Let’s Dive Into It!
Bitcoin and Crypto Market Updates (Aug 21st)
So this week’s an important one as we have NVDA earnings out. NVDA and the whole AI hype have been the key ingredient to the rally in tech this year so I can’t stress the importance of this report enough.
Personally, I think this is just a hype train right now, with many businesses ‘’researching / testing’’ how they can apply AI BUT this is yet to feed into material orders and I think this has been evidenced with companies like TSM (the actual manufacturers of NVDA chips) reporting lacklustre results.
I’ve heard rumblings that some businesses may have front ran orders, which could bolster NVDA’s earnings, but again, this is just rumours.
I’m already long VIX and in good profits here so I don’t feel the need to add short exposure… I also feel like this week could produce a more reliable/tradable bottom but conditions and scenarios need to be met and I’ll break that down now.
1. It all starts with NVDA — I need NVDA retail FOMO to capitulate and I see that happening on a drop of 20/30% as displayed below.
2. This should drop indexes around 10% and I’d be looking for a support zone at the 200MA on the Q’s.
3. We then want to see retail/general market fear and for this I’m looking at the PCC (PUT CALL RATIO) Last week we had puts dominating and we all know what happens when the market gets a little too bearish…
So this week with NVDA + Jackson Hole I’m HOPING we see some continued downside… Spiking put/call ratios further and allowing us to look at buying some fear once retail are flushed out of some of these overhyped AI names.
Hopping over to BTC I have been playing around with my inverse chart this morning, specifically looking at the monthly time frame and I thought this was worth sharing. This removes all the noise and if you ask me this is SUPER CLEAN…
Two scenario’s here and it’s simple — Buy on a ‘’rejection’’ of the zone (Plan B buy) as we should see 60k+ in this scenario OR we look to buy again at range lows of 17.5k… If that level fails then we go again at around 10k.
Much of the on-chain data I’ve been looking at suggests we stay in this 17.5 / 35k range until year-end or at least until big money really starts flowing in. Could the ETF approval be that big money catalyst? Possibly.
Evergrande files for bankruptcy
In a significant development, Chinese property development conglomerate Evergrande has filed for Chapter 15 bankruptcy after two years of financial turmoil, impacting both the crypto and financial markets. With $340 billion in debt and consecutive annual losses of $80 billion, the bankruptcy filing has sent shockwaves globally. The crypto market bore the brunt, experiencing over $1 billion in liquidations, an 8% drop in BTC, and double-digit drops in altcoins. Rumours circulate about USDT’s reserves, affecting Chinese Commercial Paper although unconfirmed. This will undoubtedly continue to have financial implications for Chinese and global markets into the near future
SEC moves to appeal the XRP ruling
The SEC has been informed they can appeal the recent XRP ruling that declared that the cryptocurrency was not a security. Although the SEC are able to appeal the initial decision it is believed their position is relatively ‘weak’ given the contradiction with previous statements made in the case. Ripple’s Chief Legal Officer has stated that no extraordinary circumstances are justifying the appeal request. XRP price has held up well following the recent developments but another drawn-out legal case is undoubtedly tiresome for all parties involved.
Bitcoin has worst week since the FTX collapse
Bitcoin faced a challenging week with an -11% decline, its worst since the FTX collapse. The recent price drop was attributed to excessive leverage, creating a cycle of liquidations to the tune of $ 1 billion. Bitcoin wasn’t the only cryptocurrency affected as much of the market took a significant downturn in what was a fundamentally challenging week for risk-on assets. Bitcoin currently sits at around $26,000 per coin and the big question remains… was this a short-term reaction to last week’s events or are the markets preparing for another leg down?
SpaceX sells Bitcoin holdings
SpaceX sold its bitcoin holdings after writing down the value by $373 million in 2021 and 2022.
The sale of Tesla’s Bitcoin holdings and the SpaceX report may have contributed to the decline in cryptocurrency prices. The news emerged last week and seemingly has an impact on sentiment for cryptocurrency holders contributing to a further decline. Dropping to a low of $24,711, the BTC decline triggered comparable slides in stocks tied to Bitcoin, including Coinbase, Marathon Digital, and Riot Platforms.
The Order Blocks
Last week we had an introduction to the ICT/SMC key concepts to better understand the key terms of it. Today we are gonna review another one that is very widely used; the order blocks.
Order block definition
Order Blocks are specific candles that when properly viewed in an Institutional context can highlight Smart Money buying or selling.
The OB term is used especially when trading based on price action; there are two types of order blocks: a bearish OB, which is the last up candle that forms the highest high before the down move, and a bullish OB, which is the last down candle that forms the lowest low before the up move.
The definition is quite simple, but maybe it’s better to see it so you can recognise one when you are looking at your charts, this shows a bullish OB and the bearish is just the same but upside down:
Identifying valid Order Blocks
There is a technical term called validation, that makes a normal candle actually become an orderblock. In the image above for example that happens in the 2nd infographic when the high of the lowest down candle (Bearish Candle) is engulfed by a later-formed candle. For a bearish order block, the validation occurs when the low of the highest-up candle (Bullish Candle) is engulfed by a later-formed candle.
How to use OBs in trading?
As part of the Smart Money Concepts (SMC) style, trading from Order Blocks is based on the belief that the traders are following the institutional market direction. In that regard, if the “smart money” is going to move from a particular OB price would come back to that particular validated candle and rapidly move away from it again. (like it happens in the 3rd infographic)
TIP: You can mark OBs from a higher time frame down to a lower one looking for areas of confluence in order to increase the strike rate. For example, mark an HTF support with a monthly bullish OB, then check for the price to go back there and form a weekly and daily bullish OB within the area for precision.
The Order Block trading provides invalidation if a form of stop loss above or below the OBs, and entry point on the retest of it, and targets on the raids formed before the price comes back to the OB for re-test or simply the next liquidity pool.
Now it is in your hand to apply risk management and do your own testing! There is an example of a bullish OB at work and the explanations on it just below, I encourage you to try and replicate it!!
There is a different kind of order block called “Breaker” that we might look at in a future lesson, stay tuned for more and join our Discord community to keep on growing!
Have a great week! See you next Monday with more.