Altcoins testing key Fibonacci level
Fibonacci retracements create natural support and resistance levels. The altcoin market is currently holding just above one of those key levels.
The altcoin market
The image above is of TradingView’s Crypto Total Market Cap Excluding BTC – in other words, the altcoin market. While the chart certainly emulates some similar structure and moves as Bitcoin and the total market cap, there have been some clear divergences. I think it makes sense to think of the cryptocurrency market as two markets: With Bitcoin and without Bitcoin. The market capitalization of cryptocurrencies with Bitcoin came out of a bear market in early 2019. But the altcoin market has not. The altcoin market has been in a bear market since February of 2018 – almost 18 months. Altcoins have continued to drop against Bitcoin and the US Dollar for the almost one and a half years. However, there may be some evidence that this could be changing.
On the chart above, there is a Fibonacci retracement drawn from the most recent swing high at 14208 to the confirmation higher swing low at 4455. The three most important and relevant Fibonacci levels are also shown: the 38.2% at 9123, the 50% at 7956 and the 61.8% at 6938. Out of all of the Fibonacci retracement levels, the 50% and the 61.8% levels are the most important. We have seen the altcoin market trade in a range between the 38.2% and 50% levels for a 31 day period from July 14th, 2019 to August 14th, 2019. Prices then fell below that key 50% retracement level to find some support against the all-important 61.8% level. The altcoin market has been trading between the 50% and the 61.8% levels now for 27 days – just 4 days shy of meeting the same amount of days in a range from the prior range. Prices have tested below that 61.8% level but have ultimately been rejected lower. So far, this final support level is holding.
The chart above is the weekly chart for the altcoin market. The altcoin market is currently at a precipice. For the past 16 weeks, the altcoin market has been trading inside the Kumo but right against the bottom of the Kumo (Senkou Span A). We can also see that for the past 9 weeks the altcoin market has traded below the Kijun-Sen and Tenkan-Sen. There is an extremely bearish setup occurring on the weekly Ichimoku chart for the altcoin market. One of the single most powerful entry signals on any instrument is a condition where both price and the Chikou Span are below the cloud and the Chikou Span is below the candlesticks. It would not take much for all of these conditions to occur. This would be a snowball effect of amazing (or horrible) bearish events. First, we would be breaking the 61.8% Fibonacci retracement level discussed in the first two paragraphs above. Second, the 23.6% Fibonacci retracement level that extends from the high at 14208 to the 2016 confirmation higher low at 1306 would be broken. All of these conditions create a kind of rocket fuel to push prices lower – likely towards the next major Fibonacci retracement level at 2099. This would mean a -69.74% drop from the present value area.