AAX Intelligence: BTC, ETH & DOT
05 May 2021
Let's take a look at Bitcoin, Ethereum, and Polkadot's recent price action. What does it mean for the cryptocurrencies in the near future?
BTC is currently down a mere 1.4% since this time last month (04/04/21), although during this period BTC has been highly volatile. Within the past month, BTC has seen a high of $64,000 USD with a low of $47,250 USD. In the chart below we can see the price action over the past month.
BTC/USD monthly price action
Short-term BTC outlook
In the short term BTC has fulfilled stage one of its retrace following the descending wedge seen in mid-April. Below we can see the descending wedge from mid-April.
BTC/USD descending wedge
Stages of the BTC retrace following descending wedge:
Stage one (A) – large pullback to around $58,000 USD – BTC hit $58,900 USD
Stage two (B) – medium move down to around $53,000 USD – currently in progress
Stage three (C) – medium final move back up to around $60,000 USD – future outlook
In the recent move back up BTC/USD formed an ascending wedge fulfilling its (A),(B),(C),(D),(E) EW pattern. Having completed the initial (A) move BTC is now looking at a small (B) pullback up before a further move downwards towards the -0.236 Fibonacci level at $53,700 USD.
This chart analysis is backed by the alligator outlook for BTC. As we can see below, the BTC bulls have run out of steam in pushing BTC higher and have now entered a bearish move as the alligator’s mouth opens.
If you are unsure what is being talked about, this refers to the alligator indicator. We recently published an article on the indicator which predicted BTCs recent short term drop off. If you want to learn more about the alligator indicator click here to read more.
BTC/USD alligator indicator
Through a combination of short term EWs and the alligator indicator, we are expecting the following move to take place. BTC should look at a potential retest (then subsequent rejection due to mid-term bearish charts) of the $60,000 USD level.
BTC/USD short-term outlook
BTC mid-term outlook
Firstly let’s look at the mid-term EWs for BTC. When looking at the EWs it is clear that BTC is still currently within a corrective wave, BTC has not finished falling yet.
Impulsive move – BTC moves from $17,000 USD to $58,200 USD
Ascending wedge move – BTC moves from $58,200 USD to high of $65,000 USD
Corrective move – BTC so far has moved from $65,000 USD to $47,000 USD (low) now at $55,800 USD. Expecting corrective move to end at $43,800 USD
In the chart below we can see the BTC EW outlook.
BTC/USD EW outlook
The RSI pulled the trigger
Why did BTC see the major sell off this month? From a TA standpoint the reason is due to BTC breaking below the descending wedge. However what triggered that break below the wedge was a major RSI divergence on the daily charts with BTC. As we can see below, the tops of the BTC candles were ascending while the RSI was descending. It is very common to see RSI divergences during bull runs with two validation points. However BTC saw three validation points with the RSI divergence and therefore a strong move down was expected. This then occurred and BTC now has to combat a descending resistance on the RSI and will likely bounce off this resistance as BTC looks to reach the 30 level once again.
Alongside this, the RSI (although it has seen a bullish cross) is bearish. This is because when combined with other TA e.g. EWs, RSI and WAI a bearish outlook is displayed. Therefore the MACD lines are likely to remain below the numerical value of 0.
Unless the MACD lines move above 0, the RSI breaks above the resistance line and BTC closes on the daily above $60,000 USD – BTC is bearish.
BTC/USD – daily chart
If BTC is looking poor – what does this mean for the altcoin market?
Currently the market is seeing a noticeable trend. When BTC drops significantly, altcoins drop. When BTC rises significantly, altcoins rise with it. However, the altcoin rises are significantly higher than the BTC rises which is causing alt coins to rally while BTC is stagnant or on the whole losing value.
This is having the subsequent effect of BTC losing its market dominance. As we can see in the chart below BTC market dominance has fallen significantly since the start of the year.
BTC dominance chart
On the whole BTC dominance has fallen 36% since the start of the year with red candles followed by red candles, something is clearly draining BTCs dominance. Although the question is… Which alt coin is it?
BTC dominance continues to fall
ETH has seen tremendous price action over recent weeks, increasing 74% since the mid-April bloodbath. It is clear that ETH has been draining the BTC dominance and that potentially BTCs parabolic run could now be over or on pause, with investors now looking towards the second largest cryptocurrency.
ETH price targets
With ETH setting ATHs at an unprecedented rate, it is tricky to pinpoint the finish line for this parabolic move. However, the 1.618 Fibonacci extension during this bullrun has worked well for pinpointing the approximate top of a parabolic move. The 1.618 Fibonacci extension is currently set at $4,086USD (+19.23%). Therefore between $4,000 USD and $4,250 is the short term ETH price target.
The final cryptocurrency which we will be analysing is DOT. DOT has been relatively quiet since late February sticking between the $45 – $30 USD region after its parabolic run from late December ($6 USD) – February ($40 USD).
DOT/USD line chart
When looking at the DOT/BTC chart the trading range can still be seen, with DOT/BTC refusing to fall below the DOT/BTC level from early September 2020. However, with the parachain auctions coming up, firstly for KSM, then DOT – it appears likely that DOT will see a positive breakout from the range. With the KSM parachain auction set to occur first, judgements as to whether DOT will see a positive breakout, KSM should provide pointers as to whether DOT will see positive price action.
If DOT sees a positive breakout from the upper resistance level of the zone, DOT is looking to hit the 0.0014 level. This would represent a +115% increase from the current DOT/BTC level.
In conclusion, DOT is still bullish in the medium term, however in the short term DOT is looking relatively neutral (neither bullish nor bearish) the focus is not on DOT – it is on ETH.
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