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Analysts' Insights

Analysts' Insights

The Altcoin Crash is Coming

1) In our 2023 outlook report (published in December 2022), we had anticipated that Solana (SOL) price could double in 2023 as we expected a solid crypto rally this year. SOL traded at $13, and the risk/reward seemed favourable. Indeed, SOL peaked in July at nearly $27.

2) As we warned last Tuesday, FTX creditors could start selling $685m in SOL holdings, beginning this week — at least $3.4bn worth of crypto is expected to be sold FTX, which should create an overhang for Altcoins for the rest of the year. During last week, SOL declined by -6%.

3) In anticipation of these sales, the SOL funding rate has turned negative (-14% annualised) and could decline further. Yesterday, we saw SOL breaking the $19 support with increasing volume. This is concerning; the more significant target levels are $15 and $10.

4) Last Tuesday, we also warned about the upcoming ApeCoin (APE) unlocks, which would allow [mostly] insiders to sell another 11% of the outstanding tokens, or $50m (Saturday, Sep 16/17). During the last week, ApeCoin declined by -10%.

5) Ethereum is also turning out not to be ‘ultrasound money’ as the issuance of 15k Ether is > 11k Ether being burned last week. We must monitor what this means (or if it even matters). Still, with Ether being close to the psychologically important $1,600 level, a break could carry prices lower, especially as revenue growth disappoints.

6) Technically, the break of $1,650 makes us extremely cautious about Ether here, and we could even envision a scenario where prices materially drop lower into year-end. A decline below $1,500 could bring back the idea that Ether could decline to $1,000 — a level that would appear justified based on the revenue projection from the Ethereum ecosystem (see our previous reports).

7) Bitcoin (BTC) price is $25,836 below the 50d MA $27,731 - which is bearish - and the WoW price increased by -0.5%. Ethereum (ETH) price is $1,617 below the 50d MA $1,752 - which is bearish - and the WoW price increased by -1.1%. Overall, the trend is down, which indicates a bearish sentiment. Weekly BTC volumes have declined by -37%, while ETH volumes are down -31%. This low liquidity window could be prone to downside risk in prices.

8) Ethereum currently underperforms Bitcoin as the trend (20d) MA shows ETH / BTC ratio is decreasing. Beta factors drive crypto; this is negative, so stay cautious. YtD, BTC has still outperformed the Nasdaq (+65% vs. +32%), but as all the BTC returns were generated in only three weeks this year, the BTC rally would be considered as being on shaky ground.

9) The futures funding rate trades positive for Bitcoin (3.6%), which is bullish, and the funding rate is positive for Ethereum (6.1%), which is bullish. But overall, the funding spreads are relatively moderate, especially for Altcoins, and we would not interpret this data as ‘bullish’.

10) Our Greed & Fear Index prints 25%, while the Ethereum Greed & Fear Index prints 11%. The RSI for Bitcoin is 39%, while the Ethereum RSI is 36%.

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