Technical analysis

Flash crash on the crypto market, a little bit of fear before going back up?

Julien Moretto – 2 Sep 2020

The market showed its strength during the month of August. But on September 2, a flash crash caused investors to doubt the market. Bitcoin erases in one hour its gains of the past week, while Ethereum, more bullish, resists better with a weekly performance of 15%. Generally speaking, there is a certain effervescence, not to say euphoria, around the Ethereum ecosystem since the post-Covid recovery. In particular, almost all projects/tokens linked to DeFi (decentralized finance) are experiencing impressive, even stratospheric increases. This is the case for example of Aave (LEND) with +96% in one month, Yearn.finance (YFI) with +615% or UMA with +344%.

Performances that are impressive but not without risks. At the origin of the craze, platforms allowing liquidity providers to generate significant returns and receive governance tokens as rewards. From a technical point of view, the rise is brutal on most of these projects. In recent days, the multiplication of “clones” of the most successful DeFi tokens has prompted caution. The whole question is whether this DeFi “bubble” is about to burst or has left to last for some time to come. Here is our market analysis.

  • According to CoinGecko, market capitalization is $380 billion, up from $350 billion at the beginning of August.
  • Bitcoin’s dominance drops sharply to 54.5%, compared to 59% at the beginning of the month.
  • The best performance of the top 50 is to be attributed to UMA with +193% over one week.

We invite you to discover our analysis in video (in french and dated from September 1st) :

Bitcoin (BTC)

Coinhouse recommendation: 
Buy on breakout

  • Bitcoin stands at €9,700 (11,400$) on September 2nd, signing a stable performance after today’s flash crash. We observe that the price of Bitcoin is still evolving in the wide resistance zone we had identified between €9,400 and 10,400 ($11,000/12,300). A very nice intermediate support formed on August 27 on the €9600 ($11 300$) level, reinforcing the probability of a continuation of the uptrend. The €10,000 ($12,000) level nevertheless held up well on September 1. We now need a clear bullish breakout of this level in the daily timeframe to have a buy signal. If current market sentiment continues, the next profit-taking target is much higher, at the €12,200 ($14,500) level.
  • However, today’s flash crash reminds us that we shouldn’t overlook the scenario of a bearish reversal. If the current rebound fails below €9900 ($11,800), it will be a sell signal, and then buy back in an optimal zone between €8600 and €8800 ($10,200 and $10,500).

Ethereum (ETH)

Coinhouse recommendation: 
Wait

  • Ethereum (ETH) continues to drive the market up and performs better than Bitcoin. Despite the flash crash, it is up 15% this week to €375 ($445) on September 2nd. The break up from the €380 ($440) level remains very positive for a continuation of the trend. There is currently no favorable configuration for purchases from a technical point of view. The next profit-taking target is in a price zone between €416 and 438 ($495 and $520).
  • Going back below the 380€ ($440) level in daily timeframe would of course be a sell signal. A first buyback zone will then be between €260 and 280 ($310 and 340).

Chainlink (LINK)

Coinhouse recommendation: 
Buy on support

  • Chainlink (LINK) continues to show a solid uptrend despite rejection following its new high of €17 ($20). LINK is up 8% on the week at €12.80 ($15.05). The underlying trend remains bullish and buybacks may occur, but on well identified supports. The first is located in a zone between $11.60 and $13.35. The second is located even lower, in case Chainlink makes a 3-step correction. This second price zone is located between $8.10 and $10.00.

Top & flops of the week (top 50 marketcap)


Tops

1- UMA : +196%
2- Yearn.finance (YFI) : +115%
3- NEM (XEM) : +59%


Flops

1- Cosmos (ATOM) : -19%
2- Aave (LEND): -16%
3- 0x (ZRX) : -15,5%

In this article, all information is given for information purposes only, even if it has been established from serious and reputable sources. It does not constitute an offer by Coinhouse to buy or sell digital assets, or an offer to provide services on digital assets, nor does it constitute advice, encouragement or a recommendation to operate on the digital assets in question. It constitutes simple information over which the user retains absolute control. We inform you that if you choose to invest in digital assets, you must be aware of our general terms and conditions of sale (https://bit.ly/2WORw2Q) and accept the various risks listed and defined on our legal warning page (https://bit.ly/2CXas8F).

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