The NWST1100 index has fallen by 1.35% from the previous week. We briefly evaluate crypto markets and Intermarket relationships in 2023.
*Below, we present a standardized weekly report and next week’s outlook, prepared based on the Theory Swingtum of intelligent finance. We gauge the crypto market’s breadth and direction by showing charts 2100NEWS Digital Assets Total Index (NWST1100), which measures 1100 (by market capitalization) significant crypto assets’ performance. The information-laden chart is complex to read initially, but the chart shows essential price information, crucial decisive price levels, momentum, trading volumes, and crypto market breadth.
Based on our previous analysis, where we predicted the NWST1100 index would likely continue its rally and potentially end the year over 4200 points, we have conducted a detailed examination of the NWST1100 chart, a vital metric for the cryptocurrency market. Our thorough review of various indicators has yielded a plethora of salient observations:
- The analysis of the NWST1100 chart suggests that the market is currently in a consolidation phase, with sideways movement, after reaching its yearly peak earlier in the week.
- Market sentiment: The slight fall in the PPO and its descending histogram slope indicate a mild pullback in the market. This suggests a decrease in the momentum of price changes, which could be a sign of market hesitation or a temporary slowdown in trend. The RSI moving out of oversold territory and trending downwards can be interpreted as a market that is no longer in an extreme condition of being oversold but also showing signs of reduced buying momentum.
- We are shifting our focus to the Crypto Market Breadth indicators at the bottom of the NWST1100 chart. A falling Advance-Decline Line (ADVL) suggests that fewer individual cryptocurrencies are participating in the rally, which could be a sign of weakening market breadth. Similarly, a falling McClellan Summation Index, a long-term version of the McClellan Oscillator that measures market breadth, could indicate that the upward momentum is not as strong as it could be.
Based on these indicators, the market seems to be exhibiting signs of cautiousness as the year closes with reduced buying momentum. As the new year approaches, investors and market participants will look for signs of a market resurgence or continued consolidation.
This is the first weekly report of 2024, and we briefly evaluate crypto markets in 2023, a period of optimism and advancement in the crypto industry, with technological innovations and the integration of traditional financial structures, such as ETFs, contributing to the market’s evolution. Here are the summarized insights:
- The average index price of the NWST1100 over the last twelve months stood at 2862 points, signifying the general price level at which the market traded most frequently.
- The volume profile, a sophisticated charting tool, indicates that most trading activities occurred between 2,500 and 3,000 points, identifying these as dominant and significant price levels.
- The cryptocurrency markets were exceedingly profitable for investors in 2023, showcasing the high returns of the market.
- The year was characterized by a phase of recovery and transformation within the industry, with significant developments that shaped the market’s trajectory.
- Bitcoin Ordinals introduced a new layer of functionality to Bitcoin, potentially expanding its role beyond a digital currency and profoundly impacting the future landscape of the cryptocurrency sector.
- The anticipation surrounding the introduction of Bitcoin ETFs was a significant market influence. The market saw this as a possible inflection point that could attract more institutional investment, thereby increasing demand and elevating prices.
According to the chart on the right, all four A50R lines have settled in the overbought territory. This breadth indicator measures the percentage of digital assets trading above a 50-day moving average. The current condition suggests that a substantial portion (over 77%) of the cryptocurrency market trades above its 50-day EMA (at relatively high levels compared to their short-term moving averages). While traditionally, the overbought designation might spell caution, in this context, it may well be an expression of the market’s enduring strength and potential for continued upward movement.
*This breadth indicator is essential in measuring the internal strength or weakness of the underlying index. Looking at the chart on the right side, we can see the A50R lines for four different categories of digital assets:
- The top box shows the A50R lines for 100 Large-cap members of NWSL100.
- The middle box displays the A50R lines for 1100 members of NWST1100, which is the Total Index measuring the performance of significant crypto assets based on market capitalization.
- The third box shows the A50R lines for 100 Ethereum Tokens members of NWSET100.
- The bottom box represents the A50R lines for 100 Coins members of NWSCo100.
Outlook for this week
This report aims to provide insights into the cryptocurrency market’s near-term outlook. While complete predictability remains challenging, the market waves show some degree of predictability with discernible patterns in market behavior. By examining momentum indicators, several signals emerge that offer insights into the potential direction of the market in the short term.
- The market shows bullish trends that differ from those seen in the early months of the year, as highlighted by the patterns within the ellipses on the chart. This shift suggests a market dynamics and investor sentiment change, potentially leading to more sustained upward movements.
- The RSI (Relative Strength Index) With an RSI reading of 58, the market is indicated to be strong, nearing the overbought level, which typically begins at 70. This suggests room for further growth before the market becomes overextended.
- The PPO lines and histogram may change the slope to an ascending, suggesting increasing bullish momentum.
- The Breadth indicators at the bottom of the first chart (NWST1100) may start to rise. The potential rise in Breadth indicators, notably the McClellan Summation Index, hints at a widening participation in the market rally. This broadening participation is a positive sign, indicating a healthier, more inclusive rally.
Considering these momentum indicators, we anticipate a potentially bullish short-term outlook for the cryptocurrency market. This forecast is based on the premise that the momentum and breadth of the market support an upward trend and acknowledge the first week of the year’s seasonal aspect. This phenomenon, where market prices tend to rise in the first week of the year, could further bolster the bullish outlook. NWST1100 index will likely continue its rally and potentially surpass resistance level R1.
Performance of various groups of Digital Assets (Coins and Tokens)
Investors and traders often rely on historical performance data to make informed decisions about their cryptocurrency holdings. After analyzing the data in the table, it can be seen that the overall index has fallen by 1.35% over the last week, indicating a modest pullback in the broader cryptocurrency market.
The chart above shows the performance of various cryptocurrencies, including Bitcoin, Ether, and the 2100NEWS Indices. These indices represent the performance of Ethereum-based tokens, Large caps, and Coins (NWSCo100). A retrospective view over the last three months indicates that Coins represented by the NWSCo100 index have shown the most promising performance, with a gain of over 88%.
While the broader market was experiencing a consolidation, different segments and individual cryptocurrencies exhibited varied performance dynamics. Bitcoin Ether and certain indices like NWSBE and NWWS30 are lagging. In contrast, NWSCo100, NWSET100, and NWSL100 are leading. Investors and traders might use this information to adjust their portfolios, possibly shifting focus toward assets with stronger relative momentum while being cautious about those in the Weakening quadrant.
*RRG® charts show you the relative strength and momentum of groups of digital assets. That with strong relative strength and momentum appears in the green Leading quadrant. As relative momentum fades, they typically move into the yellow Weakening quadrant. If relative strength then fades, they move into the red Lagging quadrant. Finally, when momentum picks up again, they shift into the blue Improving quadrant.
Intermarket relationships in 2023
The chart below shows the year-long trajectory of the NWST1100 index, which measures the performance of 1100 significant (by market capitalization) crypto assets. The index has soared 114.81% in 2023. Despite the volatility and phases of correction, the general market sentiment for 2023 was positive, culminating in a robust year-end rally. The red curve represents the 200-day EMA, a significant trend analysis benchmark. Remaining above this line for most of the year underscores the overall bullish trend for 2023.
- Initial Surge: In January, the crypto market experienced substantial growth, indicating a positive investor sentiment.
- Correction Period: A corrective phase emerged in late February following this surge. This is typical of crypto markets where rapid price ascents often lead to profit-taking and temporary pullbacks.
- Second Growth Phase: After the correction, the market embarked on another growth phase until mid-April. This suggests that the underlying bullish factors remained strong, driving the market to reach new highs for the year’s first half.
- Range-bound Movement: Post-April peak, the index entered a period of consolidation, fluctuating within a defined range marked by red and blue bands. This consolidation phase indicates that the market sought direction amidst varying investor sentiment and market conditions.
- Year-end Rally: The final significant movement of the year was a bullish breakout in November and December. This suggests a resurgence of investor confidence.
The Intermarket relationship chart illustrates the relative performance of various cryptocurrency indices throughout 2023 to Bitcoin. The indices include Ethereum-based tokens (NWSET100), large-cap cryptocurrencies (NWSL100), and coins (NWSCo100). According to the chart, Bitcoin has been the best-performing asset among these, while the NWSET100 index has been the worst performer.
- Stage 1 saw market components rising in tandem during January and February.
- Stage 2 began with the banking crisis, during which Bitcoin emerged as a safe haven asset, outperforming the other indices, which collectively lagged 20% behind.
- Stage 3 experienced a decline at the beginning of June, attributed mainly to regulatory actions from the SEC.
- Stage 4 featured a rapid increase in cryptocurrency values at the beginning of July, spurred by Ripple’s legal victory over the SEC.
- Stage 5 was a gradual decline, where the markets bottomed out at the start of September.
- Stage 6 saw a pronounced recovery, with asset values rebounding to levels seen earlier in the year.
- Stage 7 was characterized by speculation about Bitcoin and Ether ETFs. During this phase, coins represented by the NWSCo100 index experienced the fastest growth.
The chart highlights various external influences that can impact the performance of cryptocurrencies relative to each other. Factors such as regulatory developments, legal cases, and broader economic events have all shaped the performance dynamics.
Crypto (Digital Assets) compared with global equity
This report offers a comprehensive analysis comparing the performance of digital assets, as signified by the NWST1100 index, to shares on global capital markets, as represented by the Dow Jones Global W1Dow index. The comparison spans various timeframes, offering insights into historical and recent performances and potential future trends.
Let’s break down the key observations and implications:
- Historical Performance Comparison:
- 25 Months Ago: Digital assets, represented by the NWST1100 index, were outperforming shares on capital markets, represented by the W1Dow index, with a record high quotient between the two indexes. At this juncture, digital assets displayed a notably superior performance trajectory compared to shares on global capital markets.
- Recent Shift in Performance:
- An analysis of the last year (2023) reveals a stark enhancement in the performance of digital assets. They have surpassed shares on global capital markets by a significant 81.2% margin. This performance data accentuates the heightened returns digital assets offered over shares in the specified duration.
- Mean Reversion Opportunity:
- The average quotient price over the past 143 working days is plotted as a blue dashed curve (6.06). Currently, this average sits below its long-run mean, hovering around 7.39. However, the spot price is 7.39.
- The mean reversion theory suggests that asset prices, over time, tend to revert to their historical average returns. The current average quotient price below the long-run mean could imply that digital assets are undervalued compared to historical trends.
- Returns Comparison:
- The chart also presents the returns achieved with the stock generated by buying one point of the respective index daily over the past twelve months.
- The NWST1100 Crypto Index enjoyed a 116.07% appreciation relative to last year’s period. With daily index investments, an investor’s stock would have seen a 43.4% uplift compared to the index’s current price.
- Contrasting with the crypto index, the DJW, representing global capital market shares, grew by 19.04% over the past year. However, a strategy involving daily purchases would have resulted in a gain of 9.9%.
- Expectations are rife as we stand the confirmed bullish trend between digital assets and global capital market shares. Digital assets purchased over the preceding year at an average price of 2842 points seem poised to offer magnified returns compared to shares as we traverse this bullish phase.
*The box in the middle of the chart shows the original NWST1100 price; at the bottom is W1Dow.
Indices Revision 12-29-2023
Based on the latest Bi-weekly revision, SATS, GMT, Kusama, Osmosis, and Sei have improved their ranking and were added to the NWSL100 index. On the other hand, Illuvium, KuCoin Token, XinFin, and NEM were removed from the NWSL100 index. Several new mid-cap assets have been added to the NWSM200 index, including Core DAO, CorgiAI, BakeryToken, etc. More information about the additions and deletions for other indices in the family is available in each index’s presentation.