Tezos Price Action And The Crypto Bear Market

Tezos XTZ/USD is a smart contract platform that doesn’t tend to get as much attention as the other main layer 1 chains like Ethereum ETH/USD, Cardano ADA/USD, Solana SOL/USD, etc. This is despite it having beaten most of the layer 1 chains to both proof-of-stake and on-chain governance, while also being competitive in terms of throughput and fees.   

Comparing the price action of XTZ to that of BTC, ETH, and ADA over the same period, we see that XTZ appears to have been more active during the lull between 2019 and the end of 2020. BTC, ETH, and ADA, on the other hand, experienced relatively muted price action until the period between November 2020 and January 2021 when the previous crypto bull market was set in motion. 

At that particular bull market’s peak (August-November 2021, depending on the individual name). XTZ had also returned much less than the other tokens mentioned above (330% to BTC’s 450%, ETH’s 660%, and ADA’s 1300%). The fact that a more speculative, lower-cap “altcoin” would return less than the relative safety of a large-cap crypto like BTC, is quite out of the ordinary, especially a cryptocurrency as credentialed as XTZ. 

Since breaking down to new weekly lower-lows, XTZ’s price action has been unrelentingly bearish, with hardly any failed breakouts, or even a sustained period of price action above the 20-week moving average.  

As you can see above, the XTZUSD chart looks like a pretty unambiguous description of both the bull and bear phases of the crypto market cycle. But can it provide us with any clues as to where the market as a whole finds itself?  

Of the four cryptocurrencies referenced in this article, XTZ is the only one to have recently set a weekly lower-low that goes back before 2023. In fact, the weekly lower-low that XTZUSD set on the week of August 21 is XTZ’s lowest weekly close since March 2019. In other words, XTZUSD has not only given back all the gains of the previous bull market, it’s currently trading below where it was before that bull market commenced. 

This massive retracement can be seen as a sign that the worst is over and that XTZ (and maybe crypto in general) is now much closer to the start of the next bull trend. However, the new weekly lower-lows are a major concern, especially if XTZ is leading the other names mentioned and they end up following. XTZ has previously led on the way down, so watching the next weekly moves that BTC, ETH, and ADA make is crucial. 

The red channel at the bottom of the above chart is why it’s so dangerous to try to time the bottom, especially in crypto. What that channel depicts is the distance left between XTZUSD and its all-time low. Despite the great losses XTZ has endured since October of 2021, it still has more than 50% to go before it reaches that all-time low. This figure is over 90% for BTCUSD, ETHUSD, and ADAUSD. So, while many investors may be getting excited at the prospect of buying at the bottom, they should be mindful of how much they still have to lose if they get the timing wrong, especially when there is so little in the price action to suggest strength at this time.  

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