Methodical Trading - Volume 18 - "Ethereum & The Moon Mission!"🚀🌓
Bitcoin Breakout, Ethereum Moon, Alts, & Michael Saylor
This volume of Methodical Trading is free for everyone! Please show us your Support and remember to Subscribe for free via our e-mail list. 2021 is off to an amazing start in the markets so hats off to an absolutely amazing bull run!
Bitcoin has finally broken out of consolidation and needs to break two key levels before blowing past All Time highs.
Ethereum is carrying strong momentum after the fourth attempt at breaking the previous All Time High resistance set last month.
Longer term Alt plays are charted that center around DeFi and exchange coins. Older coins such as NEO and ICX are brought up as well…
Michael Saylor’s presentation to over 1,400+ corporate firms in regards to Bitcoin took place yesterday.
I would also like to take some time to discuss automated strategies and Bots related to Bitcoin trading/investing through Stacked, an automated crypto investing and bot trading company based out of Chicago. This is NOT a sponsorship. This is a sharing of experience that has been greatly beneficial to individual portfolios and has outperformed simply holding Bitcoin. More specifically, I would like to touch on the Psycho Bot (Created by @AltcoinPsycho on Twitter) and the impressive 1,308% performance it has raked in since inception at the time of writing.
Altcoin Psycho has created a fully automated Bitcoin trading Bot managed through API via Stacked that has outperformed basic investing strategies along with a majority of intraday and swing traders. The Bot has caught every strong trend leading up to where Bitcoin resides at today. No, this is not a 100% fool proof strategy. In fact, the win rate percentage is approximately 30%. However, the profitability of the Bot should be the bottom line for any trader/investor and the 1,308% all time performance speaks for itself. Here are a few examples of recent positions taken by the Psycho Bot.
Simply put, this strategy works and Altcoin Psycho has the evidence along with a full Discord of Active Subscribers to back it up (It also remains as the #1 Bot on Stacked in All Time Performance). Utilizing bots, algorithms, etc. takes away the emotion and bias that comes with day and swing trading. The risk management is automated and calculated for every position based on the Default settings. The flexibility that Stacked has integrated for users allows Spot or USD collateral to be utilized on applicable exchanges such as FTX, Bybit, Binance, etc. The positions taken are not scalps that aim for a small % gain, rather, the goal is to catch the next strong uptrend or downtrend that follows.
Again, this is NOT a sponsorship. Altcoin Psycho has created a trading Bot that outperforms basic investing strategies for Bitcoin and has helped portfolios stay afloat during strong downtrends. If you would like to try the Psycho Bot out for yourself, you can signup by clicking on the link HERE.
Talking Points
Bitcoin Breaking Up & A Simple Understanding of Funding + Premium
Ethereum & The Moon Mission
Alt Updates & Setups
New Alts vs Old Alts
Michael Saylor’s Presentation
Bitcoin Breaking Up & A Simple Breakdown of Premium + Funding
Taking a look at the Daily, Bitcoin is proceeding upwards as we mentioned in the previous newsletter. Since then, price has wicked the top of the “Elon Pump.” Caution should be warranted here as a wick and strong close below this level could end up playing out as a Swing Failure Pattern. This typically leads to a mean reversion of price and can completely change the direction of the current trend. This is likely not a place where one should take a Long position as price is just below resistance. It is important to remember that resistances are places to Take Profit and do not serve as prime entries for Buyers. As such, it’s better to wait for this resistance to be claimed as support, or a further rejection for better Risk:Reward opportunities
If Bitcoin consolidates just under these resistances, then this is a bullish signature that shows Sellers are failing to reject price and push it down further from key levels. STILL, it would be best to wait until the resistance itself is broken and flipped into Support. The idea of consolidating below resistance is just another tip to keep in mind and watch out for.
The above image contains Coinbase, Bitmex, and Bybit prices for Bitcoin, in order from top to bottom. A huge difference currently lies between Spot and Derivatives. At the moment, Derivatives is leading Spot price by $60 or more. This is a sign that a majority of margin traders are utilizing heavy leverage and causing Derivative prices to be significantly ahead of Spot prices. The ability to utilize up to 125x leverage on a variety of exchanges leads to inflated bankrolls and over-extended positions. Spot Bitcoin, as the name suggests, does not take into account leveraged positions or margin traders. It only offers Bitcoin at the current exchange price with no additional buying power. Hence, this is the reason why Coinbase and other Spot Prices are below Derivatives.
It is vice versa when this concept is applied the opposite way as well. When Spot prices are leading above Derivatives, then it typically means a heavy amount of margin traders are holding Short positions.
In combination with the difference between Spot and Derivative prices, funding rates are also another aspect to take note of. Funding rates for nearly all exchanges reset every 8 hours. By taking the above image as an example of the current funding rates, a Long position would be paying 0.0484% every 8 hours on Bitmex for Bitcoin and 0.2195% for Ethereum. This is incredibly high and deviates greatly from the default funding rates at 0.01%. Funding shows a general sentiment of the market and paints a picture as to how many traders in the market believe price will move up/down. If prices were to continue increasing, then margin Long positions would be sitting deep in profit and essentially get a free ride towards the upside. In the Short term, price corrections help reset the balance between Spot and Derivative prices along with resetting funding rates by rinsing heavy Margin positions.
In a bull market such as the one we are currently in, a reset of funding rates along with the Spot and Derivative prices staying up to par with one another can be a strong signal that the current correction has ended. As with most indicators, strategies, etc. This analysis should be combined with other forms of Technical Analysis as well in order to justify prime entries. Also, keep in mind that funding can go negative, which would mean Short positions are paying funding every 8 hours to keep their Shorts open, while Long positions would be getting paid instead. This is a basic understanding of Premium and Funding Rates.
After the recent drop from $38,900 to $36,900, Spot and Derivative prices appear to be mostly up to par with one another again. This is a good sign that further upside may resume shortly if Bitcoin can break the above resistances mentioned earlier. For the most part, margin traders who utilize high leverage positions usually do not receive “free rides” the entire way or up down. Volatility goes both ways and tends to rinse out these traders in order to maintain a healthy market environment.
Ethereum & The Moon Mission
The Daily for ETH/USD looks incredible. Price was able to break the above diagonal resistance and has currently retested it as support. If price can hold this diagonal, then the upside potential is still extremely significant. The chart above shows a higher risk ETH/USD play that can be taken at this diagonal with a Stop Loss below the recent wick. If price falls back below the diagonal, then another prime setup would be a flip of the previous Gray resistance at ~$1440 into Support as well. Either way, these are two Long setups that we are personally taking due to Risk:Reward ratio of 5.4.
Zooming out to the Weekly, Ethereum looks very promising. Volume is significantly higher on Coinbase in comparison to the previous bull run that lead up to the January ‘18 top. By drawing a Fibonacci Retracement from the previous macro top at $1,420 down to the macro bottom at $81, two key Fibonacci levels pop up: $2,256 and $3,600. These are the 1.618 and the 2.618 Fib. These Fibonacci extensions are commonly used amongst traders to search for potential resistances when price is moving in uncharted waters. In reference to the last newsletter, price is well on its way towards $1,900 and the next big levels to pay attention to are the Fib extensions just mentioned.
It was recently announced that Grayscale purchased an additional 47,000 ETH over the past 24 hours. This is likely what has helped push price up significantly past $1,440. At current market value, this amount of ETH is worth around $70,000,000. It would appear that Grayscale has received a tremendous amount of accredited investors pouring through their doors after opening back up their Ethereum product. As the bull market continues, it is extremely likely that more investors will pour into Spot ETH itself or go through Grayscale’s doors. There is absolutely no reason to be bearish or be in search of a top until drastic changes in large fund holdings take place.
Alt Updates & Setups
DEFI-PERP Update:
As always, DeFi-Perp continues the uptrend and makes a new leg up past $8,000. The current wick suggests that the uptrend is still intact and still looks good to make way for the $10,000 level.
FTT/USD Update:
FTT has rallied as well since the initial entry from the previous newsletter. The medium-long term target still stands here at $25. Nothing has changed in regards to FTT’s fundamentals and purpose on FTX.
YFI/USD:
YFI looks primed here and is looking to continue past the previous All Time High. A Stop loss below $30,000 and a target around $50,000. This would be the 1.618 Fib. extension from the local range established over the past month.
New Alts vs Old Alts
Older Alts such as NEO, EOS, ICX, etc. that date back to pre-2017 crypto market days have failed to get back anywhere near their previous All Time Highs…
This is not a good sign for these coins in regards to how they will do throughout the remainder of the current bull market. Capital rotations in crypto occurs repeatedly in this manner: Bitcoin -> Ethereum -> Majors -> Alts -> Low Caps
Alts that have greatly benefitted from this type of capital rotation are… DeFi Alts. Although it may sound like a broken record, nearly every DeFi Alt has broken upwards into new All Time Highs. In comparison to older Alts, capital has rotated out of them and transferred into newer projects that have come up over the past two years.
In general, do not get attached to bags that have fallen 90+% and despite the current market conditions… have been unable to break or reach anywhere near their previous All Time Highs. It is likely that these Alts are for the most part… dead. Crypto is an extremely speculative and highly volatile market. The conditions that change in this market are rapidly evolving and requires traders/investors to constantly adapt to newer projects and narratives coming into the space.
Michael Saylor’s Presentation
Yesterday, Michael Saylor presented a Bitcoin Corporate Strategy to over 1,400+ corporate firms that signed up for MicroStrategy’s World conference. This type of exposure for Bitcoin is what is opening up the flood gates to the corporate world.
Is crypto a bubble in this case? Likely not. Stimulus is pouring into the globe in droves and Institutions are still hopping on board. Crypto is not being fueled right now by dumb money investors, instead, SMART MONEY is beginning to enter the market in droves. You can view the entire conference that Michael Saylor and MicroStrategy held below and see recordings of it on YouTube as well.
During the conference, Ross Stevens (CEO of NYDIG) of New York Digital Investment Group stated that he expected to hold $25 Billion worth of Bitcoin by the end of 2021. You can read more about Ross Steven’s time with MicroStrategy’s conference HERE. Currently, NYDIG manages $6 Billion worth of Bitcoin with dozens of institutions waiting to join them…
Keep calm and HODL on!
Please note that this newsletter is NOT Financial Advise. Neither Methodical Trading and/or it’s associates should be considered Financial Advisors. Any and ALL related Market centric material should be considered educational content for entertainment only. Methodical Trading and/or it’s associates are not responsible for any financial endeavors an individual/group chooses to take.