Point of Inflection - Chung's Weekly Digest  (5/30)

by BSC News

May 30, 2022


The market needs to recover to avoid a market-wide selloff, as this prolonged period of uncertainty is hurting investors’ sentiment.

Bearish Sentiment is Building 

Bitcoin’s ($BTC) market cycle theory is dependent on its 4-year halving event. In the past, this provides a predictable market cycle. It is also the basis of Plan B’s stock-to-flow (S2F) model that held up quite well until it was invalidated in this cycle. 

Bitcoin’s halving process is usually followed by a bullish movement in Bitcoin’s price because of scarcity. Many market observers ruled out a bear cycle because the crypto market reached euphoria before it capitulated in the past. 

Source: Bitcoin's last halving event in May 2020 led to a rally that saw Bitcoin touching $68k in November 2021.

Bitcoin’s Net Unrealized Profit/Loss (NUPL) is the best indicator to judge market euphoria. When the NUPL chart turns blue, most entities invested in Bitcoin are in a profitable territory, and market sentiment will be euphoric.  

Source: In previous market cycles, Bitcoin would reach the stage of ‘euphoria’ before it capitulates

In this cycle, despite reaching its all-time high, Bitcoin has not attained the stage of euphoria. But the recent market condition is deeply concerning for a few reasons. First, the US has not formulated its comprehensive crypto framework. This is important for many reasons. First, a legal framework will unlock liquidity from institutions into the crypto space. Secondly, projects building on the blockchain are no longer hampered by the fear of sudden clampdowns.   

The market has also fallen below the critical level of support of $30k. It has also charted nine consecutive weeks of red candles. Bitcoin is still trading below the 200-day Exponential Moving Average (EMA). 

Source: The 200-day EMA is one of the key indicators to identify a bull/bear market 

In order to stay above the 200-day EMA, Bitcoin has to rise above $41k. It appears to be an uphill task with the current market sentiment. 

Weekly Recap

Market Sentiment


Bitcoin charts the first 9-weekly red candles in its history. This can be a cause for concern as market is on the downward momentum. However, the market will likely rebound as soon as the selling pressure eases. 

Source: A rebound will happen soon as the market is in an oversold position

Bitcoin has been ranging between $28k to $30k for two weeks, and this trend will likely be broken soon. The bias is in favour of an upward breakout as selling pressure is starting to dissipate. 

The long-term prospect of Bitcoin is still strong and intact. As a result, institutions are now more prepared than ever to have limited exposure to crypto-assets. 

Retail investors, particularly those that sold at a loss, will unlikely return unless the market sentiment significantly improves. 

Coins to Watch

  • Fantom ($FTM) - The Fantom blockchain is a smart contract blockchain protocol. It is also touted as an Ethereum competitor. 
  • Fantom can leverage its ability to scale at a cheaper transaction cost. 
  • Recently $FTM surged on speculation that Andre Cronje will return to Decentralized Finance (DeFi).
  • Andre Cronje is an influential figure in the DeFi space and he plays a major role in the Fantom ecosystem.
Source: Cronje’s return to the Fantom ecosystem will bolster the confidence of its stakeholders 
  • Protocols offering layer-1 solutions will be instrumental as Web3 is taking shape. 
  • Avalanche ($AVAX) - This is another layer-1 smart contract platform that has been building and growing its ecosystem.  
  • Layer-1 solutions will have a mainstay in the crypto ecosystem. 
  • $AVAX is 81.3% down from its all-time high but the network continues to grow. 
Source: the Avalanche Network continues to be one of the preferred networks despite its price taking a beating recently
  • Polkadot ($DOT) - Polkadot offers a different value contribution to the crypto ecosystem. It combines different blockchains into a single unified network. 
  • Polkadot makes multi-chain interoperable networks possible. 
  • Projects building on the Polkadot’s network after successfully bidding for the parachain slots will be adding to the utility of the layer-0 network. 

Come back next week for another iteration of Weekly Digest: Chung's Picks of the Week from BSC News. Be sure to follow Chung Yee on Twitter.

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