Sometimes the best thing to do for perspective and clarity is to take a 10,000 foot view. That is exactly what we are going to do now by looking at the daily chart of total cryptocurrency market capitalization.
If you are not sure what market cap is – it is actually rather easy. It is simply to total value of all cryptocurrency assets that are tracked.
So of the coins represent a large majority of the market cap, such as Bitcoin, while others are little blips on the map, similar to what a penny stock would be on stock market.
What is market cap telling us?
Just at a glance, the naked eye can tell that market cap is down shrinking for now as the downtrend beginning in early 2018 is officially over.
We can also see some key levels in play recently. The black resistance line I have drawn represented a key level on the parabolic move up in 2017 (basically the launch point) and this level also represented a support on the way back down in 2018.
To be honest, when we got back down to that level I thought it would be the bottom, given market cap made a full round-trip. But as anyone who invests knows, markets are rarely rational and generally overshoot to the upside and downside.
Celebrate with Caution
Many people want to pop the bottles and officially claim the crypto bull is back and it very well may be. However, we still want to be aware of how the price action is playing out and the clear downside risk that comes along with the potential upside.
The current market cap (which you can see from the red dotted line across the chart) is at noticeable level.
It represents a spot prices bounced off of twice in 2018 and then afterward topped out on any rally attempts.
So the question is will it now act as support? It very well could and this level is the first downside spot to eye on the current pullback.
The next level is that key resistance line I have drawn in black. After breaking out it would be completely within reason for it to come back and test it.
If that were to happen, for example, bitcoin probably sees atleast 6k again, maybe lower.
Volume Rising = Strength
Something I am loving is the rising volume on this recent trend. When you look at the volume bars on the bottom right you see a steady growth as market cap has pushed higher.
This means more action has come into the market, whether it is more participants or investors doing bigger transaction and more frequently. Either way increasing volume on a move up is always a sing of strengh.
There is alot to like right now in regard to the price action, but that does not guarantee market cap doesn’t come back down to test that support line.
If it does I will be ready to buy!!!