Crypto Investor Report, July 23 – Obvious Capital

After some first signs of market deterioration — that we flagged last week — , the big picture is now becoming more clear. And with it, the confirmation of a topping structure in the Bitcoin market, that we can look into by two different perspectives:

These facts, combined with the recent price action and markets behaviour, leads to a scenario where we might see a significant retracement during the course of the next weeks/months. How deep should we aim for? Well, that’s something we need to wait and see.

The previous instances in which the NVT indicator signalled a market top were situations that brought us with corrections of magnitude from 50 up to 70%. To be rigorous, these occurrences happened previously during bearish periods but this time — the good news — it has occurred under a slightly more bullish market behaviour.

If we project the magnitude of these expected corrections, then Bitcoin price would probably bottom in the range between $3,750 up to $7,000. If this turns out to be true, it will draw a higher low visible in the weekly charts time frame. These are great news for crypto-investors as that’s precisely what they want to see as a solid foundation for the next bull run.

Nevertheless, it’s reasonable to consider an alternative scenario, in which the retracement might not be as severe as we’ve seen in the past. The bullish market structure that has been being built during the first half of 2019 supports this thesis, allied to the fact that we have clear signs of the market being more mature than previously. Currently, there are far more institutional players than in the past and the retail participation hasn’t been quite notorious along the last bull run.

With these two scenarios in mind, it seems plausible to advocate for a milder retracement that could find a bottom around the $8k area.

Jumping into our market state charts, we can see that Bitcoin is breaking into the below side of the Weekly DMA3x3, perfectly aligned and synchronized with the NVT cross that we mentioned above.

On the daily time frame, Bitcoin is being rejected by the (now) red market state cloud, precisely in the zone of the previous candle body lows. Here we have a solid confirmation of the bearish hypothesis.

Diving into the 4-hour time frame, we can appreciate more details of that rejection. A thick resistance area, covered by our two reference clouds, has seen Bitcoin trying to breach in and breakthrough, but it eventually failed. Therefore the subsequent move forces us to look South.

And looking down we find some appealing price targets just below the $9k levels, which were not hit during the last week lows. Those targets set up a good starting point to bring the market a further step-down.

Looking into other digital assets, some major altcoins are showing a timid up reaction when benchmarked against BTC.

There could be some names willing to outperform Bitcoin, but we need some sort of extra-confirmation about the real intentions of the altcoin universe as a whole. In the meantime, best to stay neutral or carefully pick up a few ones just to be positioned in the short-term.