Market Analysis

Three Arrows Capital has failed to meet margin calls: Report

Crypto lender BlockFi was among several companies to liquidate at least some of 3AC’s positions, according to a new report.

Venture firm Three Arrows Capital (3AC) has reportedly failed to meet margin calls from its lenders, raising the spectre of insolvency after this week’s crypto market collapse triggered unforeseen liquidations for the Singapore-based company.

Crypto lender BlockFi was among the firms to liquidate at least some of 3AC’s positions, according to the Financial Times. Citing people familiar with the matter, FT reported that 3AC had borrowed Bitcoin (BTC) from the lender but was unable to meet a margin call after the market turned sour earlier this week.

The issues surrounding 3AC appear to have impacted Finblox, a Hong Kong-based platform that allows investors to earn yield on their digital assets. Finblox said it was forced to reduce its withdrawal limits on Thursday due to concerns surrounding the venture firm.

While estimates vary, 3AC likely incurred $400 million in liquidations across multiple positions. The company had significant exposure to Terra (originally Luna, now LUNC) and also held large positions in projects such as Solana (SOL) and Avalanche (AVAX). As Cointelegraph reported, 3AC has spent the past few days moving assets to top up funds on various decentralized finance (DeFi) platforms, most notably Aave (AAVE).

Three Arrows Capital bought 10.9M locked LUNA for $559.6m – it’s now worth $670.45.

Ouch

— Crypto Maxi (@cryptoMaxi420) June 14, 2022

However, this week’s mass liquidations were likely triggered by the collapse of Ether (ETH), which plunged toward $1,000 en route to its lowest level since December 2020. It has also been speculated that 3AC’s exposure to synthetic assets, such as the Grayscale Bitcoin Trust (GBTC) and Lido’s Staked ETH (stETH), was also responsible for the mass liquidation events.

Rumors about 3AC’s insolvency have swirled in recent days after Su Zhu, the company’s outspoken co-founder, issued a cryptic tweet that the company was working with “relevant parties” to resolve its issues.

We are in the process of communicating with relevant parties and fully committed to working this out

— Zhu Su (@zhusu) June 15, 2022

Ethereum’s Merge FOMO isn’t priced in, making a spike to $2.6K a possibility

Ethereum’s price action hangs around major swing lows despite the all-important Merge network upgrade. Analysis suggests ETH is discounted below $2,000.

In a May 30 tweet, Ethereum (ETH) core developer Tim Beiko confirmed that the much-anticipated Ropsten testnet trial of the Merge from proof-of-work to proof-of-stake can be expected “around June 8 or so.”

Interestingly, Ether’s price action is relatively unchanged despite the unexpected bullish announcement. There was a +10% spike on May 30, but those gains were given back between May 31 and June 2. It is very likely that the Merge — currently anticipated in August — has yet to be priced in, giving traders and investors a possible early entrant advantage.

It’s essential to monitor on-chain data

From an investing and trading viewpoint, cryptocurrency markets have a distinct disadvantage in comparison with regulated markets and transparency. The stock market is chock full of legally required disclosures. In the stock market, the retail trader can identify how many shares of a stock are short, what institution bought (or sold) a large disclosed amount, what insiders bought or sold and a myriad of other forms of information.

The cryptocurrency markets do not have those kinds of legal requirements. In fact, the public doesn’t know if the Bitcoin (BTC) or Ethereum being bought and sold on an exchange is the real cryptocurrency or a type of internal derivative used to facilitate liquidity. But crypto markets have something better than the stock market and that is on-chain data.

On-chain data allows investors and traders to monitor a blockchain’s network activity. It can answer questions: How many Ether are being sent to an exchange? Are there any large transactions? Are any “whale” wallets bigger or smaller? On-chain data can help determine whether a trader or investor should be bullish or bearish.

On-chain data that measure inflows and outflows are often used to determine a bias of whether a cryptocurrency is bullish or bearish. Inflow measurements are cryptocurrencies entering an exchange from outside wallets and are often perceived as a sign of incoming selling pressure. Outflow measurements are cryptocurrencies exiting an exchange to external wallets and are often perceived as a sign of holding or accumulation.

The number of inflow transactions has stayed relatively flat over the past three months, with a noticeable drop since the middle of May.

Inflow 24h change: -13.50%
Inflow 7-day change: -5.87%
Inflow 30-day change: -8.08%

*Aggregated exchange inflow transaction count. Source: IntoTheBlock*

However, the number of outflow transactions has declined since March. In addition, there was a major outflow spike on May 12, the date of the most recent Ether flash crash, followed by a resumption of a decline in outflows.

Outflow 24h-change: +3.62%
Outflow 7-day change: +8.87%
Outflow 30-day change: -1.56%

*Aggregated exchange outflow transaction count. Source: IntoTheBlock*

It is important to note that since May 29, outflows have increased and inflows have decreased. This could be a bullish signal that big money is accumulating.

Ether price remains at major swing lows and oscillators are at historical lows

The upcoming Merge event is one of the most significant in Ethereum’s history. It is rare to see the world’s second most valuable cryptocurrency remaining at 200-day lows and down more than 60% from its all-time high.

Perhaps the most important and relevant details for Ether are the position of the relative strength index and the composite index.

The weekly relative strength index remains in bull market conditions, but is just above the final oversold level of 40. The current value of 42.15 is the lowest since the week of March 18, 2019.

The composite index, likewise, is at near a historical low. The composite index, developed by Connie Brown, is essentially the RSI with a momentum indicator. It is an unbounded oscillator and can catch divergences that the RSI cannot. The weekly composite index value is the third lowest in Ethereum’s history and the lowest since the week of March 26, 2018.

*ETH/USD weekly chart. Source: TradingView*

The extreme oversold readings on the Ether weekly chart, rise in outflows and reduction of inflows can give Ethereum investors and traders a good reason to be bullish in the near term. However, any potential bullish reaction will likely be swift and abrupt, but limited to the 2022 volume point of control at $2,600.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Here are 3 altcoins that could surge once Bitcoin flips $35K to support

ADA, MATIC and XLM appear well positioned for a bullish breakout once BTC flips the $32,000 to $35,000 zone to support.

Bitcoin (BTC) and the wider cryptocurrency market are taking a breather after the rally on May 31. Meanwhile, most altcoins remain severely oversold, with most between 70% and 90% below their all-time highs.

What is clear is that fear is everywhere and blood is in the water. Risk-on markets are suffering worldwide, but it is exactly these kinds of conditions that create opportunities where professional money accumulates and adds to positions.

Let’s take a look at three altcoins that could be positioned for a rebound if the broader market enters a new uptrend.

ADA could be setting up for an 80% surge

Cardano (ADA) has a significantly bullish update coming very soon. The much anticipated Vasil hard fork, which increases performance and adds more Plutus enhancements, is planned for June.

From a price action perspective, ADA is positioned in a strong price range that will likely support any further upside that the broader market experienced. Within the Ichimoku Kinko Hyo system, ADA has maintained a significant gap between the bodies of the past three weekly candlesticks and the Tenkan-Sen.

When the bodies of the candlesticks and the Tenkan-Sen have noticeable gaps, a correction often occurs within three to four days. This is because the equilibrium is out of sync, the Tenkan-Sen and price action like to stick together as much as possible. A mean reversion back to the Tenkan-sen is extremely likely when one strays too far from the other.

ADA/USD weekly Ichimoku Kinko Hyo chart Source: TradingView

However, if the broader cryptocurrency market experiences a big bounce, ADA price may shoot past the Tenkan-Sen to test the Kijun-Sen. ADA has not tested the weekly Kijun-Sen since the week of November 8, 2021.

The weekly Kijun-Sen is at $1.02 and contains the 2021 volume point of control and the 50% Fibonacci retracement of the all-time high to the low of January 25, 2021.

ADA/USD weekly chart (Binance) Source: TradingView

MATIC aims for $1

Looking at the weekly chart of Polygon (MATIC), one can’t help but notice that it looks strikingly similar to ADA. MATIC and ADA both have sold off from $3 and both are stuck in the mid $0.50 to mid $0.60 price range, but that is where the similarities mostly end.

Fundamentally, MATIC remains strong. Governments worldwide have attempted to restrict or ban mining due to excessive energy costs for proof-of-work blockchains and MATIC is likely to avoid government scrutiny and attract supporters as a positive example of environmental stewardship.

Like ADA, MATIC has significant gaps between the bodies of its weekly candlesticks and the Tenkan-Sen. Although, MATIC’s gaps are more significant. Likewise, the gap between price and the Kijun-Sen is much more meaningful.

Within the Ichimoku Kinko Hyo system, there is a max-mean that price will travel away from the Kijun-Sen before experiencing a violent mean reversion. For MATIC, that threshold is 63%.

MATIC/USD weekly chart (Binance) Source: TradingView

Any renewed bullish momentum ifor Bitcoin will likely see MATIC lead the altcoins higher until it reaches the $1.00 to $1.15 value area near the weekly Tenkan-Sen.

XLM lags the altcoin market, but it’s known for surprises

Sometimes it is hard to forget that during the last major bull run from the COVID crash to November 2021, there were a few major altcoins that did not hit new all-time highs. Stellar (XLM) is one. In fact, the last time XLM made a new all-time high was the week of January 8, 2018, almost four and a half years ago!

One thing that XLM has going for it that not many other weekly charts have is a very clear falling wedge pattern. Out of the standard rectangle and triangle patterns in technical analysis, wedge patterns are the most powerful. What makes its wedge so powerful is the probable fakeout breakout lower.

XLM/USD weekly chart (Binance) Source: TradingView

The most probable direction for a falling wedge is higher — but breakouts below a falling wedge can yield powerful short opportunities. The typical behavior that analysts and traders expect to see with a failed falling wedge is an immediate and swift sell-off, but so far, bears have been unable or unwilling to do so.

Instead, the weekly chart for XLM shows a very strong probability of a fakeout. If bullish momentum returns to the cryptocurrency market, XLM is likely to hit the second peak of the falling wedge near the $0.38 value area.

Classic technical analysts believe that technicals lead fundamentals. If that is true, then altcoins like XLM, MATIC, and ADA could be positioned in very desirable conditions in the event of any new bull run.

However, downside risks remain a concern, but they are likely extremely limited. If a new uptrend fails to materialize before the end of June, the cryptocurrency market will probably move sideways until a major breakout higher or lower occurs in the Fall.