Welcome to the Three Ts with CoinJar. Each fortnight we explore a big Theme, an interesting Trade and some good, old-fashioned Technical Analysis (courtesy of Tom from trading gurus FX Evolution).

Any port in a storm

Amid a fortnight of fear, uncertainty and doubt on the global markets, perhaps one of the most interesting aspects has been the way in which Bitcoin and the rest of the crypto market has been largely impervious to the downswing.

Sure, there was the brutal sell-off as the Evergrande fiasco loomed, but while bellwethers like the S&P500 Index (SPX) and US Dollar Index (DXY) made their case for a risk-off approach, crypto not only stabilised but has started showing unmistakable signs of strength.

There’s a general assumption that crypto, being speculative, volatile and risky, will be first to suffer when the downturn comes. But what if the other side of the story – the part about being a high-yield, idiosyncratic asset class and (at least in Bitcoin’s case) an anti-inflationary store-of-value – starts driving the narrative?

If things go proper Lehman Brothers then, well, it’s cash and bonds for the foreseeable future. However, if it’s simply a case of a market cooldown after the greatest global asset bull run in history, then crypto could be poised for a Q4 for the ages.


Diminishing reserves

While Bitcoin looked a little scary last week, observers of at least one metric still felt confident there was upside in store: exchange reserve netflow.

This is a measure of how much Bitcoin is entering and exiting exchange wallets. When the number goes up, it suggests that Bitcoin is being sent to exchanges, ready to be sold. When the number goes down, Bitcoin is being taken off exchanges, presumably for long-term storage.

Right now the trend is simple and strong: Bitcoin is being removed from exchanges at historically significant rates. Combined with Ethereum’s own plunging supply and a mammoth US$21.5 billion in stablecoins sitting on exchanges, ready for action, it suggests that selling pressure may be running out of steam.

BTC shakes it off

Zoom out and Bitcoin is still in the US$41k-52k range identified by Tom from FX Evolution six weeks ago.

However, on lower time frames the story has turned decidedly bullish. After spending a few days soaking up supply around US$40.7k, the price has bounded higher, punching through the resistance at US$48.5k and surging back above the 20EMA, 50EMA and 200SMA.

As has previously been the case, these lines should offer dynamic support in the case of future corrections. Bitcoin strength can also be seen in the 4H close above the indecision candle. This suggests a firm transition to the US$48-52k range, which should frame Bitcoin’s price action while we wait for the next impulsive move.

After a significant move, it’s natural for Bitcoin to range while it consolidates and builds strength for the next jump. From a rotational perspective, this usually means money flows from BTC out to ETH and onto the other altcoins. But be wary of overtrading: if Bitcoin really makes a run for it, history suggests altcoins will suffer as liquidity rushes back to the king.

CoinJar is Australia’s longest-running crypto exchange. Since 2013, CoinJar has helped more than half-a-million Australians buy and sell billions of dollars in cryptocurrency.

FX Evolution is Australia’s premier forex, stock and crypto trading community.