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BitcoinCrypto

Crypto trader – playing the momentum juggernaut

Chris Weston
Head of Research
Nov 10, 2023
The ever-increasing confidence that the SEC are imminently due to give the 12 ETF issuers the green light to launch and to market a cash Bitcoin ETF has clearly given tailwinds to a market that responds to confidence like few others.

Momentum is the play now, where a body in motion stays in motion is the philosophy adopted by traders. The idea of buying what’s strong and what’s working is seeing capital chase the move, and what is clear is the news has sent confidence soaring through the altcoins, with some huge moves in the likes of SOLUSD, XRPUSD, GLMRUSD, LINKUSD and XRTUSD among others.

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News that Blackrock is now moving to apply for a spot Ethereum ETF is the next piece of positive news to juice up the flow, and this has seen ETHUSD rally towards the April highs of 2141 and has many feeling that we could be headed towards 2500, perhaps 3000.

Confidence is really a derivative of price and there is nothing more emotive than a market that is continuously moving in one direction with big daily percentage changes. When nearly every piece of news is positive you hit a sweet spot and FOMO kicks in, and we’re seeing that dynamic playing out now.

That said, despite the clear chase, BTCUSD, ETHUSD and the alts are neither over-owned nor over-loved at this juncture and the key question for any risk manager who is long, is whether we will see a ‘sell the fact’ event play out if, and when, the SEC does hand down their verdict – which could be very soon.

This is obviously a risk and the bulls will need new news to fuel the rally, but given the other potential tailwinds and (likely) positive kickers in the next 6 months (such as the 4th halving on 24 April 2024) that dip will likely be quickly supported.

The market is trying to model the adoption story and what this means for future demand. This is of course terribly hard to do, and the demand to offer a cash ETF as a portfolio diversifier, alongside the likes of gold, art, wine etc. may not actually really kick in for 6-12 months – but it should happen.

While perhaps for different reasons, we’re hearing news UBS is joining HSBC in offering crypto-linked ETFs to certain wealthy clients in HK, which speaks to a market where the reputation as the bad boy of finance is turning the page and having a make-over, partly courtesy of the involvement of Larry Fink.

Our crypto flow at Pepperstone has certainly increased, not just in BTCUSD and ETHUSD, but across the higher beta alt-plays too – the coins where people's expected returns are simply that much higher.

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The technicals on BTCUSD and ETHUSD are clearly hot, where the probability in the distribution is skewed to higher levels. Remaining unemotional is key and trying to extract as much out of a trade will serve you well. A mechanical stop loss works well in this environment, where one could hold until price closes a daily bar below the 8-day EMA. Another method is to exit longs on a 3 & 8-day EMA crossover. If these coins kick and keep going one stays in the trade but doesn’t surrender too much if the price rolls over.

The news is certainly positive right now, and price action speaks to a market feeling good about crypto again.  

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