Alpha Mail - #038 - TraderXO
Super excited to share this week's newsletter, not only because it features one of the most well-known traders in the crypto space in TraderXO, but it is also the first week of my new collaboration with Jim Talbot.
Jim will be contributing a short piece each week focussing on market analysis, starting with his outlook for September and what he is calling 'The Next Stage of the Bear Market'.
Let me know with a thumbs-up in the footer, or on Twitter how we can continue to improve!
Enjoy!
alpha
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Interview: Trader XO
A few weeks ago, I spoke to XO for nearly three hours to discuss everything from macroeconomics to the BitMex insurance fund. In one of the most detailed interviews to date, XO shares his thoughts on blowing up accounts, how regulation would benefit crypto, cutting losses early and his long-term ambitions as a trader.
Jim Talbot: The Next Stage of The Bear Market
I believe we are on the brink of the next stage of the bear market. How that materialises, in my opinion, is as follows:
Survival
With an inability to generate demand, the next stage of the bear cycle is survival. How does this play out?
Mass layoffs of employees surplus to requirements, pay cuts and offloading of treasuries to stay afloat.
Over the last couple of years, as demand has been incredibly high, valuations have been massively skewed, leading to mass employment of overpaid jobs unnecessary in a down-trending economy of dwindling demand.
It's a vicious cycle where increasing unemployment leads to an inability to pay living costs such as mortgages.
I believe this next phase of the bear market starts slowly and ends abruptly before entering a period of slow economic growth and stagnating markets of low volatility.
In the short term, markets lack participation, leading to false breakouts and breakdowns. As supply gets distributed on each rally, traders with size continue to leave the market, reducing volatility further.
September Outlook
Above is a BTC chart detailing where I would be willing to do business. My most likely scenario is we get a large momentum move to the downside in the coming month to wipe out the lethargic low momentum grind-up we have seen over the last few weeks. Lower timeframe RSI structure is indicative of this based on previous instances and a large flush would likely ignite some interest and activity. If it were to ignite momentum to the upside, I wouldn’t fade it but I think it's much less probable.
Key levels:
$26,200/26,600 - unlikely but not off the table. Would give a proper test of demand instead of just losing momentum like at 25k. Thin areas where initiation has occurred previously, often garner the strongest response.
$23,200/23,800 - previous breakdown, never a fan of trending moves off daily opens, usually a good target for lots of stop losses.
$18,300 - most probable level, not one to bid blindly, but worth gauging the reaction off of the stop losses there to see if there are willing buyers.
$12,800/14,000 - high EV area for strong bounce and my number one area to do business in the medium term.
Jim
Graphic: #26
If you are constantly checking your phone to see if your trade is starting to move in your direction, you are probably overexposed.