Crypto Weekly Outlook: December 21, 2021
The crypto market trended slightly lower over the weekend before bouncing up to start the week. As of this writing the global crypto market cap is sitting at $2.26T according to CoinMarketCap whereas one week prior it stood at $2.16T. Sentiment remains depressed as the Crypto Fear & Greed Index, as of this post, is sitting at 27 (out of 100) indicating fear. The sentiment measuring index hasn’t been above 30 throughout December whereas in early November when the market was at an all-time high, it reached the “extreme greed” level of 84. This cautious outlook can also be seen in equities as traders of all types are in a risk-off mood due to inflation worries and the new Covid variant among others. Evidence of this caution is illustrated in the spike in daily stablecoin transfers since stablecoins are by design not volatile with very little downside risk.
Bitcoin (BTC) didn’t do so well last week, but a key contributor to the negative performance appears to be selling in the Asian market according to Glassnode. Investors should pay attention to just how long this continues. Over the last week, BTC has fallen below $46K and hasn’t been able to reach the key $50K level, with most trading happening between these two areas. Veteran trader Peter Brandt noted that there has been no panic capitulation on strong volume, meaning that the bottom might not yet be in. Crypto analyst Will Clemente stated that the on-chain metrics and derivatives markets suggest a bear trap could be in the cards. However, Glassnode also highlighted that miner outflows have almost halved in just over a month and that this unspent supply is close to hitting all-time highs - indicating that miners are fine waiting for higher prices.
On the technical side, BTC is facing strong resistance at the $48K-$48,500 area. Above that, further resistance is present at the 20D EMA at $49,600. Support exists at the $45.5K-$46K area. Below that, solid support exists at the $42K level.
Ethereum (ETH) has been in a downtrend recently, but major positive developments are on the horizon. Chatter has been focused on the recent launch of ETH’s first ever public testnet for the full upgrade to Proof of Stake known as the Merger. The merger would finally make having miners unnecessary. It will also result in ETH’s inflation rate lowering to 0.2%-1% per year from the current rate of around 4% per year. The upgrade is expected to occur during the summer of next year. Looking ahead price-wise, ETH has resistance at the 20D EMA at $4,058, while support exists at the $3,700 zone.
Terra’s (LUNA) is certainly one to watch, especially after having such a big rise to new all-time highs in the mid-$80’s. Will it ascend further or will traders book their profits before the new year? To understand LUNA, one must watch Terra’s stablecoin UST. It recently flipped DAI to become the fourth largest stablecoin by market cap. UST is created by destroying LUNA, so as the demand for the decentralized stablecoin grows, LUNA’s supply shrinks. But remember, it goes both ways. However, with the cautious sentiment and traders hiding out in stablecoins, LUNA should benefit.
Avalanche (AVAX) has also been on a tear recently due to a myriad of good news over the past few weeks such as the integration of stablecoin USDC, allowing for more transactions and payment options for developers and users. Furthermore, institutional crypto custodian BitGo announced it would support AVAX. However, with its 40% rise over the past week, it might be due for a breather as traders take profits; that is unless, more positive news enters the fray. Looking ahead, AVAX has resistance at the 61.8% Fibonacci retracement level at $119.69 while support exists at the 20D EMA at $99.
Will Polkadot (DOT) ever excite the masses again? The much hyped previous five parachain auctions are now live, after paying the equivalent of $2.4 billion to secure the slots for 96 weeks. According to Polkadot, “The launch of parachains on Polkadot represents the culmination of the original vision outlined in the Polkadot Whitepaper (aka the Polkadot Paper) in 2016…How Polkadot evolves from here is up to its community of DOT holders, who will approve any future upgrades via the network's on-chain governance system." We also learned that the next batch of parachain slot auctions will begin on December 23, 2021. This new batch will feature six auctions, with the winners being on-boarded by March 11, 2022. In total, one hundred slots will be allocated, although not all via auctions. The market, however, did not react favorably to the super significant news, but institutions are likely paying attention.
Price wise, DOT has been moving below the 200D SMA at $28.82 for the past few days indicating that the bears are in the driver’s seat. However, a strong support zone exists at the $25 area. If the bulls can’t retake the 200D, the technicals will continue to favor the downtrend despite the improving fundamentals.
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