Welcome to this week’s analysis on which altcoins are performing well and which ones are not. You can view the list here:
Macro Update
We had a strong reaction in the stock market last Thursday and Friday which resulted in the S&P 500 dropping 10% and led to the Nasdaq dropping enough to trigger bear market territory being down 20% from its highs. I am still bullish with a 6-12 month time horizon and I think this stock market drop is an overaction that can be used as an opportunity to buy very cheap risk assets. This recent drop suggests we could have a COVID crash scenario unfold where the markets keep dropping until the Federal Reserve steps in to do rate cuts. Speaking of, I still think Gold will top soon because in a market panic like this, no assets are really a safe haven except cash so everything sells off. I am not suggesting at this point to sell everything and try and time the bottom. In fact, I think the best thing is to just wait this out until there’s more clarity whether it’s the Fed cutting rates or there being a massive reduction in tariffs. One of those will likely happen in the next month or so and is bullish for risk assets like stocks and crypto.
The latest ISM Manufacturing number came out at 49 so now we are back under 50 again. Notice how similar this looks during the COVID crash in 2020 so I suspect we could see something like this play out. With the ISM suppressed like this for so long, it’s just a matter of time before it rebounds.
Here’s another data point regarding Gold being overheated and a potential top being in:
https://twitter.com/NXGenNews/status/1905348138002477417
Bitcoin Update
Bitcoin held up surprisingly well during the drop in the S&P 500 from Thursday and Friday. Even with the further downside in stocks occurring on Monday, Bitcoin is still holding up well and not dropping in line with stocks:
I am watching out for a scenario where Bitcoin is up and S&P 500 is down by 3% over a 2-week period. This has been a fairly reliable bottom signal going way back to the beginning of when Bitcoin started trading. Every time this signal occurred, the Bitcoin returns 6 months later:
- Mean = 1673%
- Median = 183%
- Positive 93% of the time
As I mentioned in the previous newsletter, we had several bottom indicators trigger in the past couple weeks but it doesn’t mean we are out of the woods yet. The data suggests Bitcoin will be up by 50-100% a year from now so from a long term perspective, that is good enough for me and it’s just patience at this point. This bearish indicator for the Nasdaq 200 DMA Market Regime ended up playing out a lot quicker than I anticipated. The Nasdaq is down 25% from its high and is officially in a bear market but this could indicate the bottom is close at least for Nasdaq.
Here’s some other data points to consider that the bottom may be close.
Weekly VIX close above 45:
3 standard deviations below the 20d while in a 15% drawdown:
Russell 2000 after consecutive declines > -4%:
Russell 2000 after falling 20% from a new high:
https://twitter.com/jasongoepfert/status/1907803187362386324
Solana Update
Solana is now back inside the pattern and fell below $100. It’s possible it goes to $88 if Bitcoin doesn’t rally further:
Solana vs. Bitcoin lost a key support level. With everything so uncertain right now, I would hold off selling anything with the possibility that the bottom is fairly close.
Dogecoin Update
Price fell to around 0.13 but has since bounced to around 0.15. I would continue holding as this could be a potential bottom:
Sui Update
Sui still fell lower and hit the 2.00 and 1.80 targets. It’s still possible it falls to 1.55 and would be a major buying opportunity. If you want to be more conservative then wait for price to stay above the trendline on the weekly timeframe.
Large Caps
For large caps, here’s the ones that stand out on a long term timeframe:
- XRP
- TRON
I think other coins like Solana, Sui or Dogecoin will have a better risk-to-reward at this point.
Pepe needs to hold above 0.0000053 level otherwise it could fall further to 0.0000046:
Model Portfolio Update
The model portfolio is now down roughly 16% as the market continues sideways and is showing signs of a reversal:
I pointed out which coins are still in a decent buy zone so be sure to review those if you are still looking to allocate. However if you want to be more conservative, you can wait for a bullish confirmation in Bitcoin which for me is when the weekly close is above $93,000.
As I mentioned previously, I think we are showing some early signs of a reversal in the market for risk assets. With gold potentially topping soon in the next 3 months along with the ISM staying above 50, we could see a major shift of money flow out of gold and into Bitcoin and the stock market.
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