Is a Crypto Winter coming? Bitcoin & Ethereum Technical Analysis 2021 | Bitcoin Price Prediction
We will look at bitcoin, we will look at ethereum. We will also look at bitcoin relative to ethereum, so how is bitcoin performing over the long term versus ethereum, and we will also look at things such as the bitcoin dominance or the ethereum dominance. So well. Try to get a general idea of where the crypto market is currently at where it might be headed. What are the current risks versus rewards? Does it make sense to speculate in altcoins right now and what in general could be a good crypto allocation, say versus your stock portfolio? Does it make sense to currently be heavy on crypto, or does it rather make sense to go a bit more passive and maybe go a bit in fiat or in stocks? So first of all lets look at bitcoin. This is the long term bitcoin chart since 2010. So more than 10 years of data, these are just imaginary lines. These are not regression lines or anything like that. It just tries to connect as many data points here at the bottom as possible. Same goes here for those tops and obviously those lines they can be broken over time. But if we just look at this and if you maybe zoom in a little, we can see that in case we stay in this range, that the ceiling until end of the year for bitcoin is at around 70k, maybe 71k, so theres the potential to grow by 50, if we grow more than that, then these lines here get broken, which is very well possible.
But i personally, i prefer, if we do reach these kind of levels not to be too heavy in crypto anymore, because then youre really speculating on some kind of super cycle right theres. The cycle theory that we that we hit a new high every four years or so some people say that these cycles are also extending over time, because the market gets larger. It takes more time to grow and the super cycle theory will basically say that we are going straight up. We ignore the previous stops and we just simply continue rising. Now these lines are simply drawings. What we can also look at are regression lines, so this is now a regression chart over the overall price history of bitcoin, and the way this has been calculated is basically the center line over. Here is the regression and then weve got a few fibonacci distances from here. So if we now zoom in to the recent price movement, we can see a much higher potential right. So this now looks at a potential upper limit of 150k. Something like this by the end of the year, so it really depends on. If you regard this top over here as the cycle top or if you dont, you can draw something that connects all of those four tops. But if youre a fan of the regression, then theres more room to grow since we cant really know what holds true if this was really a top over here or if its just bouncing off in the middle of the trend.
Since we cant really know this, my approach to this is simply thinking in probabilities, so once we do hit those regions, i will definitely take some chips off the table, but obviously not all of them, because there is a decent chance. We rise further. These are, in the end, just imaginary lines, but its simply about risk versus reward and when one of the models or maybe thats too much of a word. Maybe this is not a model, but if one of the approaches says we might be close to the top, then i do think it does make sense to de risk somewhat and once we hit these kinds of levels over here, then i think it makes sense to De risk, a lot so basically to shift from crypto to more traditional assets, maybe use the money during that cash out for a down payment on a house, maybe use the money to simply shift to the stock market. Something like that, but risk versus reward at these kind of levels when they historically have been pretty high at that kind of a situation is probably not too good to be very heavy in crypto, especially in altcoins. Now, speaking of altcoins, i like to look at ethereum, not because ethereum is particularly an altcoin its basically one of the two major coins now right, ethereum bitcoin cardano. But the reason why i like to look at ethereum in particular is because its very highly correlated to the alt coins.
When you look at correlation coefficients between ethereum and various altcoins and bitcoin with those altcoins, you can see that in general, the ethereum correlation is higher. With the altcoin than the bitcoin correlation, so the number here on the second row tends to be higher than the number on the first row, and what that means is that ethereum tends to move more in tandem with alt coins than bitcoin does. So when you look at the cross correlations over here, ethereum has the highest. The average correlation of ethereum with those randomly selected altcoins is 0.65. So when youre trying to get an approximation of alt coins in general, trying to find out, where might the general altcoin market go, i think it does make a lot of sense to look at ethereum, because i personally think this correlation matters a lot and you can See this all the time if ethereum tends to go up since a particular point in time, you also see alt coins going up since exactly that same point in time, and the same holds true for the negative case right. So the fall of the ethereum price during the last crypto winter started in the middle of january 2018 and the price fell until middle of december 2018.. If we look at cardano, this is no different right january 2018 to middle of december 2018 thats when the cardano price fell, and so this kind of high correlation is enough reason for me to not speculate in altcoins when i see ethereum to go down.
So when i look at ethereum – and i am not bullish on ethereum – then i also dont trade altcoins, because really, how likely is it that you will find an altcoin during this time frame over here? That made you money its very unlikely? It might be possible to find a short term trade in a very specific altcoin, but how likely is it that you can repeat this kind of trade during such a market? So really it does matter where ethereum is going, and obviously this recent top over here, where we do seem to see some kind of resistance at something around 4k isnt too great. We seem to be trading in some kind of sideways range over here, and the potential risk of losing almost half the money versus the potential reward of gaining 20 doesnt seem too attractive. Now, that being said, nobody knows if this will continue right. If this kind of trading range will stay intact, but if youre, following this channel at all youre, probably familiar with those two moving averages the 23 day moving average here in light blue and the ‘ day moving average here in dark blue sorry to the long term. Subscribers that already know about this, but around 80 percent of the people that watch my channel. They are first time viewers. So i have to repeat this: this is a back test of the 23 23 day moving average and of the ‘ day moving average, and the trading strategy is as follows: when the price falls below the moving average, so the moving average years in purple when the Ethereum price falls below then we are completely outside of the market, so we are in cash.
The portfolio line here in gray is completely flat when the price goes above the moving average. Then we enter the market, we buy ethereum, and so we follow the price movements. Now, when you do this back test, this is a test completely without any trading fees. This is simply to find out what moving average predict the price movements the best. If you do this back test, you find out the 23 day moving average works well, the ‘ day works pretty well too. So, here again, i toggle between those two moving averages. We can see the portfolio line is above the ethereum price for both cases, and so i havent just randomly tested only those two ive tested quite a few of those moving averages. So these are here the ones in the first column and we can see buying and holding would have given us only 56 percent per annum trading. According to the 23 day, moving average would have given us 166 and, according to the ‘ day, moving average 144 per annum so way better than just buying and holding this portfolio line might not look very impressive, but you need to notice that this chart is also On a logarithmic scale, so this difference over here means a 10x, so we are not 10x times better, but we are quite a bit better. Over this time period we can see, it does include the crypto winter. So i like to look at those two moving averages and so back to today we are currently exactly between those two moving averages and i personally i dont like this situation too much.
I have already de risked over here, so i have sold a lot of my altcoins im now, standing mainly on the sidelines. I still own bitcoin, of course, as a portfolio diversifier im not selling any bitcoin unless it goes really really high, but for the most speculative bets, especially for the altcoins. I only want to be in them when we are bullish, when we are above those two moving averages that historically at least worked quite well, and so i feel much more comfortable buying something at market rank 50 or at market rank 100. When we are low right, when we came out of a depression when we fell 50 percent and then we cross those moving averages again, i have bought during this time the current situation. Doesnt look terrible right. We could go up, but its not good enough for me. Personally, to go really heavy on altcoins to really do large speculative bets. I simply want to be somewhat safe, whatever that means in crypto. I want to be somewhat safe in my assessment that we do have positive momentum and we have already fallen 15 from the recent top, and i dont see this positive momentum just yet, but this might change quickly right. It only takes a pretty modest move, maybe to 3500, or something like this staying above this for a while. Then i would be more bullish again and then i think it does make sense to speculate again more on altcoins now.
Another problem i have with the current market is the long term dominance of bitcoin. We are currently at 41. The all time low is at 36 percent, so we are not that far away from the all time low and the problem here is the lower we are on this chart, the more willingness there is in the mark to take on risk and at some point this Might go wrong right if everybody takes very, very speculative bets and pushes up coins that dont have a lot of fundamentals behind them. Then it doesnt take too much of a move in the wrong direction for the complete market to totally collapse and thats. Exactly what happened over here right? This is early 2018. We were very low on bitcoin dominance. A lot of risk taking bitcoin was a very small fraction of all of crypto, and so what happened afterwards is that the altcoins they got completely destroyed 98 loss in cardano. You put in 100, you get two dollars back thats, definitely not where you want to be now. That being said, i am not entirely sure if this will be again the low point. So if we do now reach 36 percent and the overall momentum still looks bullish, i would probably not sell everything just yet and the reason is rather fundamentally speaking right at this point over here we had a lot of icos. We had a lot of white papers, a lot of ideas.
People raised money for their icos, but there was very little adoption happening. It was simply ideas nowadays, thats very different right weve got real decentralized finance. You can get four or five percent on your stable coin. A real return on your money: you can use decentralized exchanges completely forgetting about all this censorship that might happen with coinbase and binance and all those other centralized exchanges. You also have nft trading, so theres a lot of real things going on. Most of it is still short term speculation, driven though, but still there is something happening, and so it does make sense that bitcoin over the very long term becomes a smaller fraction of all of crypto. Bitcoin is simply a store of value, its simply a portfolio diversifier. It can be a method of payment as an el salvador, but theres no real, broad adoption yet right right now, its still just a store of value and all the altcoins and especially ethereum theyve got real application, some of it being long term investment, as in returns Of d5, but most of its still speculation. So if the market does turn around at some point and who knows where this is, maybe this is a 30? Maybe this is at 25. If we do get very heated – and i think it wont – take a lot of brains to really find this out right if theres a lot of hype again in the media, which currently is not the case, if we do see a lot of hype, if we do See a lot of crappy projects again going through the roof, then we are very likely to be low here as well, and what i do think is that, even though ethereum does have a lot of adoption, now, its probably during a crypto winter, still going down massively Its probably not going to hold value as well as bitcoin, because bitcoin is really held for the very long term by institutional investors, even by retail, just to cancel out portfolio volatility from say stocks, but ethereums use cases.
They are still pretty much bound to speculation. And so when theres a crypto winter, then the speculation obviously will dry up as well. The usage of ethereum will dry up as well, and so weve basically got a pro cyclical business model here for ethereum. If things tend to go down, they are, in my humble opinion, likely to go down further for ethereum, even though it is a well established asset with use cases, but those use cases they are pro cyclical, and so, if momentum does turn around, if we go below The moving averages again im not going to be the person that holds ethereum over the next cycle, im, not the person that will hold it through, like a 70 80, maybe 90 down movement. I think thats still possible im simply a bit more conservative and simply the fact of holding bitcoin through the next winter is already enough risk for me. So im not going to sell my bitcoin, but i am definitely going to sell ethereum if things turn around. This is not a chart of bitcoin versus ethereum, saw the bitcoin price divided by the ethereum price. How is bitcoin relatively performing to ethereum and what we see here is a 96 under performance when i first saw this, i couldnt believe this, but thats simply because of this initial rally over here right, but still, even if we take the initial rally out of this. Maybe we measure this from here still bitcoin underperformed ethereum massively.
Now i will be closely watching how ethereum will proceed with the proof of stake implementation, because if this really works, if the decentralized exchanges will have massively lower gas fees, if you can deploy into d5 for way lower transaction costs, then i really think that ethereum can Completely blow up because right now, whats the main driver of the old coins, its transaction fees and its scalability. How many transactions per second can the blockchain process and how expensive is that processing? Now, if ethereum is able to fix those count, problems with proof of stake, then its really gon na be hard to simply just copy the features of ethereum right whos going to buy an nft on solana if the ethereum ecosystem is already so large and if transaction Costs for ethereum are low if its very easy to trade back and forth in an existing large ecosystem. How would copying a feature in a competing blockchain be able to get any kind of adoption? I think the real use case for altcoins needs to be different to ethereum in case ethereum is really able to solve those gas and transaction fees, so it cant just be copying the existing dexes, the existing nfts. There needs to be something new for the altcoins to be really able to compete if ethereum is able to launch proof of stake properly. Now lets just first see where ethereum is going. If its going to go up or down from here, the moving averages say we are neutral.
History says that septembers are not too bullish for crypto, but weve already come down right. We are down now four percent in bitcoin in september. The average is around six percent. So really for me, its now time to stay on the sidelines and get a real signal until then, im simply risk off. If you enjoyed this video feel free to join us on telegram. Weve got two channels: a public chat with around 600 people and a news channel and announcement channel here where i post my personal opinion about the market, where i also post whenever new videos come out which, by the way happens every day, i publish a video every Single day so feel free to subscribe as well, thanks in case youve, given a like youtube, will then help to grow.