Market conditions are confusing. Fortunately, you’re not navigating them alone.
Today we share the following short sections:
Keep Holding On: BTC Fundamentals
The Future of Gaming: Assessed Through Blockchain
Connect The Dots: DOT Technical Analysis
Action Bias: When It’s Ok To Do Nothing
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Bitcoin stalled for most of yesterday before making another run at $40,000. Whilst some analysts are optimistic about a decisive break above $40,000 others prefer to see stronger signs of upside momentum before calling a bottom in bitcoin. As such, the same points of data are being interpreted in very different ways. Take the Bitcoin Dominance Rate as an example. Bitcoin’s Dominance Rate shows the top cryptocurrency’s share in total market capitalization - remains below 50% currently, having peaked above the 70% in early January.
According to analysts at JPMorgan, the dominance rate is still quite low which is a bearish sign: “We believe that the share of bitcoin in the total crypto market would have to normalize and perhaps rise above 50% (as in 2018) to be more comfortable in arguing that the current bear market is behind us,” JPMorgan analysts led by Nikolaos Panigirtzoglou said in a note published June 9.
The theory here is that the largest cryptocurrency by market value (Bitcoin) is usually the first to rally, followed by alternative cryptocurrencies (altcoins).
In other words, money enters the crypto world through Bitcoin.
As such, a sustained uptick in Bitcoin’s dominance rate is needed to confirm a trend reversal higher.
For more on this, check out our Crypto Cycles Guide.
On the other hand, others see the recent stabilization in the Dominance Rate as a bullish sign. On the whole, the market still seems to be waiting for a catalyst to either drive crypto prices significantly higher or lower.
Here at Market Meditations, our BTC outlook is the following 👇
Experiencing a key retest at the moment: price has broken above key resistance at $39k, followed by a close and one day’s consolidation. We are now back and retesting the $39k level.
In terms of Fibonacci Levels, if this 0.236 level holds (roughly confluent with the $39k resistance level) there is a high probability of an extension to the upside.
Adding in Moving Averages, we are seeing mean reversion. Which supports an argument for the upside rather than the downside (at least for the time being).
Blockchain has taken the financial and banking world by storm. There is another exciting venue ready to be shaken by blockchain technology: the world of gaming. There are already some big crypto games out there:
Collectible games such as CryptoKitties
Trading card games such as Gods Unchained
World building games such as Decentraland
There is a range of reasons why blockchain is suited for gaming:
Allowing for the creation and trading of NFTs verified by the blockchain. Changing the rules of the game by allowing ownership. In regular games, in-game assets are purchased with fiat money but never actually owned by the player. Rather, the player holds a license that may be revoked by the game developer at any time! Blockchain based NFTs allow players to purchase assets with authenticity verified and transactions transparent on the blockchain for everyone to see. Assets can be securely stored in crypto wallets (and be safer from hacking attempts). Players can hold and watch their assets rise in value, or trade them in the open market. You can use our link to download the Exodus crypto wallet and in terms of security, check out our top tips in this guide.
Facilitates fast and secure purchase of in-game assets without a 3rd party payment provider. These providers such as PayPal or Visa usually charge payment fees to purchase and sell in-game assets. Bringing in the blockchain helps decentralise gaming.
Enables players to earn cryptocurrencies while playing games. It was recently rumoured that GTA 6 could have a Bitcoin-like cryptocurrency in-game.
Creates decentralised cross-platform marketplaces to trade game assets. In-game assets previously belonged to a single gaming platform and were not transferable from one game to the next.
Players can participate in consensus protocols and influence game development.
It promotes fairness of game outcomes with winners and losers recorded on an immutable ledger.
The possibility of acquiring wealth through gaming is particularly exciting and unconventional. The most expensive CryptoKitty called Dragon sold for 600 Ether at the time of the transaction and other NFTs such as game skins and weapons can run up to thousands of dollars if they are really rare. Having them on the blockchain opens the gateway for these assets to then be traded on third party marketplaces such as SuperRare or OpenSea.
Capitalising on the growing blockchain gaming trend is Enjin. This blockchain gaming platform is known as the “Ethereum of Gaming”. It gives developers and gaming communities a ready set of development tools such as wallets, plugins and apps as well as services to create and manage blockchain games.
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🔯 Connects The DOTS
Key structural level at $29. Should we flip this, we could see a continuation of this move.
Key support level at $19. Below that, much further downside. Next lifeline at $15.
Did you know you can get involved in the Kusama Parachain Auctions? Here’s a full guide with more details as well as an explanation of some of the potential upsides.
Action Bias: When It's Ok To Do Nothing
In response to external stimuli, we often feel the need to act and it's no surprise! We live in a world full of common sayings that tell us action is a good thing; from Nike’s “Just Do It” slogan to proverbs such as “the devil makes work for idle hands”. When decisions are based on logic and previous data, action is essential; however we are also prone to carrying out actions simply to do something as opposed to nothing. It is these instances which are described by action bais. This is a proven phenomenon and can have substantial impacts for us as traders and investors.1
Overtrading is one such effect. We feel the need to do something, so even if a trade does not match our system (say we rely on 4 confluent data points but only 3 are present), we may give into impulse simply due to not having taken a trade in a few days. This leads to worse portfolio performance and is further exaggerated when we feel overconfidence.2
The way we process information is also affected. We are constantly bombarded with new data and action bias can fool us into thinking we need to analyse this in far greater detail than we should. As discussed in a previous article (check this out here), new information is often perceived to be more significant than it is in reality. As such, action bias can cause us to spend large amounts of time analysing insignificant information - incurring a great deal of opportunity cost.
So how can we avoid these negative effects? Firstly is to always consider a “do-nothing scenario”. We are often faced with options but rarely consider the choice of simply not carrying any of these out. Another method is to be deliberate. Each time you dedicate your time to an action ask yourself, “why am I doing this and does it help achieve my goals?”
Everyone is susceptible to action bias alongside it’s negative effects on our financial performance and overall productivity. Be deliberate with your actions and remember, often it really is ok to do nothing.
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Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision.
Patt, A., Zeckhauser, R. Action Bias and Environmental Decisions. Journal of Risk and Uncertainty 21, 45–72 (2000)
Odean, Terrance, Volume, Volatility, Price, and Profit When All Traders are Above Average (April 1998).