Crypto markets have been rallying with force for the past 8 weeks, BTC is up over 25% from its early summer lows and ETH's>100% during its long-awaited merge rally
But is this price action sustainable? Is there a historical precedent for continuation?
Let's check the data...
First up: 30D returns
This shows us how much profit taking there may be in the market at a given time
The white line shows us prior bear mkt rallies +30-50% range have been good times to sell
BTC currently rests at a comfy ~+17% so there may still be room for a run higher
ETH tells a much different story with 30D returns encroaching on ~75%
Historically this rate of return has triggered harsh selling & corrections(white line)
But there have also been past instances when 30D returns have surged much higher,along with ETH price,before reversion
Due to correlations merge or no merge ETH will be hard pressed to rally much further without BTC coming along
The pair move in tandem,so if ETH is headed higher it will need BTC to join. But is there any accumulation data hinting at a larger BTC rally upcoming? Let us see...
Whales(red dots)have been BTC indifferent since the spring, making this a retail rally for the time being
However, retail accumulation (green dots) has been insatiable at nearly every price
What we'd like2see now is a q4 2020 repeat w/ whale buyers stepping in to join them
The ETH divergence chart below shows the same whale/retail accumulation patterns, we see similar indecision
Both accumulated during the crash, but both also took profits at the start of Aug(blue dots)
This brings life to how much uncertainty remains over the current rally
Since the accumulation and 30D returns don't provide us with any concrete clues on direction we look down the risk spectrum, and view our Fair Price Scanner
With this we see most alt-coins are performing only modestly. A sign that the market may not be as frothy as advertised
We did see risk-premium scores top out multiple times during this BMR, indicating that even though risk has been attractive, caution is highly advised for the coming weeks.
Checkout @MrBenLilly 's Espresso post on ETH Merge and the associated unknowns. jarvislabs.substack.com/p/the-unknown-unknowns