⛓️Block On Chain 016⛓️
Week of December 20-26. Bears get squeezed💥
Good Evening Investors,
As per usual, year end means just another crazy week in crypto as we saw a bullish pop in prices for most digital assets followed by sideways ranging price action. We ended the week green as Bitcoin reclaimed US$50K and Ethereum US$4000. Interestingly, Bitcoin continued to lead the market with Ethereum still lagging behind.
Macro
This week there is not much to cover on the macro side as the year comes to a quiet end. As mentioned last week, an expected short squeeze for Bitcoin and Ethereum was developing and did in fact play out. This bear squeeze was derived from none other than price action playing its course with supply, demand and derivative factors shadowing it.
Bears eventually lost steam during the week coupled with notably stacked short orders at the trend range highs making it the market very vulnerable to a squeeze to the upside. As the market continued to dip lower, liquidity was being soaked up. Once price made a significant move up, bears were either forced to sell positions or buy to hedge. This eventually played out in a pop to the upside - this however played slightly different for Ethereum.
kadeem @0xKadeem
#btc https://t.co/Fe7BWijXmC https://t.co/G3mllpe5MwOn-Chain
This week, we shall continue to monitor the Ethereum inflows/outflows from exchanges to get a better understanding of what market participants are doing during this quiet time.
As mentioned last week, we noted that there was some capitulation in market participants when observing the Exchange Net Position Change metric. This week we are seeing a continuation of asset holders depositing their Ether onto exchanges. Additionally, the trend of inflows increased.
We can note this is a similar trend of capitulation that has been seen in previous dips and end of year cycles. Thus far, these inflows do not raise too much concern as market participants are likely capitulating due to fear or exiting due to year end reasons discussed last week. Although inflows increased, due to the lack of volume/amount I am not overly concerned as these are likely the final batch of end of year profit takers. In addition, the inflows still remain at small volumes compared to previous periods in time - (i.e December 2020).
A look at Balance on Exchanges we can see that the overall amount of Ether on exchanges has of course slightly increased. We can note however, that the current amount of Ether available on exchanges is still at similar levels when price made previous ATHs at US$4870 last month. With this in consideration, we are still at bullish levels of unavailable supply in the market for price growth.
Conclusion
During the final week of the new year, I remain relatively neutral. With many considerations in regards to current market conditions, I am bullish for Q1, 2022.
Considerations such as the currently lack of retail speculation, readjusted risk tolerance, overall market supply accumulation, etc. leave me excited for what’s to come - capital will be hungry and ready to be put to work. On a side note, as mentioned in previous weeks, inflation is at all time highs. This current inflationary environment requires capital to be put to work or otherwise lose purchasing power in fiat.
In terms of price, I will not become bullish until Bitcoin breaks above $53k. This reason is due to longer term technical levels that I view to create a shift in market structure/sentiment. I remain bullish for Ethereum as we stay above $4000 which as proven to be an important technical level since April 2021.
In the meantime, I expect a continuation of a price action driven market until year end. On the derivatives side of the market, Open Interest has been readily building as many short sellers are becoming trapped in light of the recent short squeeze. I believe this squeeze will continue into the new year and will likely intensify once more volume enters the market.
-Kadeem
This is the last Newsletter of 2021 and I would like to extend a special thanks and wish a happy holidays and new year to the Block Gang😊
As we enter 2022, we will remain relentless in attempting to stay a few steps ahead of the market with on-chain data⛓️📈
Great analysis Kadeem, hope you had a good Christmas!