Things are going crazy at the moment on the wild west of cryptos, where meaningless tokens on Uniswap are pumping up 10-15x within hours of sale (not naming anything yet, but I'll soon come up with a long list :P).
DeFi has almost caught mainstream attention, with people calling this thing as the future, which can sweep the centralized banks out of business.
Sounds like the 2017 alt euphoria?
(" Wild claims... Reality may be something different. Banks have been there for decades, DeFi came just round the corner, and is still very new, though I personally believe they have a lot of potential, but hey, it's too early!!")
Have a look at the Uniswap mania post here!
Here's a small update about the bearish DeFi chart I posted yesterday (And believe me, I can still be wrong about the market.
Chart: DeFiperp, 4H:
Link: https://www.tradingview.com/x/UBG3eHFh/
Points to note:
- There was a small fakeout and it started going down,
- And then there are some capital inflows on to Uniswap, even though the volumes have dropped significantly over the last 24 hours.
source: https://uniswap.info/home
So anyway, back to today's topic, and before I continue, here's the usual disclaimer:
I'm not a certified financial advisor, and even though I've been trading for quite a few years, I urge people reading this, and my other posts to #DYOR (Do your own research) before taking any decisions!
Of course I'm going to help you out if you have some queries/doubts, so feel free to let me know in the comments, or on Twitter :)
From the perspective of market sentiments, Bitcoin and Ethereum are nowhere near peak euphoria levels, but the hype around DeFi, and Uniswap definitely is. And that needs to slow down.
Right now, just anyone can create a new token, and a website, build a marketing team, shill some vaporware, and mint some hundreds of thousands of dollars, by hyping it and selling that to unsuspecting noobs.
I'll still agree that there are some gems in this market, which can make life changing wealth, but after the initial hype is over.
One thing I can say, with almost 80% certainty: Uniswap is here to stay :P
Scenario right now: Many of the projects on Uniswap don't even have a working product, they have bold promises, people are taking flash loans to basically mint money out of thin air, mostly through arbitrage, or through loan refinancing, or even stablecoin swaps, whereas there are other bunch of people who are minting tons of money through gas fees, and alike.
Now these inefficiencies arise when market is a bit irrational, and people usually don't care about small losses in transactions.
Let's see how we can spot inefficiencies in the market:
Imagine the following scenario:
"Sam has $1000. He sees everyone is making money on uniswap. He market buys ETH, (1) transfers that to Metamask (2), connects wallet to Uniswap, Converts that ETH to WETH (3) (Wrapped ETH), Buys his favourite "Uniswap Gem" (4) which everyone shilled, will go 50x, transfers that out to his wallet (5)."
Now on every step, he pays a lot of fees. He may eventually end up with $950, which he may not even bother, because he has those 10-20-50x in mind.
Now here comes another catch: While buying his favourite token, there will be many other people who will be competing for a spot in the sale, which will result in a lot of people like Sam, to pay for more fees, which creates a loop like scenario where the gas fees go exponential.
This creates inefficiencies in the market, and usually when the market is too much euphoric, these ineffeciencies become big and can be easily spotted by rational investors.
Here, the smart money are those who created the tokens, who are doing yield farming, and also those who are mining liquidity, or fees. They'll probably dump and exit even before you can react, or they may have already hedged their exposure.
TL;DR:
Let's come and have a look at the charts of Bitcoin and Ethereum:
A few days back, I posted an article about a probable 30% correction.
Now I'll share another short to mid term market insight:
Chart: BTC/USD, 4H
Link: https://www.tradingview.com/x/EaE81TeD/
Points to note:
- Bullish Ascending triangle pattern observed.
- RSI divergence observed (Bearish)
- CME Gap on charts around $9600 -ish levels. (Besrish short term)
On 1D chart, there's nothing much to note. so let's move over to Ethereum!
Chart: ETH/USD, 1D
Link: https://www.tradingview.com/x/TbmeJVUO/
Points to note:
- Bull pennant noticed (targets given later)
- Small RSI Divergence noticed (bearish)
- DeFi sentiments are at its peak.
- Weekly resistance, marked in green box (weekly chart below)
- RSI showing similar fractals, with respect to price, and the bull pennants, similar to the market structure, just before the previous dump.
Chart: ETH/USD, 1W
link: https://www.tradingview.com/x/65Euco3l/
Points to note:
- If the bull pennant breaks above, Next immediate target will be around $480-500-ish levels
- In case the fractals repeat, a good buy zone will be around the retest of the previous swing highs, or $280-ish, levels.
Note: The recent bull move seems much more impulsive, and considering the fact that Btc broke out of a multi year downtrend, it's better not to short the market. In case you are in profits, you may want to book profits to buy back later, if the market dips.
A critical point to note: Word is out that Russia has developed a vaccine for Covid-19, and some news agencies are claiming that Putin has already tested that vaccine on one of his daughters.
If this is true, Gold may dump, Bitcoin may dump as well, and stocks may start going up, but these dumps will be temporary, and here are my thoughts:
- The damage done by printing excess money will be extremely difficult to reverse, so hyperinflation will creep in slowly, pumping everything up.
- I'm skeptical that vaccine is out already! There is no cure for common cold and seasonal flu, every year vaccines get outdated, several other diseases running around for decades don't have any vaccines, we have to fight them with our own immunity, and now there is a vaccine for a novel virus? It's a bit hard to digest, but let's see.
But TBH, this news can affect the markets either way. So, stay safe! Trade safe!...
We never know what's cooking infront of us, but we have to be cautious.
At the time of writing, we can already see gold down by almost 5%
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