Follow the Money, Trade the Trend

With President Trump winning the 2024 election, the buzz around crypto was high, and expectations for price increases were even higher. The spike in crypto prices following the November 6th election looked like the breadth thrust that was going to propel the entire market to new all-time highs. And from November 6th to mid-December, that’s exactly what the technicals showed.

Blue-chip DeFi protocols like AAVE and UNI both rocketed higher, doubling in value in just over a month. Meme coins were at the top of every retail trader’s mind, and if you chose the right one, you made HUGE gains. PEPE increased 180%, DOGE surged 146%, and best of all, FARTCOIN exploded over 3,000% before topping in mid-January.

Even the majors saw respectable gains, with BTC, ETH, and SOL posting 44%, 50%, and 41% returns, respectively. Not too shabby for a month’s work.

But in mid-December, things changed. While markets continued grinding higher, cracks started to appear in the technicals. At first, these cracks were small—while price was making higher highs, daily RSI failed to confirm the higher levels.

These bearish divergences—where price moves higher while an indicator fails to follow—are common and often signal a waning trend. However, this doesn’t mean the trend must immediately reverse and head lower. In a strong bull market, price often drifts sideways, allowing the divergence to “burn off” while market participants reload for another push higher. That was exactly my thinking—but then, in mid-December, things started to shift.

The 50-day simple moving average (SMA) is a basic trend-following indicator that has been used since modern technical analysis emerged in the 1950s. It calculates the average closing price of an asset over the past 50 days, smoothing out short-term price fluctuations to help traders identify the overall trend. I find the 50-day SMA particularly useful in identifying the intermediate trend of an asset.

So, what happened in mid-December?

Many cryptos started testing their 50-day SMA, the first warning sign of a potential trend slowdown. Testing the 50-day SMA is very common in uptrends and often provides a great opportunity to enter the trend or add to an existing position. However, if price starts trading below the 50-day SMA, trouble is on the horizon.

Chart 1.1: Ethereum (ETH) from the Election to Now

Chart 1.1 shows the price performance of ETH from November 6th to now. Looking at the chart, you can see the strong rally following the election and the topping pattern in mid-December.

The Bearish RSI Divergence is also noted—price made higher highs, but RSI failed to confirm. This signified a lack of continued momentum to the upside. That lack of momentum was later confirmed as price reversed lower and tested the 50-day SMA. After a one-day bounce off the 50-day SMA, prices plunged below it and started drifting sideways. There was a brief attempt to reclaim the 50-day SMA, but this was quickly thwarted by sellers. Since then, price has been consistently rejected at the 50-day SMA, and now, the slope of the moving average has turned negative.

Chart 1.2: Solana (SOL) from the Election to Now

The story of SOL is similar to ETH—a strong post-election rally, followed by a test and break below the 50-day SMA. But SOL has a twist.

Unlike ETH, SOL briefly reclaimed the 50-day SMA and even pushed to a new all-time high. However, the euphoria was short-lived—the all-time high candle closed red, and SOL quickly reversed into a downtrend. Now, price has broken below key two-month support and appears to be heading lower. 

Chart 1.3: Bitcoin (BTC) from the Election to Now

Of the three major coins, BTC is the strongest. It has managed to hold onto most of its post-election rally and has found support around the $90,000 level. Institutions remain bullish on BTC, but with price still trading below the 50-day SMA, it’s hard to be optimistic about an immediate rally.

So, what changes my outlook on crypto?

We need to see a reversal in the current trend.

How does that happen?

Crypto assets need to reclaim their 50-day SMAs!

ETH and SOL have more work to do than BTC. Both also need to break back above their former support-turned-resistance levels.

And when will this reversal occur?

I don’t know. And guess what? No one else knows either.

Sure, your favorite Twitter pundit might make predictions, but that’s all they are—predictions.

Never guess in the markets—only react.

Once the trend reverses, I’ll be reacting.

Until then—stack cash and wait for the opportunity to strike.