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).
Death of the tradoooooooor
It’s no secret that crypto has been built on the back of speculation. The fact is often thrown around as an argument against cryptocurrency, but if feverish speculators hadn’t taken up the cause there’s every chance crypto wouldn’t have had the chance to develop into the transformative technology it has become.
But there’s a limit to how far mere speculation can take you. Just ask the founders of pets.com. And for crypto, a culture built around longing s..tcoins, chasing 100x-ers and going all-in on dog-themed memecoins might finally be reaching its limit.
To be sure, crypto trading isn’t going anywhere. It’s tremendously lucrative for the purveyors and millions of people (mostly young men) engage in it every day.
But we are perhaps witnessing the end of trading as a driver of market growth. While the waning of the pandemic has undeniably been bad news for activities that depend on being alone in your bedroom and having access to cheap money, there may also be an upper limit on the number of people that want to go HAM in the crypto casino.
It’s still too early to know if this is The Big One, the crypto correction that finally sends all the imitators, knock-offs, con jobs, meme-meme-meme-coins and half-assers to zero. But one thing’s for sure: if crypto is to grow from 15% of the population to 50% or more, it’s going to have to offer the world something more than 150x leverage.
Speaking of, can I interest you in this $5000 picture of a pixelated creature with a penis for a butt?
Drop the charts, pick up the paper
Chartists will often tell you that the worst thing you can do as a trader is look at the news. Markets rarely react how you expect to a given headline and a focus on real world events can cause you to doubt what the chart is trying to tell you.
However, when you find yourself in a powerfully trending market like the one we’ve been grappling with since November, a focus on the news can save you a lot of money.
This is because trending markets occur when strong narratives take root. And right now, the narrative is simple: soaring inflation = higher interest rates = less cheap money = bad times for speculative assets. (Oh and let’s add a new Cold War into the mix, shall we?)
Twitter traders will post endlessly about RSI resets, bullish divergences, must-hold fib levels, OBV reversals, etc, etc, etc. But until the story changes, any positive results you might gain from trading these indicators will likely be short-lived.
Trading the narrative (or, let’s say, vibes) might not help you pick the pico-bottom, but it sure could help you keep hold of the profits you made from the 20/21 bullstravaganza.
Do or die moments
Well, that reversal was short-lived. The most recent rejection from US$45k left us with a shooting star candle on the weekly, kicking off what has become a seemingly inexorable descent.
According to Tom from FX Evolution, the next stop looks like US$30k, where we can expect the real battle between the bulls and bears to kick off. In the meantime, watch out for the downside crossing of the 20 and 50 EMA lines, something that hasn’t occurred since the black swan of March 2020.
Crypto’s pain is also being shared by the tech-heavy Nasdaq, home of the speculative growth stocks. With correlations between the two nearing all-time highs, the Nasdaq’s continued downward momentum may suggest further weakness as US$30k approaches.
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.