FA vs TA and more
Not sure what crypto to invest in? Here’s a stance on the upcoming weeks, analyzing coins and a summary of the recent action going on.
Fundamental Analysis vs Technical Analysis
When analyzing digital assets, one must consider that only a handful of cryptocurrencies have shown to be worthwhile investments, rising in value cycle after cycle. Most cryptos die off after their first parabolic rise in value and permanently lose value in Bitcoin terms. Let’s use Ethereum as an example, and while it has had incredible fiat-denominated gains, it loses value when viewed in Bitcoin terms. If you bought Ethereum during the 2018 peak, it would have cost you about $1,450 or 0.095 Bitcoins. If you sold it during the 2021 peak, your Ether would be worth around $4,900 or 0.07 BTC, a nice 340% gain in fiat terms but a loss of 36% in BTC terms.
This means that if you held Bitcoin, which has proven time and time again to preserve and gain value, instead of Ethereum and sold it at the same time as ETH, you would have around $6,600, a 455% gain in fiat terms. However, this is different for shorter-term trading, as TA can tell you more often than not how an asset will move, which is more beneficial for traders than investors. This is why any Technical Analyst worth their weight would tell you not to hold any altcoin for the long term.
In layman’s terms, Technical Analysts follow previous movements, common patterns, and a plethora of indicators to try and correctly predict an asset’s next move. Since previous trends are not necessarily what will happen in the future, TA is not foolproof. While most Technical Analysts can more often than not predict the direction of an asset’s movement, it is nearly impossible to correctly predict the exact future price of an asset from TA. Anyone claiming to do so is misleading you for their own gain.
We provide our members with a limited set of TA, enough to satisfy the need of some of our members who prefer using TA entry points instead of Dollar-Cost Averaging and have a low time preference for their investments. It is important to note that our preferred market entry method is to Dollar Cost Average. DCA is a method where you buy or sell a small amount of the asset every day/week/month to try and capture the average price so as not to miss highs when you sell and lows when you buy.
Members who have a high time preference should rely on Fundamental Analysis, which is the study of the validity of an investment. Fundamental Analysis determines whether an investment is sound, stupid, or straight-up gambling. Questions like does the asset have utility, backing, future, demand, supply, and everything in between. An investor who invests based on sound fundamentals can sleep peacefully without worrying about the ups and downs of the market, as his investment is poised to increase in value in the long term.
To satisfy the demand for digital asset Fundamental Analysis, we created our own proprietary Digital Asset Research & Valuation Analysis, DARVA, which looks into every possible aspect of a cryptocurrency. From tokenomics to proprietary valuation methods, DARVA has got you covered.
If you’d like to learn more about trading and investing, head over to our ebooks section to read our free ebook to learn what strategy suits you best.
Monthly Technical Analysis
June started off with some green, and as we approach the end of the first week, where could we be headed? In the big picture, we keep seeing a rejection around the $31k area.
It’s understandable to think that we’re oversold right now looking at all crypto-related projects being slowed down or even “halted”. What does this really mean for the immediate short run? Despite the current sentiment, we could be going lower: looking at the monthly charts, we can see that in previous bear markets, BTC only became bullish when RSI went below 50 and the Puell Multiple indicator actually managed to touch the green line.
So we can’t say for sure that we’re undervalued yet, even though RSI has just gone below 50 because we believe this is all part of a super long term bull run, but considering the whole 4-year cycle idea, this could be the beginning of the accumulation phase which you’d expect to be followed by a nice relief rally.
The charts also show a pattern of multiple dead cat bounce scenarios (with the horizontal lines being broken supports), if the same rules apply we’re looking at a medium-term target of around $19k as the low. It’s possible we avoid going that low if we are able to break through the monthly CPR level sitting at around $33k to which at least we will see a higher low – it may be time we hit $24k (again). If we look at it from a smaller time frame, our weekly charts indicate a falling wedge, which is just reiterating our idea above. The latest bounce from the lower wedge line (and Fib Retracement) does give us some hope, but right now (maybe always) the idea is to get over some targets to make big moves.
TLDR: One more dip till we see some markup to BTC.
Planning to invest in digital assets? Check out or model portfolios on www.bullsgazette.com/members/portfolio
Market Digest
Summary: May
May has been quite the eventful month for crypto particularly due to the Luna Crash that wiped over half the entire market cap in a matter of days. Bitcoin ends the month at $31.7k a fall from the $37.7k it opened with, a 15.9% decrease. Similar levels are apparent in Ethereum, closing May at $1950.
News Updates:
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- Central Bank of Argentina bans Crypto
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- Gucci accepts crypto payments
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- Kraken and Coinbase launch own NFT marketplaces
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- UK Government proposes harder regulations on stablecoins post terra collapse
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- Nvidia fined for unlawfully obscuring how many GPUs sold to miners.
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- Luna, Solana and Haven.
Luna Eclipse:
Luna, created by Do Kwon in 2018 is an open source crypto project aiming to accelerate global adoption through its “algorithmic stablecoin” Terra (UST). Luna uses an arbitrage mechanism in order to mint its tokens, burning and minting enables UST to maintain its $1 peg. Our article on the crash goes into more detail about this mechanism.
Problems arose when the Anchor protocol, the lending program that promised absurdly high yields of 20% APR for those who saved their UST within the program, changed to a variable rate. It’s estimated that over 70% of all circulating UST was deposited into Anchor. The rate change prompted major FUD; causing many people to exit out of their UST positions. The large influx of burning caused UST to crash and depeg, LUNA’s supply to baloon and the entire mechanism to collapse. At the time of writing UST, a so-called “stable dollar-pegged” coin stands at less than 2cents. Its sister Luna, worth practically 0.
The crash saw over $1.5trillion dollars in market cap wiped. There is speculation that suggests that this was part of a larger coordinated attack. Regardless, lessons are to be learned here, the crash reflects inherent instabilities within the crypto space, ones that must be addressed before any hopes of global adoption.
Yet another Solana outage
Solana has been hit with yet another major network outage, contributing to 5 major outages in this year alone. The recent outage (June 1st) was due to a bug in the consensus mechanism that validates blocks in order to complete transactions on the blockchain. As Solana uses the proof of history, the blockchain relies on these validators for the network to run. Fortunately the Solana team was able to fix the outage within 4.5 hours. This is an improvement from the January 2022 outage that lasted 6 days. Needless to say, a network this popular and strong shouldnt have such suceptibilities to outages.
Haven
Haven protocol is a network of private stable assets. It is built on Monero and includes the worlds first private stable coin xUSD. The haven token uses the same arbitrage mechanism to keep its stable coin pegged. Instead of LUNA/UST its XVH/xUSD.
The death spiral happens in these short steps:
XVH is minted as 1 xUSD is burned.
XVH’s price drops. The more XVH on the market, the higher the supply and the lower the demand.
More and more units of XVH are minted due to its lower and lower price.
The price falls further.
So how is this any different from Luna, well the devs implemented a 12hour delay in conversion. A wait time if you will. This prevents those that are selling off/burning XVH to wait for their xUSD to be minted. In theory this would give an opportunity for arbitragers to strategise and make money but in practice it allows more people to get out of Haven while the roof is still collapsing. Would a wait time such as this prevented Luna’s Fate? Short answer is no, it just lengthens the already depressing process.Algorithmic stable coins all head to the same finish line, that being the death spiral.
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