Cryptocurrency Charts, Part 2

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Includes: BTC-USD, BTSC, COIN, GBTC, RIOT
by: Arun Chopra CMT, CFA

Summary

Follow up to Cryptocurrency Charts!, my first look at how technical the price action has been in cryptocurrencies.

The market continues to trade technically, in many cases even more so than before.

The fever has spread to the 'no go' crypto's further suggesting this is just price driven speculation.

In my first arcticle on Cryptocurrency Charts! I pointed out how less mature markets 'can' theoretically be better technical playgrounds. Coupled with the ambiguity of cryptos in general, the combination is something I've only seen one other time.

There are many technical skeptics out there. As a Chartered Market Technician this makes a lot of sense to me. There are so many 'chart' enthusiasts it has become a mess.

Can you imagine the same environment for fundamental analysis? Some of the charts out there would be akin to people making up new fundamental meanings and measures they are so far off the mark.

In some sense this happens with non-GAAP or pro forma type numbers, but at least we can discern between faulty analysis/logic and fair research. With charts is naturally harder to recognize malpractice.

The issue is how do we prove charts? Statistical backtesting? Pure quant? Does anyone really think profitable algorithms won't be arbitraged away? Further what about price patterns vs indicators? Can you test a 'pattern'?

So should we throw out the tool all together? This series is designed to show why I continue to use technicals as part of my multidisciplinary fusion approach to all markets, not just cryptocurrencies.

There is tremendous strength in mental flexibility in financial markets. Stagnant minds, uber skepticism, 'know it all' mentality's and dismissive attitudes are what I feed on. I am doing this series partly to prove a technical point, but mostly to show how important an open mind is. Less than 24 months ago this trade didn't even exist.

On the flip side, the crypto purists and specialists (fundamentalists) are also likely too rigid today as we have now seen not only the LTC founder cash out (back to fiat?) but below I show how even the original 'no go' coins are flying.

It's been a dream market for open minded, generalist, technicians.

Let's get started (please note dates on twitter posts for consistency)....

Ethereum +150%

The 'ascending triangle' setup began in late October, as price started to hold the middle end of the range. You can see I threw this 'up on my watchlist' as it became clear to me the higher lows were for real. Part of the thesis was the idea we would see crypto capital rotate as well.

A month later I reminded participants not to dismiss the price action (even as it lagged the space) as the pattern headed higher. Note the prior consolidations (ascending triangle in March, and the flag in May). This was a clear price consolidation in an existing uptrend trend.

And the breakout followed 3 days later. The amazing this about this space is that alone was good for 30%. Very rare to get such technical purity coupled with serious price gains in traditional assets.

But that was hardly the end of it. About two weeks later price retested the breakout area at 390(a very classic technical process), before moving higher. My comments at the time alluded to the textbook nature of price action here.

The next day on December 13th, the follow through drove price up to the 700+ level.

Ripple +250%

Ripple was another big mover. This is a name that has a mixed review in the community. Is it a bankers coin, is it not a bankers coin? Bernanke pumped this one at a conference pretty hard. I am pretty sure this was one of those 'no go' coins amongst crypto purists.

Either way it was building what I like to call an 'alligator' formation, but really it's just strong consolidation of price. Very similar to the ascending triangle seen above but slightly tighter (higher lows bumping up against the same resistance levels).

Days later price doubled on heavy volume.

Then it doubled again the next day. Suddenly the whole banker coin thing didn't seem to matter.

DASH +80%

How about DASH. DASH is cash for the internet. You didn't know that? Everyone knows tha...wait. Almost no one knows what DASH is. But it is a crypto and it was flagging on December 11th. This classic 'flag' formation is another form of consolidation of price, but this time within an existing and defined uptrend.

We (technicians) consider these flags to be shorter in duration than the 'alligator' or 'ascending triangle' above primarily because the trend is already underway. The tighter and quicker (4-6 weeks traditionally, in crypto the durations are shorter) the better. It's like a pit stop.

A pit stop that in this case led to a double in price. As I showed in Cryptocurrency Charts! particularly with Monero, this space is technical analysis on steroids.

But what about the bubble you said? Glad you asked. In a bubble every dog has its day (or ten), something I alluded to with respect to Ethereum Classic.

Ethereum Classic +30%

Not to be confused with Ethereum, Ethereum classic was created during the original fork. I am told this was a major event. The story sounds fascinating. Apparently Ether Classic is therefore another one of those 'no go' crypto's.

Good thing I don't care that much about the drama, it's a bubble, doesn't matter. All I see are setups. See below ETC had bested the 21 resistance and was consolidating nicely. It started to effectively flag (pit stop) above that range.

For price action analysis, this suggests the market was digesting the newer higher price well. Equilibrium if you will.

And just like we saw with DASH, the flag fired to the upside for a good 30+%.

ZCASH +120%

ZCASH anyone? Z to the cash? Its like DASH but with a Z. Get it? Neither do I. I do know a bull pattern when I see one though. This was a classic inverted head and shoulders continuation pattern.

And there it went 8 days later. A solid 100+% in days. It's hard to overstate the axis on these charts.

Bitcoin Cash, or BCASH for short. +160%

And in saving the best for last, Bcash. If anyone has seen the bitcoin cash vs bitcoin 'core' debates it is pretty hilarious. It's an epic battle for purity in a market that is seeing a 6 fold increase in capital flows with very limited liquidity. The debate just doesn't matter in a bubble. You are arguing points no one has a clue about, and even if they did, would not do the 'rational thing' anyways. I think CNBC is now attempting to be the expert in the differences between these two.

When I first proposed this technical formation on Bitcoin Cash (Bcash), the push back was strong. The anger for Roger Ver is palpable. I have zero opinion. He seems to have real passion for decentralization and the no/low fee transfer of 'value'. I also loved the drooling hate for this bullish chart just because of Ver (read contrarian trading).

In any event Bcash, or 'Bitcoin cash' set up with one of the most incredible pennants out there (and that I had seen in this cycle). This is another ascending triangle as well but looked much more powerful.

Note the magnitude of the volume and up bars in the rally that lead into the consolidation in November. Also note the range inside the formation. These are the things that technically matter and why this one was even better than ETH and Ripple.

And then then move started to get going a few days later, plus 1000 bucks or nearly 60%.

And then the much bigger move for over 160%.

Summary

So that's what I continue to see in cryptoland. As of this writing the charts continue to flow nicely. I expect that to change especially as the purists narrowly focus on the crypto to btc cross rate vs realizing the dollar is in play here too. I think there will be some significant turbulence shortly for those who think the name of the game is accumulating BTC. More there later.

For now there is a lot of nuance in this market especially when one digs into the lower priced spaces however it's been an incredible experience to date.

Finally the larger key point I want to convey is how chart action can be useful to the investment process. At Fusion Point I combine fundamental research, technical analysis, and behavioral finance for higher probability outcomes across major mature markets. This type of research is just one piece to that puzzle.

Thanks for reading...

Disclosure: I am/we are long ETH BCH XRP.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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