Crypto Price Analysis: Market Bottoming Out

On our January 25, 2019 crypto update, we revealed the reasons why we believed that an altcoin season was on the horizon. Back then, the altcoin market cap was showing signs of bottoming out. Over a month later, countless altcoins such as Ravencoin (RVN/BTC), Ark (ARK/BTC), and even Litecoin (LTC/BTC) have generated gains of 100% to 300%.

With this development, we looked at the total crypto market cap to look for reversal signals. What we saw strongly suggested that the bear market may be coming to an end. In this article, we reveal the signals indicating that the entire crypto market is bottoming out.

Bounce at Parabolic Support

If you’ve been following our trade recommendations and crypto updates, one emerging trend was the reliance of many altcoins on their parabolic support. In other words, these altcoins have more or less given up all of their gains from the 2017 bull run.

Take for example Litecoin (LTC/USD). The market range traded between $20 and $30 from May to June 2017. When the market took out $30, it flipped it into support in September 2017. This price action ignited the parabolic move that saw Litecoin climb as high $374.888 in December 2017. A year later, Litecoin relied on the same $20 to $30 range to bottom out and possibly reverse its trend.

Weekly chart of LTC/USD

You can also see the exact same setup on the total crypto market cap. The entire crypto market struggled to go above the $100 billion mark in June 2017. It eventually breached the resistance and flipped it into support in September 2017. This price action started a parabolic move that catapulted the total market cap to over $835 billion in January 2018. Almost a year later, the market relied on its parabolic support at $100 billion to stop the bleeding.  


Weekly chart of Total Market Cap

It’s not an accident that the market is establishing a bottom at the origin of its 2017 bull run. This price movement tells us that the entire crypto market may be ready to start a new cycle.   

Significant Rise in Volume

During a bear market, volume gradually decreases as demand dissipates over time. Demand eventually returns when participants deem that price is low enough to provide significant upside. Interestingly, that is also often the point when investors lose hope in recovering losses so they sell at a loss. As a result, volume surges as investors capitulate while bargain hunters and bottom pickers scale in.

We are seeing this play out in the total market cap. At the height of the 2017 bull market, the weekly volume average was between 200 billion and 300 billion. As bears took over the market, the weekly volume dropped. It even plunged to as low as 76 billion in August 2018.

Total Market Cap Volume Resurgence

Volume started to show signs of life in the week of November 19, 2018 when the weekly volume surged to over 125 billion. This pointed to selling climax or capitulation as the value of the market dropped from $186 billion down to $114 billion in one week. From that point, the weekly volume was on the up and up indicating that buyers were scaling in.

The week of February 25, 2019 supports this view. During this week, the total weekly volume was over 184 billion but the value of the entire crypto market stood at $129 billion. If the market was still bearish, the heavy volume should have driven the value of the entire crypto market to new bear market lows.

However, the valuation of the market remained stable because buyers absorbed the selling pressure. People are accumulating positions now because they believe that prices have gone down low enough to offer sizeable gains. After all, the entire crypto market lost roughly 88% of its value from the bull market high of $835 billion when it dropped to $100 billion in December 2018. From this perspective, the entire crypto market looks very attractive.

Bottom Line

Many may disagree to this statement but we believe the bottom’s already in. The bounce at the parabolic support plus the significant rise in volume tell us that demand has returned. With the total market cap losing almost 90% of its value from the bull market high, it looks very attractive to smart money investors.

 

Disclaimer: The writer owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.