The Crypto Comms #11
As Bitcoin exchanges hands around the pivotal $20,000 level, investors are keenly watching US macro economic data before placing their bets. Still, indecision grips the market, and range-bound trading appears to be the new normal. But this could be cut short due to USDT flows in and out of exchanges.
In this issue:
- Bitcoin analysis
- USDT exchange flows
- Latest happenings
- Listening material
At $20,850, BTC/USD closed a modestly green week on Sunday, up 10% week on week. But the up-move was short lived as prices reversed course after reaching a local high of $22,400.
If ‘risk off’ sentiment prevails this week, the top crypto could revisit last week’s key low ($19,000). BTC/USD is down 2.8% on Monday, and price has retraced all gains since last Thursday. A rejection after a sweep of the high is normally indicative of a range-bound trading environment. Still, bulls will look to form a higher low from which to launch another attack at $23,000.
Locally, the H4 stochastic RSI is in oversold territory, indicating an opportunity for an intra-day bounce. Since Friday, bounces have been met with weakness against a downward sloping trendline. Currently, this weakness appears to be accelerating to the downside.
The range POC ($20,300) has offered some support during Monday trading, but not enough to offer a reasonably optimistic immediate outlook just yet.
A retest or deviation of the monthly open (Mo) could open the door to a sustained relief rally heading into the end of the week. So absorption around that level will be key for any potential reversal.
BTC/USD range-bound price-action; levels of interest
But such a reversal is in turn dependent on the macro economic backdrop. Friday’s strong US employment data was not ideal for risk appetite (good news is bad news). And investors will be keeping a watchful eye on Wednesday’s US Consumer Price Index (CPI) data for June. So far, the Fed has continued to pursue a policy of hiking interest rates to tame the inflation it created in 2020–2021.
If CPI data comes in hot (as is expected), it would put a damper on risk appetite, if history is any indicator.
Meanwhile, the DXY has reached 107.8 — a level not seen in over two decades. As such, it is unreasonable to expect an imminent raging bull market as long as this trend continues. This is not to say Bitcoin cannot reverse towards $30,000 in July, but rather tempers expectations in the context of unfriendly monetary conditions. This idea assumes Bitcoin remains relatively correlated to risk assets; a correlation that will eventually break down as it has in the past.
Long story short, BTC/USD must take out the steep and accelerating local downtrend in order to offer a technically viable bullish setup. Barring that, $19,900 & $19,000 are levels to look for absorption. If both fail, a sweep of $17,600 is back on the table, and while I do not expect the latter scenario to play out, it’s good to be prepared for one final scare before the real action begins.
USDT exchange flows
While Bitcoin is not technically compelling on lower-time frames, USDT flows indicates the bottom is either in or very close.
USDT exchange outflows reach lowest point since June 2020
Per the above chart, USDT outflows are collapsing. Tether is not being withdrawn from exchanges. While large spikes could indicate profit-taking or exchange inventory reshuffling, there is a clear drop-off in outflows.
This means two things:
- If less people are withdrawing USDT, then there aren’t really any serious sellers left.
- The USDT that is on exchanges is waiting on the side-lines ready to be put into the market.
A clearer picture is offered by USDT exchange deposits, which has been ticking higher ever since BTC fell below $20,000.
USDT exchange deposits; higher peaks and troughs.
While the trend has yet to fully develop, we can see a series of higher peaks and troughs in June-July (blue). More USDT deposited on exchanges means more available purchasing power. Combined, these two on-chain data points are positive developments for Bitcoin.
Big players are ready to buy the dip. Are you?
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- Celsius Repays Maker Loan in Full, Reclaiming 22,000 BTC Collateral.
The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Monday and Wednesday. I am not perfect and this is not a science — nor is this newsletter a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.
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Originally published on Revue (11/07/2022).