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🟣 We’ve seen this movie before

And the Oscar for best chart pattern in crypto goes to...

January 24, 2024

Nominations for the 96th Academy Awards dropped yesterday, with Oppenheimer getting 13 shots on Oscar.

If trading were a movie, a Christopher Nolan film-sounding title might well be The Wyckoff Distribution.

This is a pattern in technical analysis used for understanding and predicting trends in markets. Part of the Wyckoff Method, the concept was developed by Richard D. Wyckoff, an early 20th-century stock trader.

While securities laws of the 1930s may not be ideally-suited to serve crypto assets, the contemporaneous analyses of behavioral psychology observations by Wyckoff still very much are.

The Wyckoff Distribution pattern specifically relates to the market topping process, where prices move from a period of accumulation (buying) to a period of distribution (selling). It typically occurs after a prolonged price rise and signifies a potential reversal in the market trend.

The pattern is characterized by several phases:

A) Preliminary Supply (PSY) indicates large investors starting to sell their holdings, followed by a Buying Climax (BC), pushing prices to peak levels, met by an Automatic Reaction (AR) and Secondary Test (ST).

B & C) A Sign of Weakness (SOW), as a drop below the support level of the trading range, indicates that distribution is underway. But that doesn’t mean a local top just yet. The Upthrust (UT) and Upthrust After Distribution (UTAD) respectively shows signs of transitioning from an uptrend to a downtrend.

D) Last Point of Supply (LPSY): The final point where supply overcomes demand, leading to a price drop.

E) It’s completed when prices break below the support level, confirming a bearish trend.

Now, look at the daily chart of bitcoin since the start of December:

Call me crazy, but it looks like we’re heading into a Phase E dumpola party.

Now, that’s easy for an armchair analyst to say, and many traders on crypto Ex-Twitter today evidently think we’re setting up for a bounce back into the mid-40k area. Depending on how high such a bounce plays out, this pattern may or may not be invalidated.

But it would have to at least close a daily candle or two above $40,500.

Meanwhile, GBTC continues to hemorrhage billions.

Solana DeFi: Jito Airdrop Impact:

Daily active users of both MarginFi and Kamino — two prominent Solana DeFi dapps peaked one day after the Jito airdrop.

Since the start of the new year, MarginFi usership has stabilized at between 9-10 thousand users per day.

Points systems continue to be popular but airdrop hunters have no idea if or when these may determine eligibility for liquid tokens, or at what value.

In this episode of Bell Curve, which was streamed live on YouTube, Michael Ippolito was joined by both the UMA and Flashbots to dive into their latest collaboration, Oval. Oval unlocks a new MEV capture mechanism for protocols to monetize the value that they create. The show unpack Oracle Extractable Value (OEV), a type of MEV that has historically been uncaptured by protocols.

The Arbitrum Foundation has allowed developers to utilize the Arbitrum Orbit stack to launch rollups that settle to any chain. However, doing so will cost the rollup a 10% sequencer profit share, with significant implications for rollup token value accrual.

Solana DEX protocol, Orca, has recently implemented its fee switch, which passed the governance vote in November 2023. The protocol stands to generate a significant amount of revenue from the fee switch, presenting a potentially attractive fundamentals based opportunity.

Justice Richard Mosley said Trudeau’s administration acted outside their authority by invoking the Emergencies Act in Feb. 2022.

Nexo filed an arbitration claim against Bulgaria for $3 billion. The crypto trading platform is seeking payment for both material and reputational damages caused by the Bulgarian investigation announced last year.

The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.