After observing the huge fall in the crypto asset market, and that it has undergone a process of dilution and certainty, the question that many investors ask themselves is if we are already facing a moment of purchase. Is it the right time? What do we understand as the right time?
Obviously, this definition is very much in line with the fact of identifying whether we are facing what we call a market floor. As in all technical figures, these are very evident once the moment has passed, but the harsh reality of the markets is that while they are happening, no one can be sure that we are facing that situation.
Starting from this base of uncertainty, as always, we will have to work on different scenarios assigning them a probability factor. This is the most effective work methodology
Within the distribution channel
The logic and the different theories and schools of analysis give us the necessary tools to be able to identify the sentiment of the market in each situation that occurs. In this sense, the Bitcoin chart is explicit
We can clearly see the technical channel structure within which the price is moving and bouncing either on its top or bottom. The last to be tested was the ground level of this channel, which still looks solid for now.
This has caused an interesting rebound in price with relatively considerable force, rapidly recovering the equator of the channel. The market is patiently waiting for events with a volatility that has decreased significantly in recent times
Closeness of the bearish guideline
We have to point out that the channel continues to develop horizontally, but even so, it will encounter benchmarks that will force investors to make decisions that may be interesting from a statistical point of view.
The importance of statistically significant facts
There are significant moments in the market, marked on the price chart. Moments in which events historically occur that have not taken place until that moment or for a long period
In the case at hand, we can see how the bearish guideline originated by the fall of May 5 and with a maximum on June 8, prior to a new downward impulse, stands between the price and the upper part of the channel.
The overcoming of this guideline and its positioning on its bullish side would be a fact that has not occurred since the beginning of this bearish period
The price space between the guideline and the ceiling of the bullish channel forms a triangle that we could define as a Price Compression Zone, that is, a level that will be difficult to overcome.
Any positioning above these two levels would suggest a sea change in market sentiment
Actually the facts described are those that could show that the dynamics of investors has changed. Subsequently, it would be necessary to analyze whether the characteristics of the bull market in terms of volatility and liquidity are assimilable to previous markets or if we have a different structure. That will basically depend on how prices will behave.
Ethereum takes the lead
Whenever we analyze the market we like to compare the BTC chart and the ETH chart. This simple comparison has very important implications and gives us a broader view of the market.
Ethereum would have already exceeded the bearish guideline
The breakage of the bearish guideline in the case of this cryptoactive has already occurred. We see the price in a situation that has not occurred since last May 5, and we enter that compression zone that will make it difficult for the price to advance
How has the market managed the entry into this new phase?
One of the references that we must take at a more macro level is dominance. Dominance, referring to the two main assets, is very important and expresses the tendency of investors in asset trading processes
It is an outstanding fact that in this market reaction scenario, we do not see Ethereum taking advantage of this movement, on the contrary. The fall in its weight and influence in the total market capitalization shows how the prominence and activity has not focused on the second largest Blockchain.
One more sign of the compression zone that the price is facing. As we have discussed, the extension of the move from around $1,000 to $1,218
Pressure continues in the derivatives market
YES, it is true that we see an interesting movement in the market from the bullish point of view, but if we have to identify an optimal window to buy assets, we must consider other data.
In this sense, derivatives market positioning is a useful tool to have a reading of investor sentiment. The Put/Call Ratio consolidates much of this data into a single metric. We will NOT discuss this metric in detail now, but the reader should keep in mind that this ratio shown between seller and buyer sentiment can give us a profile of the orders that are placed in the market.
The strong divergence between BTC and ETH metrics still shows significant market tension and a lack of consensus, necessary to see a continued uptrend.
Is it time to buy?
Well, as always, we don’t have a single answer. But in our opinion, if you are a long-term investor, perhaps that moment has not yet come and it is better to wait to see how the market resolves how to deal with those compression zones that we have mentioned, even if that means having an entry price slightly worse
You already know that this post does not imply any investment advice, it only provides the opinion of professionals in the sector. It is you who must decide what you want to do depending on your risk profile