The Crypto Comms #17
In this edition we talk Bitcoin, Ether and macro economic data as it relates to risk assets and cryptocurrency markets. This week, all eyes are on Wednesday’s US CPI data, which may spur a ‘big move’ later in the week.
Let’s dig in.
In this issue:
- Bitcoin analysis
- Ethereum analysis
- Macro risk on or risk off?
- Latest happenings
- Listening material
Bitcoin is up 1% week-on-week but remains below the pivotal $24,800 level at the time of writing.
On Monday, Bitcoin/Dollar gained 4.52%, surpassing the previous weekly high of $23,650. Still, BTC/USD exchanges hands below the ‘macro falling wedge’ structure, and has yet to break out.
Provided the BTC/USD price does not fall below $23,160, an expansion higher is the logical conclusion of consecutive higher highs, and higher lows.
On the other hand, losing this level suggests further consolidation and ‘chop’ is likely. In that case, the first area of buying interest is $22,200-$22,300. A shock liquidity grab to the quarterly Volume-Weighted Average Price (VWAP) is not out of the realm of possibility.
It goes without saying that all crypto asset values would follow the flush.
Ethereum/Dollar continues to outperform Bitcoin/Dollar due to the ‘merge hype’. The number of daily addresses on Ethereum breached its all-time high and ETH futures open interest eclipsed that of BTC according to ‘volume dominance’ data by Coinalyze.
ETH/USD is up 1.3% week on week, ceding gains made on Monday. The next noteworthy areas of interest for ETH/USD are $1,975 (take profit level) and $1,694 (Monday open). If this level is lost intra-day, a sell-off to the 20-daily ema ($1,622) and $1,550, respectively, is on the table.
Admittedly, there is a fair bit of ‘air’ below last week’s low. If this level succumbs to selling pressure, a market wipe could send ETH/USD to as low as $1,280 before buying interest reappears. But provided the local uptrend is respected, then ‘trending’ logic applies (until it doesn’t).
That said, Ethereum is not the barometer for asset valuations, Bitcoin is. As such, there is an element of excess volatility that needs to be considered on top of BTC/USD.
Macro risk on or risk off?
A potential catalyst for a ‘big move’ is expected around Wednesday’s US Consumer Price Index (CPI) announcement. Fundamental economic readings tend to be accompanied by volatility in markets. Declining inflation would be positive for risk assets, as it indicates that the Fed may pivot on its interest rate hikes sooner rather than later.
As noted on twitter, the volatility index (VIX) for the S&P500 has also traversed below a key trend dating back to Nov. 2021. This is a tailwind for risk assets would should there be expansion lower.
The USD Index (DXY) appears to be cooling off too — another tailwind for Bitcoin, Ether and risk assets more broadly. A weaker Dollar (largely measured against the Euro) historically lends itself to better market conditions for value buyers.
Meanwhile, USOIL meanders in 2-digit territory after having topped out at $129. Between Dec. 2021 and June 2022, Bitcoin and OIL were more or less inversely correlated. WTICRUDE exchanges hands at $90 presently, creating a local downtrend measured from February 2022.
While there isn’t necessarily a causal link to Bitcoin, such macro economic data is confluent with a broader relief rally thesis for the crypto sector. For now, all eyes are on Wednesday’s CPI reading.
- Crypto Lender Hodlnaut Freezes Withdrawals Citing “Market Conditions”.
- Coinbase Partners with BlackRock, Opening the Door to Institutional Clients.
- New Bitcoin Whale Owns $3 Billion Worth of Bitcoin.
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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