The market is bleeding – The year 2022 is far from being that expected by the majority of players. Indeed since the end of the year, the Bitcoin lost 60% and a large majority of altcoins lost 90%. That we have a bias bullish or whether we are optimistic about the adoption of cryptocurrencies for the years to come, it is clear that the period is strongly bearish. Cryptocurrencies are part of the so-called risky assets and are highly correlated to US equities. At the moment, they are bearish and, despite the recent rebound in these, it is not certain that the decline is over. Have altcoins finished the cycle? Is the situation different compared to 2018 despite the sharp drop? Let’s see if the party is over or if there is still hope.
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Ethereum against Bitcoin: break of the trendline, Ethereum sends a bearish signal
As of February 2020, Ethereum (ETH) is bullish against bitcoin. The bullish trendline of the ETH/BTC pair is broken, it will take retain support :
The bullish trendline (brown) is broken. Ethereum must absolutely hold against Bitcoin by retaining the support number 1 (S1). Now the pair is bearish in weekly unit. Ethereum is considered the altcoin leaderit is for this reason that it is interesting to study this pair.
For now, there is still hope for altcoins as long as the support 1 holds. If he were to give in, the pair would send a strong bearish signal. At best, the pair would even have to re-enter the trendline, but that seems compromised for the moment. the Bitcoin has taken over the reins of the market and it will be necessary to be patient before seeing Ethereum outperform the king of cryptocurrencies.
The momentum for knowing the strength of the buyers versus the strength of the sellers is clearly bearish and below bearish trendline. This trendline will have to give way to be able to hope to find some strength buyer side.
The situation does not resemble that known in 2018 on this graph. To hope for anything, Ethereum will have to regain strength by structuring a dynamic change weekly.
Altcoins at the end of the cycle or is there hope?
The capitalization of altcoins
As said in the introduction to this article, altcoins have greatly lost in value. The graph that highlights the capitalization of altcoins, however, seems to give hope:
The situation seems catastrophicaltcoins lost 90% from their all-time high. However, the capitalization of altcoins seems all the same solid. The course draws a tidy and is currently at the level of lower boundary. The graph is bearish in weekly time unit, it will be necessary to wait rollover structure for altcoins to regain value.
The momentum is bearishit will also be necessary to wait before being able to find buying force altcoin side.
The situation is certainly complicated for many altcoins, but this graph gives hope for the coming months. Of course, if the lower limit of the range gives way, it could be very complicated for altcoins. Let’s not forget that altcoins can lose many times 90% for a bearmarket.
Return to support for altcoins against Bitcoin?
The chart of altcoins against Bitcoin shows if altcoins are powerful against Bitcoin or if they are in bearmarket as in 2018. Again, the situation does not seem so catastrophic:
For the moment, the resistance doesn’t want to give in. If the altcoins manage to push and close this chart above the red zone, it will be a strong buy signal for altcoins. Although altcoins are bearish and they have lost a lot of value, the price of the capitalization of altcoins against Bitcoin is close to an important support. All is not lost, altcoin buyers will have to defend this support.
As we can see, the situation is completely different of that known in 2018. It is not impossible that this support yields and gives way to a bear market of the magnitude known in 2018, but this is not yet the case. The probabilities are oriented towards a continuation of the range In progress.
The momentum is bearish on this graph. Buyers are not showing strength at the moment, this trendline will have to give way.
Altcoins are currently very shorted by market players?
There are derivative products which allow in particular to be able to use theleverage. Through perpetual contracts, actors can long (which bets on a rise) or shorts (which bets on a decline) an asset. These products are very attractive and more and more players are entering in the hope of making big gains. It is important to remember that this type of product is highly risk.
The actors pay costs to be able to stay in position. the funding rate is a fee mechanism that allows you to constantly have the spot price (purchase of real cryptocurrencies) and the price on derivatives (contracts) close. When the indicator is in redthe actors in shorts pay a fee and when he is greenThose are the long that pay.
Currently, overall funding, i.e. across all contracts, is very negative. It is even more negative than when it fell in May 2021. It is very rare to have so many shorts in the cryptocurrency market, it often results in rebounds.
Of course, this kind of data does not help us in terms of timing. This clearly shows that the actors have a behavior of aggressive shorts and that this phenomenon is rare. In general, the market accumulate the shorts to then liquidate them. This is called a squeeze shorts. This requires Bitcoin to stop falling and stabilize.
Altcoins are in a sticky spot. Altcoins are bearish in the short and medium term, but the various charts analyzed in this article do not seem to be catastrophic. Indeed, most are reaching support levels that should be able to allow altcoins to rebound, or even change trend. On the derivatives markets, altcoins are currently very shorted and this very often results in a short squeeze. It will be a long road to regain bullish altcoins, and there is no indication that the fall is over. We can however notice that the market does not look like the bearmarket period in 2018 and this still leaves hope.
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