850 or $2,800 is support for ETH.
