Crypto is consolidating: Short-term pain, long-term gain

For me, (Tom) interest rate cuts are the main catalyst needed to see risk assets move more meaningfully higher, and with Powell and the Fed pushing that out further (from, say, a September start to a November start), we've seen risk assets sell off into this.

I (Tom) believe the incoming data will mean that the Fed will cut interest rates twice this year, but risk assets are vulnerable until that data comes in. We still expect a bull run at the back end of this year and early 2025 to likely be really positive for crypto assets. 

However, there are definitely headwinds in the short term. I am not selling any Spot bags/positions and remain tight in the barbell portfolio of BTC, ETH, SOL, WIF, and POP. 

With this context laid out, let's dive into the market direction.

TLDR

• Fed's hawkish Dot Plot pushing out rate cut expectations has created short-term headwinds for risk assets like crypto, leading to a sell-off
• Bitcoin will likely be the most resilient, with $62,600-$63,500 expected to be a major support/buying zone if tested.
• Ethereum is facing some weakness, but there's a positive ETF catalyst: $3,200-$3,300 could present a buying opportunity.
• Solana is vulnerable to further downside in the current environment, but there's a potential reload zone of $131.
• POPCAT is vulnerable to further downside in the current environment, but there's a potential reload around $0.22-$0.23.
• WIF shows relative strength; any major dip into the $1 range would be an attractive entry for long-term bags.

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results. 

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BTC

• BTC will likely be the least affected and pullback/drain the least of all the coins. In fact, we see the Yellow Box between $62,600 and $63,500 as the major support and likely a great buying zone if price gets there.
• Price has rejected from the horizontal resistance of $68,900, but price is currently finding a local support at $66,800.
• $63,400 is the major horizontal support, and price may retest that level in the coming week or two.
• The RSI on the Daily timeframe is at 45, which is a very middle area, meaning there is potentially room for price to go lower. But the RSI doesn't indicate a bullish or bearish bias here.
• A move above $68,900 would trigger a breakout to the upside.

Cryptonary's take 

In the coming month or so (until more macro data comes out that we expect to be supportive of rate cuts and, therefore, positive for crypto), we expect BTC to remain tightly range-bound and potentially move down slightly. 

The main horizontal area of support is the Yellow Box between $62,600 to $63,500. I (Tom) think this area can be tested in the coming month, and if I were underexposed to BTC, I'd consider adding BTC in that price zone. 

For now, just remain patient in what I believe is this boring consolidation period for BTC (although altcoins will drain out a tad more, I feel). But for BTC, we're not taking much action here and are just waiting to see if $63k can be tested.

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ETH

• Following the breakdown of the pennant, ETH is now battling at the horizontal level of $3,485.
• Beneath $3,485, the next major horizontal level is at $3,280. If price were to pull back to $3,280, it could test $3,120, but between $3,120 and $3,280, we believe that'll be a good long-term buying opportunity, particularly with an ETH ETF on the horizon.
• ETH's RSI is similar to BTC's. It is in the middle territory, which doesn't really indicate a bullish or bearish stance in terms of direction.
• To the upside, $3,650 is likely a short-term horizontal resistance, with the major level at $3,960. But let's get back above $3,650 first.

Cryptonary's take

ETH actually has more bullish catalysts at the moment than other projects, with the ETF on the near-term horizon. This may help it to hold up better than most altcoins. 

Let's see how the battle unfolds at $3,485. However, we expect that ETH will probably pull back to the $3,200 to $3,300 area, which'll likely be a good price to start adding more ETH to the long-term Spot bags. For now, we are remaining patient and seeing how this unfolds. But we expect $3,200 to $3,300 to be tested in the upcoming weeks.

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SOL

• Charting-wise, SOL looks more bearish than BTC and ETH in the short term.
• SOL couldn't hold above the local horizontal support at $162 and then $152.
• Local support is at $141, which also converges with the main uptrend line that SOL has held above since mid-November.
• Now, SOL may rally if it bounces off of the main uptrend line. However, overall market conditions probably don't support this currently.
• If SOL loses the main uptrend line, the next major supports are $131 and $106. We would be surprised to see SOL reach $106, and we expect $131 to hold as support.
• To the upside, SOL would need to get above the two local levels of $162 and then $172.

Cryptonary's take

SOL is where we see the real opportunity to add to Spot bags if it retests $131 and any deviations below that level. 

Overall, we think the lack of extra liquidity coming into the macro markets and the fact that rate cuts have been pushed out (even though data in the coming month or two may bring a September rate cut back on the table) is not supportive of SOL. We expect SOL to be range-bound between $131 and $170. We'll look to add to our long-term Spot bags on any deviations below $131 if we get them.

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WIF

• WIF has been far stronger than most. WIF is the only meme currently that doesn't seem to be draining, showing real strength against the rest of the market despite the fact prices have come back.
• WIF is in a local downtrend, where a breakout could support a move up to $3.05.
• WIF is approaching a horizontal support of $2.20. If this level cannot hold, WIF will likely see a deeper pullback like the rest of the market. That area could be $1.50.
• The RSI is at 35, which is somewhat close to oversold territory, so even if there is a slight pullback, you would expect a relief bounce at some point in this play.

Cryptonary's take

For my WIF bags, I am not too worried about here simply because it has held up so well in comparison to other memes. If WIF were to puke out and retest somewhere in the $1s, this would be the gift to all those who have been sidelined and missed out on WIF. We note that the timeline (Twitter) is very bearish at the moment, making me cautious about just continuing to be bearish. Still, liquidity isn't rife at the moment, so we're not ruling out a more meaningful pullback on WIF. 

If WIF did pull back to the $1s, we'd add to our long-term Spot bags. But, ideally, we're looking for a bounce at some point considering this price action. 

Overall, we're not too sure here, but we're not selling Spot bags, just looking to add if the $1s are seen/retested.

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POPCAT

• POPCAT's price action has been really disappointing, but we have seen similar situations across the board when it comes to all the memes (other than WIF as the exception).
• Price has broken below what was a key level/zone of support between $0.32 to $0.34, leading to a more severe sell-off. This price zone may now be new resistance.
• The next support below the current price is at $0.22/$0.23. If this level doesn't hold, then $0.16 would be the next target. However, we expect to see $0.22/$0.23 hold as a major support, even in a poor liquidity environment.
• POP is in a larger downtrend, so if a breakout of this downtrend were to come, this could be majorly bullish. However, we'd need the data to signal the Fed's need to cut rates, and then that might be enough of a stimulus to help these risk assets go higher.
• The RSI is at 35, so it's close to oversold territory. If the price were to move another 10-20% lower, you would expect some form of bounce, meaning that $0.22/$0.23 would be the area for the price to bounce from.

Cryptonary's take

As many of you know, I (Tom) have a large POPCAT bag (large for me, at least). I note that the timeline is very bearish, and POPCAT does look due for a bounce, even though liquidity conditions are certainly not ideal currently. 

I am leaning toward POPCAT bouncing soon and retesting $0.32; that'll then probably be a key inflection point for POP. Ultimately, we're looking for a breakout of the main downtrend, and if we get that, then POP could send. However, POPCAT is a long way off that level currently. 

In the short term, we expect POPCAT to be range-bound between $0.23 and $0.32. Back above $0.32, and a larger move up is possible. For now, I am holding Spot positions. If we do move up to $0.32, depending on price action, I may sell a tiny portion of my size simply to reduce my personal emotions in this trade and lock some profits in. But I haven't fully made my mind up on this. 

Long-term, we still expect POPCAT to be a major meme coin winner and targets well north of $1 are still possible for the peak of the bull market, although that may be 4-9 months away. Let's see what we get!

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Final words

I have been working on the Monthly Report for you all, so I have chosen to do the ⁠market direction in a short format today. 

Overall liquidity isn't as positive as it was a few months ago, and that's now really starting to take effect. We're bullish for the long term but cautious in the short term. I see prices pull back more meaningfully further; we may look to add to some long-term Spot positions. Let's stay patient and see what the market gives us. 

One last thing to add: We have many bullish catalysts. We're just in an air pocket of lacking liquidity while we wait for more significant stimulus and interest rate cuts. Late Q3 and then Q4 are likely when things will start going ballistic again. 

I am staying patient here and not overdoing anything to avoid chopping myself up. 

Let's see what we get!