Crypto Frontline

BTCUSD (Coinbase)

Bloodbath is the keyword for the beginning of August, given the entire crypto market is under heavy pressure. A confluence of factors is weighing heavily on all risk assets, including major stock markets, and we would like to take a couple of lines to talk about that.

After the FED meeting, there has been a growing concern that the central bank is once again behind the curve, so rates are too restrictive. Additionally, the Yen carry trade has been a massive source of liquidity during the last two years.

Simply put, as the Japanese Yen weakened, people borrowed Yen, then swapped it for other currencies (USD, EUR, etc.) and bought financial assets. This strategy works until the Yen starts to appreciate, forcing participants to cover their shorts and sell assets. Thirdly, the rising tensions in the Middle East create a perform storm.

Back to the BTC analysis, we mentioned last week that breaking $60k is a risk-off scenario. Indeed, that’s what happened, with the price dropping to $50k. We are now in oversold conditions and the $49k – $50k area is the first support zone. If the selling intensifies, the next area to watch is $45k. On the upside, $51.5k followed by $53.5k are resistance levels.

ETHUSD (Kraken)

When Bitcoin drops heavily, Ether and other altcoins drop even more. This statement is reinforced again today, considering ETH posts -17% losses at the time of writing. Luckily, selling seems to have stopped around $2k, due to extreme oversold conditions.

Now, we believe the $2k – $1.9k support is key in the upcoming days and that should act as a floor in the face of renewed selling. A dead-cat-bounce is very likely and although the trend has shifted to bearish, until further notice, the coin can move up to the $2.5k – $2.7k resistance area first.

We’ll shift our sentiment back to bullish only if Ether manages to break back above the daily 200 SMA, currently at $3.2k. That’s quite a distance to cover and it might take a while.

BNBUSD (Binance)

The 3^rd coin we want to talk about is Binance Coin because this is a popular exchange and how the token performs speaks about whether crypto holders are liquidating their positions. That happens, considering the price dropped almost 25% in less than 6 days.

Right now, we can see a short-term bounce after BNB almost touched the $400 support level. We see a floor at $400 – $386, which should hold for the week. Below that, our attention will shift to the $345 support level. A bounce is increasingly likely and as a result, traders should treat the $456 and $498 as key resistance levels.

Most of the time, liquidation phases like this one are accompanied by strong counter-trend moves. The rationale is simple – all traders and investors who were levered up have trimmed or fully closed their longs and now a new cycle can begin. Lastly, we want to emphasize caution because it is during these periods traders face the heaviest losses.