Weekly Update September 26th

Welcome to our Weekly newsletter!

So last week was savage for crypto and legacy. All the 75 Buy boys got rekt… retail was left holding the bag… again. What do we expect for next week?

Odds favour a squeeze, imo, so I don’t think you should be looking at late shorting here and I’ll go into why now…

Put / Call ratio (shorts/longs ratio for options) – On Friday we hit the highest level since the covid crash in March 2020 and with that, we had the 2nd largest volume day this year.

So hedging and panic on Friday were evident in the hard data.

So I can’t help but feel we are in the same situation we had back around September 6th – everyone major bearish at support

Support/target hit – As I said above – SPX hit my initial downside target last week, we’re now heavily oversold on multiple TF’s and we also have divergence.

Didn’t really see any major flows into exchange during this stock market panic late last week… So maybe some seller exhaustion on BTC for now?

Options

BTC max pain for the 30th options expiry is 22k and ETH 1500 – This could act as a magnet for price next week.

End of Quarter Fund rebalancing

Another reason not to get overly bearish here… Funds often rebalance and review portfolios at the end of a quarter. Passive funds often auto-buy stocks to add to the portfolio – Mainly the heavyweight names like Apple etc so this could also provide some support

Summary – Odds favour a rebound here. October is historically a good month for risk on assets, everyone is bearish, we have portfolio rebalancing coming in and I think this sets up nicely for another bear market rally before another hefty drop. Just enough to convince everyone the whole of October will be bullish… then flip the script. As per my updates on premium positions I shaved profits on some hedges – around 30% - I’ll keep the rest in play but for now, I’m bracing for a short-term bear market rally – expected to last about a week. Two weeks max

Nasdaq To Enter Crypto Custody Market for Institutional Clients

Nasdaq, which is the second largest stock exchange in the United States are looking to offer crypto custody services for Bitcoin and Ethereum. The former head of crypto exchange Gemini will be joining the new division at Nasdaq to head the new division. Approval is still needed by the New York Department of Financial Services (NYDFS) but if granted, Nasdaq will be competing with the likes of Coinbase and Anchorage Digital. We are seeing increasing interest from Wall Street giants in the blockchain technology space. Such moves are positive for the crypto space, improving exposure and validity - which is much needed, particularly for institutional investors.

Binance CEO, CZ Believes DeFi & Decentralised Exchanges Will Take Over CEXs in the Future

CZ, CEO of one of the largest centralised crypto exchanges (Binance), believes the DeFi revolution will likely take over centralised exchanges in the future. Huge words from a man who couldn’t have more of a vested interest. CZ said last week at the Mainnet conference in New York that he believes new users will continue to use CEXs to onboard into crypto, but will likely transition to DEXs as they become more accustomed to the space.

US Judge Orders USDT to Prove Backing of Stablecoin… again

Here we go again… stablecoin issuer, Tether, has been ordered to produce general ledgers, balance sheets, and income statements concerning a market manipulation suit tied to USDT. The requests also seek to determine Tethers backing which has long been a controversial topic within the crypto space. Tether has long maintained it has sufficient backing for USDT - which is made up of cash and bank deposits, money market funds and commercial paper. USDT has a market cap of $68 Billion today.

Robinhood Lists USDC on Platform

Trading platform Robinhood announced last week they would be listing crypto stablecoin USDC on their platform which was made available for transfer on the Ethereum and Polygon networks. The move indicates a greater emphasis on cryptocurrencies toward the future of Robinhood's business model. Robinhood recently said, “Our vision with crypto is to be the most trusted platform for customers to invest in crypto as well as the most trusted on-ramp to the decentralized web”.

UK Seeking Further Powers to Seize Crypto Linked to Criminal Activity

The UK government has introduced a bill to grant additional powers to seize and recover crypto assets tied to suspected criminals. The bill is apparently designed to bolster laws aimed at curbing illicit proceeds - also targeting other sanctions evasion activities from the UK to the likes of Russia and Iran

AZUKI Latest NFT Project To Gain Big VC Funding

Rumours are circulating around an upcoming Series A investment round worth $ 30 million in the AZUKI parent company Chiru Labs. This would value the company between $300million and $400million once completed. This is still unconfirmed officially but seemingly is in the process as we speak! Renowned Hong Kong based art collector Adrian Cheng recently purchased 101 Azuki NFTs out of love for the collection and is also speculated to have been part of the raise with his VC firm C Capital. This is not the first big VC investment we have seen in NFT projects in recent months, with the likes of Doodles, Fluf World and Proof Collective raising Series A’s. Interesting times for NFTs - let's see if and when this reflects in asset prices.

Fear & Greed - The index

The two predominant emotions in human psychology that can influence market participants are fear and greed. The Crypto market is no exception to this. That’s why market sentiment awareness can be of use to decide the right time to enter or exit a position.There is a tool that measures how the general market feels about crypto assets. The Crypto Fear and Greed Index is a major cryptocurrency sentiment index created by the investment analysis website Alternative.me and has been measuring investor sentiment since February 1, 2018.

How is it calculated?

The Index accumulates data from multiple sources to generate a number. This number is measured on a scale ranging from 0 to 100, where 0 indicates maximum fear and 100 total greed.

Within the 0 to 100 scale, the Index is classified into four basic categories:

• 0 to 24 = Extreme Fear,

• 25 to 49 = Fear,

• 50 to 74 = Greed,

• 75 to 100 = Extreme Greed.

At the same time, the Index extracts data from the following sources to calculate the score:

• (25%) Volatility, which compares the current value of bitcoin to its average value over the last 30 days and the last 90 days.

• (25%) Market momentum and volume of bitcoin traded over the last 30 and 90 days.

• (15%) Social media sentiment, or what people are saying about bitcoin on social media.

• (10%) Bitcoin’s share of the crypto market against all the other cryptocurrencies (also known as Dominance).

• (10%) Search trends across relevant Bitcoin search terms to identify substantial periods of growth or decline.

• (15%) Surveys conducted weekly crypto polls, which would be used as part of the index calculations. While the polls are still being conducted, they are NOT currently utilised as a part of the index calculations since recently.

This is what it looks like today:

Limitations 

Despite the usefulness of the fear and greed index, it doesn’t tell investors anything about market timing or claims to make any effective predictions. Therefore, even if the market is in extreme greed, prices may still go up further and stay there. Similarly, even if the market is in extreme fear, prices may fall further and remain depressed for an unknown period.

The index is strongly focused on Bitcoin and less focused on other crypto assets, which may make it less accurate and useful than it could be. It should also be noted that the index also does not factor in Bitcoin halving, which has typically been a bullish factor due to less additional supply (meaning a reduced Bitcoin inflation rate).

This is all the historic data on the index and its correlation with the Bitcoin price:

Conclusion

Measuring investors’ fear and greed in the crypto market can be done using the Crypto Fear and Greed Index. However, this is only to track investors’ sentiments in the market whereas using it for indicating buying and selling signals must be done involving other factors as well.Overall, the Crypto Fear and Greed Index is only one tool that long-term investors should consider using, along with a variety of fundamental analysis (FA) metrics when deciding when to purchase crypto.

For day traders and swing traders, the Fear and Greed Index is also of some use, though it should only be used along with a variety of other technical analyses (TA) tools and metrics. Usually around the extremes is when volatility could be expected in any direction.

Pro TIP: Beware of using only a single indicator to make any investment decisions. One should use it along with a combination of other technical, fundamental, and on-chain metrics, especially during the uncertain macroeconomic environment we are going through.

If you don’t know where to start your trading journey, Crypto Rand Group is a community where seasoned investors and beginners trade, research, discuss and learn together. There are also academic materials and professional analysts at your disposal.