An Unimaginable Rise For Bitcoin
Just a couple of months, who would have bet a $40,000 Bitcoin? Only a fool or a visionary.
Hands up who a long time ago would have said that Bitcoin would be as valuable as it is today (for those distracted today, the price of Bitcoin is one step away from 42,000 USD). No need to lie! At least not with me. Not because I have the power to read thoughts with a lie detector, but for the simple reason that I remember very well every single conversation I had in these last two years with many of my collaborators, friends and followers with whom I very often had to deal with different analyses and assumptions. Due to my more than twenty years of experience in the financial markets, during a friendly chat or a professional confrontation, I am often asked a hypothesis based on technical analysis. For this reason, having to repeat often the same concepts, I found it easy to answer in a vague way listing the most plausible hypothesis.
When I was asked about Bitcoin, when the price of Bitcoin was either just above or just below 5,000 USD, I very often repeated that many technical signals indicated phases of accumulation that, I won't hide, I too often questioned because I couldn't find reasons supported by facts. I am not referring only to technical analysis signals such as the breaking of the trendline, the bullish head and shoulders or the Fibonacci extension. I refer, in particular, to indications that I found from the study of trading volumes. A technique that is already very difficult to apply for traditional financial markets despite the huge developments and innovations that trading platforms have made in the last decade. Let alone for cryptocurrency trading platforms. It is well known and often mentioned in the news, that many exchanges distort trading volumes to attract attention and customers. But what was happening from the second half of 2018 to before the summer of 2020 was something unusual and something that from my experience in the cryptocurrency industry I had never noticed.
In the previous report of December 4th, a week before the break of the previous all-time high of 20,000 USD, I reiterated a quote I wrote in an old report of mine from March 2019 "In order to discover opportunities, it is not necessary to have to venture ahead of time, but to follow the silent moves of those who in their DNA are used to sniffing out deals." Before proceeding, for the avid statisticians or the forgetful, in those days Bitcoin prices were dancing in the 4,000 USD area while Ethereum prices were deep in the 100 USD area. In two reports between February and March 2019, I was highlighting how in a period characterized by 9 out of 10 news items with ominous predictions, some news items of particular importance were mistakenly going by the wayside. They concerned companies of the calibre of VanEck, or Facebook with the acquisition of the unknown Chainspace, or even better Bakkt and Fidelity Investments. For all of them, news of interest in the sector emerged, at the time, like today, mainly defined as 'blockchain'. Today, two years later, all of them are now leaders often mentioned for different reasons and partly influencing what is happening in these weeks.  Â
But let's go back to a few lines above. When I was pointing out the levels to follow and that I considered fundamental, I had no shortcuts. Either Bitcoin would smash below 3,000 USD or a slow and structured ascent could find space first above the psychological area of 10,000 USD and then between 12,000 and 15,000 USD. If the price had found the strength and motivation, not only technical but also fundamental, to push above these levels, the story would have started to take a different turn. For this reason, it was important to wait for either the fall below 3,000 or a return between 12,000 and 15,000 USD. As the weeks and months passed, the holding of the March lows was increasingly confirmed and even some of the most renowned analysts overseas, albeit with difficulty, began to question the gloomy analyses that continued to be preached in the YouTube ocean.
In this period I have known only one person more optimistic than myself. Out of respect for privacy, I will not mention his name, not even under torture. I can only say that he is a well-known person in the environment and one of the first experts on Bitcoin and cryptocurrencies. During our exchanges of analysis and various hypotheses, I recognize that I have had more and more a positive attitude but decidedly less dreamy. My medium-term analysis limited by the structured thinking of a technical analyst projected a return to the all-time highs of $20,000 USD if prices had the strength to push above $15,000 USD. But that's where I stopped. Already a return to 20,000 USD for me was an achievement that would again attract confidence and purchases. But my interlocutor went further by projecting possibilities that at the time seemed almost madness, while today they are making headlines. The point was made to me that if the Bitcoin prices had returned first above 15,000 and then above 20,000 we should start considering crazy targets well above 30,000 USD. And this would be within how long? I asked. It may happen even in the next few months (for the record between late 2020 and early 2021). Despite my admiration, more for courage than faith, my smile was a mixture of hope and disbelief and a hint of scepticism. Such a thing could not happen. With prices under 10,000 USD and with a lack of relevant news, only a miracle could realize such a hypothesis.
Today all this is reality and coincidences of life have intersected during the Christmas season.
I will continue this story in the next newsletter. I'll give you a week to allow you to continue to fantasize about the continuation of this fairy tale...oops, story!
Decentralized Finance - DeFi
A week of record volumes for decentralized exchanges (DEX). Over the past seven days, with over $14 billion exchanged, trading volumes increased by over 70%. Since Friday, January 1st, 60% of the entire trading volume of the month of December has been traded in DEX protocols. If the trend continues in the coming days, the month of January is set to surpass the record of $28.3 billion recorded last September.
DEXes Monthly Volume
The leader of the sector remains Uniswap which, with over $5.4 billion, saw 43% of its entire business volume pass through its smart contracts.
This is followed by the vampire project SushiSwap with about $3 billion or 23% of the market share, which since the end of November is finding more and more appeal among users who prefer to use decentralized exchanges.
Curve maintains third place with $1.8 billion, reaching 14.7%.
DEXes Volume Last 7 Days
For the first time, the Total Value Locked (TVL) reached $22.5 billion, despite the fact that in the last week there has been a continued withdrawal of Ethereum and Bitcoin tokens from the various decentralized finance projects. A choice mainly due to the decision by users to cash in on the profits made thanks to the strong price rises in recent days. A price increase that at the same time increases the total value of the locked collateral calculated in dollars.
Total Value Locked in DeFi (TVL)
Maker remains the leader of the sector and for the first time has broken through the $4 billion wall of collateralized value, occupying about 20% of the entire money supply.
Aave follows, consolidating its second position at $2.8 billion.
The DEX of Uniswap rises to the third position for the first time, thus crowning its best week for the reasons mentioned above.     Â
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Technical Analysis
Bitcoin (BTC)
There is a shortage of suitable adjectives to properly categorize what is happening in this first part of 2021. Today as well - Friday, January 8th, 2021 - Bitcoin registered a new all-time high of 42,000 USD. A week that marked the end of the New Year festivities but did not extinguish the celebrations of Bitcoin sympathizers and investors. Unless there are violent reversals in the next two days of the weekend, for example, a return below 34,000 USD, this week would also close with a positive sign and a double-digit performance for the fourth consecutive time.
Since the beginning of October, out of fourteen weeks, only two have closed below parity, i.e. with a close lower than the weekly reference opening. Such an enduring positive streak has resulted in the Bitcoin price multiplying four times in just over three months and a gain of over 30,000 dollars per Bitcoin. The previous rally in late 2017 pales in comparison. Such a climb can technically be called "vertical", which is impossible to find in technical analysis manuals and is starting to look scary. If two weeks ago I pointed out the danger of vertigo, now it is even more necessary to be very careful. The turns can be sudden and violent. As already mentioned and recommended above: never go against the trend especially in irrational bullish phases, but it is necessary to maintain high levels of attention.
BTC Chart
Upwards the target levels are over. Any new record is possible. Downwards, instead, the sudden rise has widened the margins of space for possible speculative movements. In these days of euphoria, bearish 10% movements, such as the last one recorded in the early hours of today, go almost unnoticed. However, it is necessary to understand that every downturn can be an opportunity for new purchases because, at least in the short term, this winning streak cannot last forever.
Rises of this intensity make it useless to read strategies in options that, as can be seen from the chart below, do not provide any useful signal. All postponed to next week.   Â
BTC Options
Ethereum (ETH)
Since the beginning of the year, the price of Ethereum has taken off, gaining over 80% and recovering the entire period that, unlike Bitcoin, had forced Ethereum prices below 700 USD until December 27th. A trend that has been characterizing Ethereum since the March 2020 lows. Phases of accumulation of many weeks - such as between late July and early November or from April to July of last year - that end with the breaking of the neckline of the upper channel and a race that in a few days recovers the difference in performance with Bitcoin. This trend has allowed Ethereum to build a very solid bullish structure and in some respects, as I have repeatedly pointed out in previous updates, better than that of Bitcoin.
The rise of this week, while on the one hand raises the adrenaline and euphoria for Ethereum holders, on the other, it gives ample room for manoeuvre both upwards and downwards, where short-term speculation can occur. Speculation that during the week has struck twice. Monday, January 4th, the price of Ethereum has lost over 25% in two hours, only to be recovered completely within the next 24 hours. And today, Friday, January 8th, with a movement that started from the period high a few points below 1,300 USD in the last part of the day yesterday, and ended with the minimum after 11 hours in the 1,050 USD area, which saw prices fall a little less than 20%, only to be (almost) completely recovered in this second part of the day. These are excursions that can affect a lot for short term operations and create a sort of limbo for medium-term operations. But it is good to remember that such a high volatility also requires an operational and emotional management that is difficult to handle even for the most experienced traders.
ETH Chart
Ethereum prices have returned to the levels of early January 2018, now just over 10% away from the all-time highs recorded in those days. Last week I wrote: "in the coming weeks it is necessary to exceed 800 USD and in the coming months to exceed 900 USD. Only if the 1,100 USD mark is breached will Ethereum enter a new long-term bullish phase." All this happened in a matter of days. In such a context, it is useless to make projections that in a few hours or days may be disproved or confirmed. It is necessary, instead, to identify support areas where a possible lengthening could compromise the trend of short or medium term. In the short term, (hours or at most 1-2 days) it is important not to go below 1,000-950 USD for more than 24 hours. In the medium term, descents below 700-650 USD become dangerous. That means about a 50% drop from current levels (1,290 USD). This should point out how the current upward movement is nice to see and follow but at the same time does not allow too much room to relax.
In the case of Ethereum, the analysis of options strategies this week does not allow for valid reference levels either. The strong rise of the last 10 days is reshuffling the cards even among professional options traders. Better to take a break and postpone until next week.
ETH Options
