Crypto Summer

The market is reaching an interesting crossroads point. It is one of these situations in which the price has to make a decision that marks the immediate future. Right now from a technical point of view we can see a sideways range structure that is running out of recent moves. And I say this, for a simple matter of geometry.

Market at confluence

Technical Analysis is the discipline that allows us to analyze the behavior of the prices of an asset. In this case, if we look at Bitcoin as a market benchmark, we can see how the price draws a smooth upward movement, which has recently allowed it to leave the distribution zone.

What is a distribution area?

Let’s explain it for those less introduced to the subject:

We call the distribution zone the lateral range that normally occurs in the price, after a large trend movement, although depending on which authors will differentiate between whether this zone occurs after an upward movement (distribution zone itself) or a bearish one ( Accumulation zone)

In this sense, the second term would be more appropriate. The market has ‘digested’ the fall in price and has generated a lateral movement in which volatility is very low

No alt text provided for this image

We can see these zones in the graph (Green – Distribution zones and Red – Accumulation zones)

Side Range Structure

We can be more precise and try to get more information about what has happened with the price in the last few weeks. When the market is under a lot of pressure with a violent trend movement, it tends to absorb it later and needs time to recover and generate a new trend with chances of success. This, neither more nor less, is what we have practically experienced in the last two months.

No alt text provided for this image

The detail shows us much more information and we can clearly see the range that we have already commented on in other posts, with a very prominent area around 22,600 USD as its ceiling. But everything has an end, and really since mid-July we have seen a new configuration of prices with a growing strength that has ended up piercing the ceiling zone of the channel, but exhausting itself around 24,000 USD

It will be because it is summer and we have a decrease in activity, or because the market is not ready to start an upward trend, we do not know, but the price has stopped in this area marking a triple top figure

The end of uncertainty is near

But this situation will not last forever, so the date on which we are going to see an outcome is getting closer. And we can see that on the same chart with the presence of the last bearish guideline, originating in the ATH or historical maximum of the market, of November 2021

Possible bullish composition

A breach of this line would be a statistically significant event, and would put us in a long-term uptrend for the first time since the ATH, ending the bearish move (what some call crypto winter).

This of course is pure Technical Analysis theory and this can be affected by many factors that can alter this outcome. What is clear is that it is a critical moment in which the market as such has to make a decision

Are we in a position to see a bull market?

It is a difficult question to answer. We could see a bull market and we have already discussed this from a technical point of view, but what is clear is that the macro situation of the economy can be a double-edged sword in this regard.

The liquidity shortage scenario we are facing is new for the crypto market, and we will see how a bull market adapts to it.

For now, what we can say is that the market does not have enough strength to see an upward climb as we are used to. Our market strength indicator says so

No alt text provided for this image

We can see how the speed of entry of non-stable coins in exchanges (red line) has been reduced, and has even entered the extraction phase. But we see that it is not accompanied by a contribution of stable coins to exchanges, which makes it difficult to think of important upward movements, given that in this situation, the only possibility for demand is that it be made by buying crypto from FIAT, and as we have mentioned, we are facing a scenario of liquidity shortage, so we should see a contraction

Could we see the crypto ecosystem become an alternative?

Well, I think that’s the big question. Unquestionably, the crypto ecosystem has a new opportunity to become an alternative to the so-called TradFI or traditional Finance.

Factors such as a deflationary approach and a higher remuneration of liquidity play in its favor

waiting for the outcome

Whatever it is, the market is close to having to take a certain direction, at least that is what the statistics tell us. We, just in case, will keep an eye on him, even if we are in a rest period, because you already know that crypto assets do not rest.