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Dear Meditators

Welcome to another week in the crypto markets. 

✅ Today, we share an exciting and powerful tool for predicting price action. 

➡️ Tomorrow, we will provide everything you need to know about the EIP-1559 Upgrade. If you’d like to receive this letter, make sure you’re on our free email list!

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Delighted to say this article is brought to you by FTX. Make sure to use our link to get a 10% discount. Based in the U.S? Here’s a discount link for you: FTX.US.

⏰ In A Rush?

Here’s 5 things you need to know about the crypto markets today:

Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool. 

🦀 Bullish, Bearish, Crabbish… What Is Market Sentiment?

1️⃣ Defining Market Sentiment

Put simply, Market Sentiment considers investors and traders’ thoughts, feelings and moods regarding an asset. Market Sentiment does not always reflect or indicate the fair value of an asset. It can however impact the price. Market Sentiment Analysis then tries to predict price movement based on market participants’ overall attitudes. This tends to be used in conjunction with other tools such as Technical Analysis and Fundamental Analysis.

👉 For more on Technical Analysis check out our free beginner’s course and for more on Fundamental Analysis check out our letter on On Chain Analytics.

2️⃣ Why & How It Impacts The Crypto Markets 

In crypto markets, price is impacted by supply and demand. This is the mechanism through which Market Sentiment can also affect price. Dogecoin is a good example. A lot of this asset’s demand in the bull market came from the surrounding hype or sentiment. A single tweet from Elon Musk would create strong positive sentiment, increased demand and therefore appreciation in the price of the asset.

3️⃣ How To Track & Monitor Market Sentiment 

To understand Market Sentiment, you need to collect market views, ideas and opinions. You can either investigate this yourself or use some premade tools. 

  • 🐦 Monitor Social Channels. For a project, token or asset you may want to consider investigating their social media platforms (Medium, Twitter etc.) In crypto, it is usually possible to join Telegrams, Discords or official servers. Here, you can interact with the community and sometimes directly with the team. BEWARE: there are many scammers in these groups.

  • 🔥Stay Up-to-date. Have a resource for the latest industry news. This newsletter is an example along with CoinDesk and CoinTelegraph

  • 🐳 Set Alerts or Track Whale Transactions. Accounts like CryptoQuant.com track the decisions of big crypto investors. These decisions can often have an impact on market sentiment. 

  • 📈 Check Market Sentiment Indicators. Sources like CoinMarketCap analyze a range of different sources and provide easy summaries of market sentiment. 

  • 💰 Use Google Trends. This measures the hype surrounding a cryptocurrency. For example, a large search volume for “How to Buy Crypto”, could suggest the market sentiment is positive. 

  • 🤝 Crypto Fear & Greed Index. The index shows Bitcoin market fear or greed on a scale of 0 to 100 by analyzing five different information sources: volatility, market volume, social media, dominance, and trends.

    • Extreme fear can be a sign that investors are too worried. That could be a buying opportunity.

    • When Investors are getting too greedy, that means the market is due for a correction.

  • 🐻 The Bull & Bear Index. The graphs show how bullish/bearish conversations about Bitcoin (BTC) are on social media. 0 is extreme bearish, 1 extreme bullish. The underlying data is collected from Twitter, Reddit and Bitcointalk and updates every hour.

4️⃣ Putting It Altogether 

There are plenty of ways to conduct Market Sentiment Analysis. The list we have shared is not exhaustive. This type of analysis should not be used in isolation but rather in conjunction with other practises such as technical analysis and risk management. By way of example, after you’ve established a good entry point based on your Fibonacci Retracement levels and placed a sensible Stop Loss order, you might use the Extreme Fear reading for some final conviction before you to decide to open a new long position. 

👉 For more on Fibonacci Retracement check out our letter and for more on placing Stop Losses check out our video guide.

Did you enjoy discovering this new crypto tool? There’s plenty more where that came from. For more FREE alpha and insights into navigating the crypto markets, consider joining the market meditations community! 

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🥶 Supply Shock

As Bitcoin continues trading sideways in a seemingly endless period of consolidation, the question on everybody’s mind seems to be “will this breakout or breakdown?” One indicator, among many, we can use to give us a hint as to Bitcoin’s next move is on-chain metrics, which refers to a range of metrics that can be observed by looking at data provided by blockchains. 

One of the many on chain indicators is that of the Bitcoin supply ratio, which showcases Bitcoin’s availability on exchanges continues to decline with respect to supply. Click here to view the data on Santiment.

The circulating supply of Ether on exchanges also continues to hit an all time low. What conclusion could declining supply of both crypto assets lead us to? 

  • When supply leaves exchanges, this indicates that people have likely purchased coins and are moving them off the exchange for safekeeping. 

  • The implication here is that they, at the moment, don’t have any intention of selling in the short term, for if they did then they would keep coins on the exchange after purchase. 

  • When supply continues to decline and hits lows, however, this suggests that this could be a period of accumulation. 

To learn more about different on-chain indicators and how to interpret them, check out our On Chain Analytics Guide.

On Mondays, our ‘Scan The Week’ section is designed to show our community what events and headlines we will be keeping an eye on.

Monday, 12th July

  • 🚀 Kava Testnet Launch
    Kava Labs announced its next project, Kava Swap, the first production ready cross-chain liquidity hub for all DeFi apps and financial services. Today is its testnet launch.

  • 📃 Q2 Earnings Week
    This week, companies will begin to report their Q2 earnings. Economists expect earnings to have increased 65% over Q2 2020, when much of the world was in lockdown mode. Per tradition, big banks go first: JPMorgan, Goldman Sachs, Bank of America, Citigroup, Wells Fargo, and Morgan Stanley.

Tuesday, 13th July

  • 🤝 BandChain Phase 2 Mainnet Upgrade
    This upgrade is the last step for BandChain to upgrade to Phase 2 Laozi, bringing a scalable feature of on-chain streaming revenue, cross-chain compatibility and improved performance

  • 💸 U.S. Inflation Data
    Consumer Price Index will be available on this day. This index measures inflation and is closely watched by investors. 

Wednesday, 14th July

  • 📱 Crypto.com DRACO II EVM Launch
    To further support the Crypto.org ecosystem, blockchain accelerator Particle B has announced the CRO EVM Fund, which will grant up to $1M per project to at least 100 projects committing to building applications on Crypto.org Chain.

Thursday, 15th July

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Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here

Disclosure. Some of the links we’ve included are affiliate, they give you rewards and discounts and earn us a commission. Additionally, the Market Meditator writers hold crypto assets. See our investment disclosures here.