As part of an educational effort, I've unlocked this previous paywalled post so anyone can access.
I've flipped my short-term bias (that looks out weeks) to bearish as the three largest tokens in the asset class test critical resistance levels. Ethereum has been the exception in the group over the last few weeks, but even now it looks set up to consolidate its gains.
If Ethereum, the one token that has helped support market breadth over the last two weeks, begins to pause, it could set the asset class up for a few weeks of indiscriminate selling. What would prove me wrong is seeing all three of these assets complete successful breakouts.
Regardless of whether sellers step in here, I think this is a good area to pay ourselves and take some profits off the table. It is prudent trading/investing to scale out of positions as the market works higher.
I think if we see any meaningful weakness here in the coming weeks, it will present itself as a great buying opportunity.
But in the interim, I think the best approach is to be patient.
Overview
Directional Bias
Short term: Bearish
Intermediate term: Neutral
Long term: Bullish
(Short term is defined as weeks, intermediate term as months, and long term as quarters)
Leaning Bearish Into The Week
Bitcoin, Ethereum, and Solana have all run into significant levels of potential resistance. These are logical areas for these assets to back off and consolidate their gains. You're already seeing this, with both Bitcoin and Solana pausing over these last few weeks.
Going into this week, I want to really play it cautiously especially now you've got Ethereum (which has been the exception) hitting it's own respective resistance level.
I certainly believe these assets will break all-time highs, but in the mean time I think they're set up nicely to consolidate their gains.
Since Solana and Bitcoin have been consolidating, there has still been money flowing into the altcoins. I think this has been supported by the fact Ethereum has been rallying.
So if Ethereum begins stalling here also, I think we could be in for a few weeks of indiscriminate selling across the crypto complex.
Again, I'm talking shorter-term in nature (a few weeks). So while I think it makes sense to take some off the table here and pay ourselves, I still like being overweight crypto longer-term.
Some additional indicators suggesting a potential pause here include the significant increase in positioning within futures markets. When a large number of positions are being opened (shown by the black line being elevated), the market often moves in a way that causes the most discomfort to participants. Typically, this means moving in the opposite direction of the recent trend where positions have been concentrated.
Furthermore, funding rates (a measure of optimism or fear in futures markets) point to the beginning stages of excessive optimism.
Again, the fact that funding hasn't been extremely optimistic for few weeks on end makes me believe that any weakness isn't the beginning of a new downtrend in crypto.
While my short-term outlook for crypto suggests caution with key resistance levels coming into play and early signs of optimism in futures markets, the long-term bullish narrative remains intact.
Scaling out or taking profits at these levels makes sense to my portfolio to manage risk and lock in gains. Any significant weakness in the coming weeks can be viewed as an opportunity to add to positions, as these consolidations are likely a healthy pause before the next leg higher.
