Altcoin Breakout Imminent, Says Analyst Nicholas Merten: Here’s the Sector To Watch

A popular crypto analyst says that altcoins are primed to surge and he’s eyeing one key sector that could see the biggest gains.

In a new strategy session, Nicholas Merten tells his 489,000 YouTube subscribers that although Bitcoin (BTC) looks somewhat stagnant, money isn’t moving out of the markets completely but instead shifting into altcoins. He’s particularly interested in seeing how much the decentralized finance (DeFi) sector can break out to the upside.

First on his radar for 2022 is the automated Ethereum-based crypto exchange Uniswap, and he looks at how native token UNI stacks up in its BTC trading pair UNI/BTC.

“One of the plays here that we’ve been big on is UNI. UNI’s basically recovered back to where it was against Bitcoin back here in October of 2021, and with this descending line of resistance [dating back to May of 2021], medium range of support here [0.0003219 BTC], we can see that we not only found support at a very critical level, previous support in the past [October of 2020], resistance in [January 2021].

It started to coil up here towards the resistance point and looks like it’s ready to really pop out higher and start to reclaim against some of these losses and continue moving higher.”

Source: Nicholas Merten/YouTube

Uniswap is up slightly on the day to $18.71 and has worked its way up from under $15 over the past two weeks.

Bitcoin remains mostly flat during the same time frame, although it did briefly recapture the $50,000 level over the Christmas weekend. BTC is currently trading for $46,795.

The DataDash host is also interested in fellow decentralized finance (DeFi) platform Aave (AAVE).

“What’s really exciting is if we take a look at AAVE as well. AAVE has been making some serious moves. About 70% here over the past couple of weeks.

We’ve come up here from around 346,000 satoshis, now pressing up close towards around 600,000 satoshis, around 580,000 at the moment.

Some pretty big breakouts against Bitcoin bringing it back to levels again not seen since as early as October of 2021, making up months of losses.

This is kind of the early sign of a further breakout to come for the general sector.”

Source: Nicholas Merten/YouTube

At time of writing, AAVE is up 2.47% on the day to $270.26.

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Data suggests traders view $46,000 as Bitcoin’s final line in the sand

Dec. 13 will likely be remembered as a “bloody Monday” after Bitcoin (BTC) price lost the $47,000 support, and altcoin prices dropped by as much as 25% within a matter of moments. 

When the move occurred, analysts quickly reasoned that Bitcoin’s 8.5% correction was directly connected to the Federal Open Market Committee (FOMC) meeting which starts on Dec. 15.

Investors are afraid that the Federal Reserve will eventually start tapering, which simply put, is a reduction of the Federal Reserve’s bond repurchasing program. The logic is that a revision of the current monetary policy would negatively impact riskier assets. While there’s no way to ascertain such a hypothesis, Bitcoin had a 67% year-to-date gain until Dec. 12. Therefore, it makes sense for investors to pocket those profits ahead of market uncertainties and this could be connected to the current correction seen in BTC price.

Top cryptos weekly performance on Dec. 13. Source: Nomics

Bitcoin price retraced 8.2% over the past week, but it also outperformed the broader altcoin market. That is in stark contrast to the last 50 days because the leading cryptocurrency’s market share (dominance) dropped from 47.5% to 42%. Investors could have simply fled to Bitcoin due to its relatively smaller risk than altcoins.

Tether’s discount bottomed at 4%

The OKEx Tether (USDT) premium or discount measures the difference between China-based peer-to-peer (P2P) trades and the official U.S. dollar currency. Figures above 100% indicate an excessive demand for cryptocurrency investing. On the other hand, a 5% discount usually indicates heavy selling activity.

OKEx USDT peer-to-peer premium vs. USD. Source: OKEx

The Tether indicator bottomed at 96% on Dec. 13, which is slightly bearish but not alarming for a 10% total cryptocurrency market capitalization drop. However, it has been over two months since this metric surpassed 100%, signaling a lack of excitement from China-based traders.

To further prove that the Dec. 13 price crash only slightly impacted investor sentiment, the total liquidations over the 24 hours was $400 million.

Total derivatives exchange liquidations on Dec. 13. Source:

More importantly, only $300 million of long leverage contracts were forcefully terminated due to insufficient margin. This figure looks insignificant when compared to the Dec. 3 crash, when $2.1 billion of leveraged buyers had their positions closed.

There’s no excessive demand from Bitcoin bears, at the moment

To further prove that the crypto market structure was not strongly affected by the sharp price drop, traders should analyze the perpetual futures. These contracts have an embedded rate and usually charge a fee every eight hours to balance the exchange’s risk.

A positive funding rate indicates that longs (buyers) are demanding more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, and this causes the funding rate to turn negative.

Bitcoin perpetual futures 8-hour funding rate. Source: Coinglass

Considering that most cryptocurrencies suffered considerable losses on Dec. 13, the overall market structure held nicely. Had there been excessive demand for shorts who were betting on a Bitcoin price drop below $46,000, the perpetual futures 8-hour funding would have gone below 0.05%.

Tether trading at a 4% discount in the China-based markets, $300 million in long contract liquidations and a neutral funding rate is not a sign of a bear market. Unless these fundamentals change significantly, there is no reason to call for $42,000 or lower Bitcoin prices.

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