The Crypto Comms #28
Bitcoin rallied above its 2017 all time highs and paused for tea and crumpets. With historical volatility at decade lows, the market is left on edge as it waits for the inevitable ‘big move’ that’s around the corner.
Let’s dig in.
In this issue:
- Bitcoin analysis
- FOMC meeting
- Confluent charts
- Latest happenings
- Listening material
Bitcoin’s end-of-month closing price for October was $20,500 — a marginally bullish move 2.1% over the previous monthly close.
The squeeze higher since last week broke mid-term bearish market structure, consolidating arguments for an accumulation phase and a reversal following a year-long bear market.
Locally, Bitcoin faces immediate resistance at $20,800 and support at $20,000. If bulls lose ground below $19,800 on the H4 time-frame, then expansion to last week’s low (LWL) — $19,100 — is on the cards.
A deeper pull-back to back-test the diagonal trendline would place the cryptocurrency at $18,000.
Alternatively, the more fun and probable route is the ‘disbelief rally’ propelled by the compressed high-time-frame historical volatility index (BVOL).
Immediate upside targets rest at $21,800-$22,000, regardless of BVOL. As discussed last week, daily consolidation at the range highs indicates acceptance, making expansion towards the 200-EMA a distinct possibility.
Notably, the FOMC meeting tomorrow (7:00pm CET) is an event traders will pay attention to. There are two scenarios worth mentioning.
- A 75bps hike represents the consensus view of the market. Given the clarity surrounding this hike, this outcome would serve to bring more Bitcoin consolidation and price compression. No dramatic moves besides the typical event-based intra-day volatility.
- A 50bps hike, on the other hand, would tangibly increase liquidity in crypto. This would be a surprise outcome which cements a ‘Fed pivot’ in financial markets (which the Fed have already indicated is coming by December).
As I have repeatedly said, these central bank committees and meetings are over rated self-fulfilling prophecies when it comes to the crypto sector — largely because crypto is not beholden to Fed rate hikes to the degree that legacy finance is. Far from it.
The Dollar index (DXY) is showing weakness and a willingness to cool-off to 108. If prices continue to fall lower, it’s safe to say the crypto bear market is officially over.
The SPX is showing signs of overheating as it approaches the 4,000 point resistance zone. Bulls need to push beyond 4,200 to convince the market that the turnaround isn’t an ‘exit liquidity’ grab.
Beyond that, it is astonishing how much value is placed on shiny rocks. And yet, this is the way of the world. Gold has not moved and remains as boring as ever. Gold’s price is potentially a leading indicator that would propel the ‘sound money’ asset basket forward.
Meanwhile, LEO/BTC gained upwards of 12% week-on-week as Bitcoin consolidated near $20,500. A back-test of the breakdown trend could be in the works, but a weekly close above 0.000244 jeopardises the overall Bitcoin rally thesis.
Overall, I’m cautiously optimistic heading into November, especially with US elections around the corner (markets tend to rally). Elon Musk’s acquisition of Twitter is also interesting as rumblings about a native crypto wallet could be the catalyst which sparks a crypto rally.
Besides that, fundamental tailwinds for Bitcoin and Litecoin include ongoing conversations about censorship, central bank digital currencies, and financial privacy. These conversations are great because if done in good faith, the correct emergent answers will always benefit the two cryptocurrencies.
Gatekeepers from legacy finance have a vested interest in maintaining today’s closed and exclusionary financial system. On the other hand, crypto projects which masquerade as innovation (but are just sophisticated cash grabs offering zero value) have done a great disservice to the sector.
It is unfortunately impossible to have a panacea, and the best regulation is often self-regulation. Twitter handle Zachxbt’s timeline is a testament to the power of self-regulation in an open financial ecosystem. It just works.
That said, it’s astonishing how often the cynical view about regulators ends up being correct — whether it’s about the controversial NYDIG BitLicense (whose creator made millions advising companies on how to workaround the license), or the SECs absurd refusal to allow GBTC to turn its product into a Spot Bitcoin ETF.
At some point, you have to ask the question: just who are you really protecting, exactly? Because it sure as hell isn’t your average investor.
- New UK Prime Minister: Crypto believer or CBDC Promoter?
- Bitcoin Historical Volatility Index Hits All-time Lows.
- Fidelity Report: Institutions Double Down; 74% Plan to Buy More Crypto.
- Censorship Resistance is Mission Critical to Open Finance.
The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Tuesday. 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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