To the stars
4 min read

To the stars

Cryptic ball: ad astra, per aspera.

Topkek, right? What a nice dip! If you learn one thing in this market, it should be that crypto is all about these "small" hardships and you need to know how to navigate them if you want to enjoy the massive gains this space provides - as Kyle Davis, a trader who literally handles billions every day, notes with this popular Latin saying. Now, I hope you noted yesterday's newsletter, where I remarked the next days were going to be hard, and how one should distance themselves from short-term price action, unless one was actively trading.

So, let's continue to zoom out to analyse the larger trend and see what may lie ahead. To begin, Crypto Twitter and some amateur crypto-traders, heavily focused on textbook technical analysis, continue to argue the charts look awful and we'll continue going down. In theory, that makes sense, especially with some anticipated Thanksgiving selling (to buy gifts) over the next weeks. But they seem to forget that cryptoassets tends to reverse suddenly and, more importantly, whale sentiment remains solidly bullish - which is aligned with the strong buying bitcoin saw at $58.7k, right where its key 50-day moving average was.

Moreover, I believe this dip wasn't aggressive enough to change those feelings. While we can't trust the big funds when they say they aren't selling (yet), because they would need some exit liquidity when that time comes, it's also the case that smaller, historically successful investors, as well as top industry analysts, all agree that this 5% to 10% dip across the board is quite normal. Furthermore, we must remember aggressive dips tend to hurt a bullish trend when they liquidate leverage traders. But we didn't have significant liquidations (above what we saw in the past two months) or even aggressive funding rate changes over the last day.

This means the pullback was driven by spot selling and that most futures traders weren't that overleveraged, or else the liquidations cascade would have been dramatic. Still, it seems funding has now reset so the next days may be rather boring, as long as BTC doesn't fall below $58k. That would mean we're indeed experiencing a dead cat bounce, but I'm assigning a low probability to it as the market is clearly not overheated and the flush below $60k was solid. Still, if you need some hopium check the charts below. Just be prepared for the risk of catching a falling knife if buy the dip - so phase your entries if you can't resist the early Black Friday preview, and make sure you have a plan!

Chart art: zooming out.

Glassnode's weekly insights are a great way to keep tabs on the bigger picture.
These relationships will likely continue to hold unless we have an unforeseen global crash, as bitcoin - crypto's bellwether - is now heavily correlated with global markets again.

Three things: alea jacta est.

Tweet tip: time to react.

Hit reply and tell us your best scenarios for the months ahead!

Meme moment: again, don't focus on prices.

While price action and market structure (higher lows and higher highs vs. lower lows and lower highs) are definitely important, crypto trading can be improved by looking at funding rates and analysing sentiment across different trader profiles.

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Our newsletter offers opinions and insights from analysts in the cryptoasset space. It is not intended to be investment advice, and should not be treated as such. You must not rely on its information as an alternative to financial advice from a qualified professional. Without prejudice, we do not undertake or guarantee that its information is correct, complete or non-misleading; or that the use of guidance in the report will lead to any particular outcome or result.