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    market commentary

    Daily market commentary from 23.04.2020

    By on Market Review

    Marktcommentary from Patrick Heusser, Crypto Finance AG

    Inhalt

    • 1 Rotation Analysis
    • 2 Altcoin Futures Basis Analysis
    • 3 Top Ten Comparison
    • 4 Volatility and Correlation Comparison
    • 5 ETHBTC 4h Technical Chart Analysis
    • 6 Market Cap Overview
    • Glossary

    1. Rotation Analysis

    A tight trading range

    Overall, BTC traded between the short-term support of 6,500 and the resistance of 7,300. No major rotations took place last week.

    There was major news from the commodity market. Oil continues to be under pressure, and the CME May futures contract turned negative and traded for a long time in a negative zone. Eventually, it settled with plus $10. To date, futures contracts trading in minus have never been recorded in history. The CME will allow the listing of options contracts with negative strikes. Due to the current global crisis, and therefore no demand for oil, the pressure on the next futures contracts remains high. The announcement of the big deal of cutting oil production starting in May for the upcoming two months might only offer slight support. More shocking news is the collapse of Lim's Hin Leong oil trading empire in Singapore. The global lockdown is disastrous for the oil sector.

    The crypto scene, unfortunately, saw another hack in the DeFi space. The attack on the dForce DeFi protocol resulted in a $25 mio loss. Two days later, the mystery hackers returned the stolen cryptocurrencies.

    Libra has scaled back from their initial cryptocurrency plans, and has applied for a payment system license from the Swiss Financial Markets Supervisory Authority. Basically, Facebook is planning to offer Libra as a payment wallet in a digital wallet.

    Digital currencies, CBDCs, remain a hot topic. The People's Bank of China is kicking off a digital currency trial in four cities across China.

    In the charts below, you can see the technical analysis for the Alt/Mid/Shit Indices. Attached you will also find our short-term view on support and resistance levels for all three indices:

    Alt:     Support 65.00 / Resistance 75.00 / Alt (4h)


    Mid:   Support 58.00 / Resistance 65.00 / Mid (4h)


    Shit:   Support 69.50 / Resistance 78.00 / Shit (4h)

    The Alt Index traded alongside BTC, whereas the Mid Index and Shit Index outperformed BTC, and reached the resistance line.

    The outperforming sectors were Entertainment, Privacy, Store of Value, and Interoperability. The losing sectors (with a similar underperformance) are Exchange, File Storage, IoT, Payment, and Platform.

    The best performing coins were ZEC and ENj, with a plus of 28%. Both coins are constituents of the MID Index. The worst performing coin is CKB, with a minus of 3%.

    There have not been many outliers in the coin universe that we are covering (roughly 90 coins).

    MACDs moved a bit in the Mid Index towards a slightly overbought scenario, but basically all coins between 1 and 50 remain neutral.

    The BTC halving will take place in roughly 19 days.

    Figure 1: Sector Rotation

    2 Altcoin Futures Basis Analysis

    The June futures basis is trading neutral on all derivatives exchanges, whereas the September future is trading mainly in contango: between 0.25% and 1%. The overnight funding rate is currently neutral. Altcoin futures recovered, and most of them are trading neutral again.

    In general, implied volatility is decreasing slightly, especially in the front months. The volatility term structure in BTC and ETH looks similar.

    The overall traded volume has increased across the board. Especially ETH experienced an active trading volume, and saw increased liquidations of positions within the bull run by 19%.

    Figure 2: Altcoin Futures Basis Overview

    3  Top Ten Comparison

    Table 1: Datasource: Coinmarketcap; change to last week in parentheses
    Table 2: Datasource: Coinmarketcap; change to last week in parentheses

    4 Volatility and Correlation Comparison

    Figure 3: Volatility Comparison; Datasource: Coinmarketcap
    Figure 4: Correlation Comparison; Datasource: Coinmarketcap

    5  ETHBTC 4h Technical Chart Analysis

    Figure 5: Datasource: Bitfinex; Chartsystem: Tradingview

    "I love it when a plan comes together" (some of you out there might be old enough to remember this phrase)

    It is time to take some chips off the table. Ever since we started talking about the potential bottom building at the beginning of April, the market has moved up by roughly 25%. We even managed to push through a pretty important support/resistance line at 0.0250 (it can be seen best on the daily chart).

    The exit strategy of my longs is the following:

    1) Selling 1/3 of the longs now

    2) Entering a stop loss for the remaining 2/3, just below 0.0246

    3) If my stop loss level stays untouched, I will ride the remaining 2/3 higher, but will still enter a take profit level at around 0.0270

    Some of you might be saying to yourselves: "Why don't you just let the position run? Things still look bullish." And you're right, but the margin longs on Bitfinex I was talking about in the last two reports make me feel uneasy. No reduction has happened yet, and I do not want to get buried in a selling avalanche that they might trigger.

    View the charts: ETHBTC 4h & ETHBTC daily

    6 Market Cap Overview

    Figure 6: Market Cap Overview; Datasource: Coinmarketcap

    Glossary

    Advance Decline Line - the Advance Decline Line shows the ratio of coins for which the market cap increased relative to the market cap of BTC for each day.
    ATH - all time high (maximum lookback period of 730€ days).
    Data Source - tables and charts are based on daily close prices provided by Coinmarketcap.
    EWMA - exponentially weighted moving average.
    MACD - moving average convergence/divergence is a popular technical indicator to identify trends in the underlying instrument. It consists of the MACD and signal line, and the area shown in the background. The MACD line (strong) is the difference of two exponential moving averages, which are defined by the first and second parameter of the indicator. The signal line (weak) is the exponential moving average of the MACD line defined by the third parameter. The area in the background illustrates the difference between the MACD line and the signal line.
    Pearson Correlation - quantifies the linear relationship between two variables.
    Spearman Correlation - quantifies the monotonic relationship between two variables. As such, the Spearman Correlation is based on the ranked values of each variable and is used to detect non-linear relationships between the two.

     

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    About the author

    Patrick Heusser is Head of Trading at Crypto Broker AG. Prior to joining the company, Patrick worked as an Interest Rate Trader at UBS and held various positions in the IRCC (interest rate, commodity and foreign exchange trading) in London, New York, Singapore and Zurich. Patrick is an expert in trading and risk management. He also gained experience in other areas, such as building start-up companies. Patrick has a degree in banking from a business school. He has also taken various courses in technical chart analysis.

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