Can we have the ETF FOMO

Dear subscribers,
Welcome to the October 17, 2021 report.

My last letter, written when BTC was at $54.6k, showed a sideways to bearish on-chain structure. I had a price action expectation for consolidation below $58k. This was with a very low conviction due to unpredictable nature of speculation around the upcoming ETF decision. BTC in the last 48 hours has rallied past the $58k resistance upon news that an ETF will be approved on Monday.
We are now in a zone where on-chain analysis will have very little say in dictating short term price action. Buying and selling by speculators will now dominate any short term signal we get from investors on-chain.
Top level summary for 16th Oct 2021 (current price $60.7k):
> Macro: Unchanged from the last letter. Long term accumulation is at peak levels, structurally this points to a strong rally and a bull market continuation well into 2022. This rally may have started.
> Short term: Investor buying momentum remains strong, with a recent uptick of renewed interest by strong handed investors and whales. However, with the current demand and supply dynamics, my models point to $50k as the point of balance. We are nearing an overbought region.
> Ethereum Notes: ETH investor demand is currently stronger (relative to its price) than BTC. There’s some evidence ETH may regain some lost ground against BTC in coming weeks.
> Price action expectation: Bullish. BTC is under strong buying momentum, but has early signs of being overbought. Should we break past the $64k all-time-high on ETF speculative FOMO this week, I would expect some selling afterwards to revisit $64k to test this as the new support.
> Price action conviction: Medium. Please be wary that speculation around the ETF will be very strong. This has the tendency for fundamentals in this letter to hold less weight than usual.
All the best until the next letter.

Where to buy BTC…my FTX referral >  link
It’s that part of the cycle again where I’m being asked where’s the best place to buy BTC…
I use FTX due to their low fees and excellent liquidity. For limit orders the fee will be 0.02% or less, even as low as a 0.03% rebate (i.e. you get paid when your order fills).

I will be using this BTC chart (above) with many indicators to assess how BTC is tracking against these tools. We have also added another page with a listed toolset outside these reports to also see how BTC is tracking. These won’t be included in the reports but just reference material which could be included from time to time

Analysis Breakdown

An ETF gets the green light

The last 48 hours has seen a steady flow of news pointing to an ETF launching. Here’s the summary of key announcements as they came in, these were instrumental in helping BTC break past $58k.
> Oct 14 – The SEC Education Twitter account tweeted: “Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits.”
> Oct 15 – News dropped that Bloomberg’s data team was in the process of adding ProShares Bitcoin Strategy ETF into their terminal.
> Oct 16 – Coindesk reported ProShares Bitcoin Strategy ETF will launch on Monday 18th Oct.

Short term: Investors continue to buy while price overextend

In the oscillator chart below we can see “Strong Hands” had an impulse of buying leading up to the latest ETF confirmations. We can also see this in the heatmap belw.

Strong Hands (a.k.a “Rick Astley”) have been buying while speculative investors have been selling very recently. Strong Hands is defined as investors whose wallet history demonstrates buying with minimal selling.

Yesterday also saw a new impulse of buying from whales. Whales are investors holding more than 1000 BTC.

While this latest round of buying builds on the bullish momentum, there is reason to be cautious due to price showing signs of being over-extended. The absolute levels of Supply Shock demand and supply point to $50k as a fair price point.
Transforming this signal into an oscillator we can see we are quite close to historically overbought levels.
Locally we under bullish buying momentum, however in absolute terms we are close to overbought levels. Should we break past the $64k all-time-high on ETF speculative FOMO this week, I would expect some selling afterwards to revisit $64k to test this as the new support.

ETH Commentary

After months of consolidation, ETH’s Supply Shock is now at all-time-highs. Meanwhile the price is trading slightly below all-time-highs. Now if we compare ETH to BTC’s Supply Shock we can see that ETH has been gaining without it reflected in the ETHBTC price. A bullish divergence is beginning to open up. 

SUMMARY: Some evidence that ETH will out-perform BTC in coming weeks.

The chart below, left ETH BTC pairing and the right, ETH USDT. This 2 daily chart shows that the emerging Bullish div on the ETH.BTC pairing and with the ETH.USDT, on the daily, we see not only the 8 weekly MA acting as support but we also not on the RSI, a breakout from the RSI structure resistance and using in the past, the MA (RED) as either support or resistance and hence supporting evidence of ETH bullish  orientation.

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