Note: “This analysis is an adaptation from the work of Mati Greenspan, Senior Market Analyst at eToro
- Falling crypto markets giving lucrative entry points which may interest Wall Street
- Increased activity on Bitcoin Futures suggest Institutional participation
- Technical Analysis 101: Newbies don’t fall it blindly
Market Meltdown is giving attractive entry points for Wall Street to enter cryptos
Well, the market has been in free fall for past couple of weeks and a lot of investors have eroded their capital in this downfall. But on the other side, this downfall has bought cryptos to a level where it looks a lucrative buying opportunity for the ones who have been waiting on the sidelines especially the institutional investors. Of course, it would be very difficult to prove but this theory really rings true.
What makes one feel this theory to be untrue is that there are still some questions that go unanswered. Iik, for example,e the analyst, in their viewpoints, have suddenly turned bearish on Bitcoin at USD 3700 levels when they were bullish even at USD 20000? And that to when nothing much has changed fundamentally for the Bitcoin. And if institutions are buying or accumulating why are the prices falling?
Even with these unanswered question,s there is some incident that shows some institutional interest building up. There is commonly circulated which shows that there is a whale who is currently accumulating massive amounts of Basic Attention Tokens (BAT) on the down-low. Also, there has been increased volumes over the last two weeks in the bitcoin future on the CBOE and CME exchanges which suggest that the futures market on Wall Street are participating in the volatility.
Even though the volumes in the futures contracts are still only a fraction of the market there have been instances of spikes in volume in recent times. Like on November 20th they peaked at 87,278 BTC, which is about 8% of the volumes recorded on the crypto exchanges. All this really tells us is that they’re trading more when prices are moving and we’ve seen that before. Whether they’re secretly accumulating through OTC deals and using the futures to hedge remains to be seen.
Newbies in cryptos need to understand situations before following Technical Analysis
Technical analysis is an excellent study and if used wisely, could help people make good money. But using technical tools without market knowledge or situation analysis can land one in trouble. And that is what is happening with the newbies who are reading indicators blindly. A lot of beginners you come across take things like trendlines start to treat them as if they’re a perfect indicator of what’s about to happen. For example, this log scale bitcoin graph has come up a few times in the last week.
It does show a break below the long-term trendline, however, for those of who are new at this stuff forget to understand that a break below a trendline doesn’t indicate that the trend is over. Take this chart as a perfect example. Notice how in early October the US Dollar broke strongly above its downward trendline, only to continue downward and test that same trendline in January.
The key here is to take this type of things in stride and not to place too much weight on a single breakout or indicator.
Taking it to cryptos, when someone says that the next area of support is between $3,000 to $3,500 it doesn’t mean that this is the bottom and it also doesn’t mean that the markets necessarily need to go that far down. It’s just one indicator and should be seen in the context of a greater story that includes both technical and fundamental analysis.