🧘♂️Altcoin. Opportunities. Alert.
Market Meditations | May 21, 2021
Hurry up and grab this Altcoin list
Dear Premium Meditators
We’ve seen too much FUD on Twitter. Enough. Time to build on the great analysis and sentiment on our premium Discord channel.
Today, we are sharing our top Altcoin predictions. 2 of which are made available to the premium community exclusively.
As promised, please use this link to download a PDF Cheat Sheet with all the Candlestick Patterns discussed this week as part of our Candlestick Patterns Course. Feel free to share it on Twitter and tag @MrktMeditations.
Sentiment seems to have recovered somewhat with many prominent figures on crypto twitter stating that the market has been cleansed of overleveraged traders and there being a “shakeout before breakout”. Bloomberg Intelligence has gone so far as to call this a Discounted Bull Market. This coincides with on-chain analytics which reveals that the majority of selling pressure has been driven by newer participants to the crypto markets and that the sudden price drop was driven by liquidations (particularly with traders trying to leverage longs in an attempt to time the bottom).
? ATTENTION. The majority of funding rates are still negative. Meaning the majority of BTC traders are currently short. We’ve yet to see any major short liquidations so beware a big-short squeeze (provided spot can help push us up and initiate this).
In almost perfect opposition to new entrants panic selling, long term holders appear to be buying the dip and accumulating cheaper coins. The number of addresses that are in accumulation have increased by 1.1% since the recent low.
Over to Technicals. On the one week level, it appears price action is confluent with a 0.618 retracement of our entire move up since March 2020.
Clear reversal with a severe loss of a key structural level and dip to the low $30k region. Anyone who has been following our previous BTC/USD on the newsletter will not have been surprised by this price action.
Key support at $30k. Important both structurally, psychologically and in that it’s failure to hold could signify the short term end of the bull market.
Slowly edging our way up to the key resistance at the $45k level. However, the key level for structural shift is $50k. Until we get back $50k we will regard BTC market structure as neutral (compared to previous parabolic bullish).
All doom and gloom? Not necessarily. A range bound BTC between $30k – $45k will allow altcoins to run.
Over to the technicals. Similar price action to Bitcoin. Dip to $2k and tested at around the $3k level. Key pivot points: conservatively -> $3.6k and less conservatively -> $3.2k. That’s when we can regard ETH as parabolic bullish.
ETH/BTC has retraced perfectly to the 0.382 level which is confluent with the theory that Bitcoin might range while altcoins continue to go up.
Invalidation point: 0.06 level.
0.618 or $47 was the key structural shift.Had we gotten above that the SOL market structure would have been very bullish. Will be the key level to flip. Currently at $40 which is a key support level.
Upside target if we break the 0.618 breakout zone? $70 confluent with the 1.382 level.
Steep drop to $270. As far as the technicals go, if the price were to recover, the upside target would be $450-$480. As for the fundamentals, there remains a positive narrative around BNB: cheaper Ethereum and exchange coins.
Clear invalidation at around the $300 level.
Ranging between $34 – $41 level. Potential upside movements if we can get above $41 and hold it. That being said, we may see resistance at the $50 level.
Potential to accumulate above $41 and set an upside target of $50. Tight invalidation at around $30.
Growing in popularity. Recent steep drop of over 50% and a strong bounce back. Potential for entry at these levels and a bounce back to extend as far up as $16 or the 0.618 level. This level is also confluent with the Moving Averages.
Invalidation around $10 or $11 depending on how aggressive you would prefer to be.
Gambler’s Fallacy: Don’t Roll the Dice
Let’s consider Tom’s hypothetical trip to the casino. He’s sitting at the blackjack tables when he notices something that could propel him to riches. After the first sip of any new drink, he wins the round! So Tom quickly finishes his drink, buys a new one and takes that first sip. Then he bets big. However, to Tom’s horror, he goes bust and loses his entire bankroll. He thinks, how could that possibly have gone wrong?
Gambler’s fallacy is where we believe that an outcome is more or less likely, based purely on a series of past events that in reality are not connected with each other. In this case, of course Tom’s drinking habits had nothing to do with his success at the blackjack table.
But let’s take a closer look at how this can impact our trading and investing. One common manifestation is in times of a prolonged trend. Many investors think that the trend will reverse at some point, simply because of the amount of time the trend has been ongoing. This can lead us to stop letting our winners run, taking profit too early and holding on to our losses for too long, sure that the trend will reverse.
It would be easy to let this fallacy impair our trading decisions in the current market. We have entered the first period of uncertainty where the market structure no longer represents a parabolic bull market. We could think, the market has gone up in recent months, it can’t stop now, or in fact the opposite, that simply because we have been in a parabolic market, the trend must stop. However, the best approach is to make sure every decision you make is independent. Yes of course, we should use past data to inform our systems but the key distinction here is we have back tested to formulate these strategies and are not relying on tenuous links. Use current data to inform your decisions, and do not think that sipping your drink will increase your chances of success.
At Market Meditations, we firmly believe that generational wealth should be accessible to everyone. To that end, we’re delighted to be partnered with Nexo: one of the most user-friendly crypto lending and earning platforms in the industry. You can use our link to create an account.
Portfolio Allocation and Black Swan Events with Nassim Taleb
In this episode, we explore key takeaways from 2 books, in Nassim Taleb’s Incerto series. Key Takeaways:
Black Swans are rare events that move markets in a severe and unpredictable manner
They need to meet three criteria: (1) The event is an outlier (2) It has an extreme impact and (3) it is only explainable after the fact.
Black Swan Events reveal certain behavioral traits we should look to avoid
This includes the narrative of fallacy where our love for stories over statistics cloud the facts and our ability to make rational decisions.
Taleb argues that effective risk taking should be fully protected from total ruin
In agreement with Taelb is Warren Buffet who said “the first rule of investing is never lose money. The second… never forget rule number one” and Ray Dalio: “make sure the probability of going bust is nil”. Survival is key to long term success.
Consider the speculative insured portfolio strategy
This is where you take on large speculative positions however insure against losses greater than say 10%. You can do this via traditional insurance or by putting in stop losses at 10%.
The perceived risk levels of “medium risk” assets can be lower than in reality
The risk of these assets can be difficult to measure because black swans are often not accounted for. Whilst you may have the perception of safety, in reality you are exposed to major downside risk (from Black Swans), whilst not being exposed to major upside.
The Barbell Strategy can be used to capture the upside of positive Black Swans whilst mitigating the risk of negative Black Swans
This strategy entails allocating a large percentage (say 90%) of your portfolio to low risk assets and a small percentage (say 10%) to hyper-aggressive high risk assets, ignoring those in the middle. This protects you from the downside risk of negative Black Swan events whilst exposing yourself to maximum upside.
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