In yesterday's note, we outlined our patient approach in the face of this messy tape.

For the most part, we're sitting on the sidelines waiting for an uptick in investor demand to drag the market out of this correction.

Current price action is being heavily driven by the futures market, which will only serve to increase the probabilities of whipsaws and fake-outs that can wear on traders' emotional as well as their financial capital.

Additionally, when evaluating the altcoins, there isn't any edge in being positioned aggressively long.

As we'll explore in today's post, many names look vulnerable for further near-term downside, and even most of the leading alts have lost much of their bullish momentum over the last few days.

Let's dive in.

This is the video recording of our January 14, 2022, All Star Charts Crypto Weekly Strategy Session.

It's been a tough period for crypto-stock bulls.

While most cryptocurrencies themselves have done well since the summer, many of the most prominent crypto stocks and miners have been painful underperformers.

But, given that many of the biggest coins are in the process of forming potential tradable bottoms, there are early signs of this changing.

Many crypto stocks are also in a process of testing critical levels of support, and the risk versus reward is currently more in favor of the bulls over bears.

Before we dive into individual names, here's a look at the sector as a whole.

In Monday's report, we outlined how conditions haven't fully developed for a high-conviction dip-buy. We're anticipating a high concentration of whipsaws before these assets find a tradable bottom.

At the same time, from a risk-versus-reward perspective, the recent pivot lows are proving to be important levels of interest right now.

In a weekend note, we'd asked whether this was simply a retest of the crash low -- or whether it was still crashing.

Fast-forward today, and the market is respecting this level -- certainly an important one to be watching.

It seems the equivalent level in Ethereum is just below 3,000, which not only represents its latest pivot lows but is also the...

Over the last few weeks, we've been pointing to the growing leverage in the derivative markets exacerbating volatility.

In our last report, we also outlined how we're anticipating this to unwind in the coming weeks. This continues to be the key theme for the first quarter.

Additionally, a variety of metrics suggest the market is strongly in oversold conditions, offering a favorable level for long-term investors to add to spot positions.

Meanwhile, derivatives and macro conditions present a headwind for speculative dip-buyers.

This is the video recording of our January 7, 2022, All Star Charts Crypto Weekly Strategy Session.

Over the last week, we've been outlining how the market looks set to unwind out of this trading range.

High open interest combined with diminishing implied volatility, increased price stability, and thin futures volume all contribute to a scenario where the probabilities of a long/short squeeze are elevated.

We're still in elevated cash positions and, for the most part, still sitting on the sidelines.

In yesterday's note, we pointed to the growing leverage in derivative markets, explaining that we anticipate it unwinding in coming weeks.

Since we published it, we've seen an aggressive "sell" wall placed on FTX, the world's third-largest derivatives exchange by open value.

This caused Bitcoin to sell off and created a clear zone of supply.

On the other hand, Bitfinex, one of the most prominent spot exchanges, has a monster "buy" wall placed just under current market prices.

FTX and Bitfinex are experiencing significant order book activity, and there are now monster walls placed on either side of market prices.

Additionally, we've seen yet another uptick in open interest to all-time highs in a context where price stability is at a local peak and Deribit implied volatility is progressing down to its lowest value since April....

Last week, we outlined how the recent recovery in leverage in the derivative markets combined with thin end-of-year liquidity would exacerbate volatility. This same message continues to ring true.

Open interest is elevated, and the market has become susceptible to an unwind via a long/short squeeze in the coming weeks. Even a small supply-and-demand catalyst has the potential to cause a big shift given these current market conditions.

We want to dedicate this week's report to describing how we're approaching this period and defining the probabilities we're weighing with each scenario.

This is the video recording of our December 29, 2021, All Star Charts Crypto Weekly Strategy Session.

Our general approach following Bitcoin's correction is to sit on the sidelines while the market grinds sideways.

We've seen this play out, with most crypto assets trading under contracting price action.

The case continues to be if we're below the 53,000 to 54,000 zone, we want to remain patient before deploying cash into more aggressive long positions.

There have been a few exceptions that we'll discuss in today's report. But patience continues to be the prudent approach for the vast majority of names out there for now.

This week's biggest development is a dramatic rise in speculative activity, exacerbating volatility and the probability of a long/short squeeze.

This is the video recording of our December 22, 2021, All Star Charts Crypto Weekly Strategy Session.