The Crypto Comms #29
Bitcoin course-corrected and the talk of the town is all about FTX’s potential insolvency issues. But is it all just noise given Thursday’s looming CPI reading?
Let’s dig in.
In this issue:
- Bitcoin analysis
- Weekly events
- Confluent charts
- Latest happenings
- Listening material
Bitcoin analysis
Bitcoin reached $21,500 before witnessing a -10% draw-down, seemingly on the back of the latest SBF-CZ public beef. FTX’s native token dropped -21.5% in the same period as rumours comparing the exchange’s position to Luna circled the web. In my view, this is mostly noise.
As discussed in the Telegram channel, Bitcoin/Dollar flashed a trifecta of bearish indicators on the daily time-frame before prices corrected. High funding rates, increasing open interest and a technically bearish RSI divergence suggested that the market would course-correct in the short term.
So what’s next?
Admittedly, the strength of the draw down has placed Bulls on the back foot this week. Unless price reclaims $20,100 on H4, continuation to $17,300 is a distinct possibility. Bitcoin has a tendency of back testing broken trends and faking out before reversing entirely. This scenario doesn’t have to happen, but it’s worth noting that another push down would probably be a bear trap. Considering BVOL, all range-bound downside price-action could reasonably be considered a bear trap (unless it’s different this time and BTC has lost its use-case).
This week’s events
US mid-term elections today could cause more volatility. Chief Twit, Elon Musk said something that’s not a meme the other day, noting that a balance of power between the two parties is desirable. In theory that sounds great, but in reality the only vote that matters is your wallet. The worst-case scenario for markets is if the election process is sabotaged and/or riots break out.
The bigger driver for financial markets comes on Thursday’s CPI reading. Setting aside the fact that these data are not representative of true inflation, if there’s a tangible CPI reduction, then markets would have their rebound narrative. Bearing in mind that J.Powell has already indicated that lower rate hikes are being considered moving forward.
This is partly because interest repayments could bankrupt the Fed as rates approach 5%. Also, any plan that does not produce more energy as a central policy (see Europe) will fail. Check out macro economist Luke Gromen’s various takes on this.
The turnaround is coming, it’s just a matter of when.
Confluent charts
The Dollar index (DXY) is forming a top-structure after over 19 months of strength. A weekly close around 108 would confirm the rejection, opening the door for a prolonged rally in risk assets as the Dollar consolidates or breaks down. 113 remains a pivotal level.
Gold trades at $1,670 at the time of writing. As discussed in earlier posts, reclaiming $1,700 opens the door for a move to $2,000. Once a deviation gets confirmed on a weekly basis, price tends to traverse to the other side.
Meanwhile, LEO/BTC has confirmed its breakdown structure. Given Bitfinex’s standing in the sector (the invisible hand), continued drawdown relative to BTC indicates an acceleration of BTC/USD’s bottoming situation. Provided 0.000244 is not reclaimed on a weekly time-frame, nothing has changed.
Closing thoughts
All in all, the case for ‘volatility’ this week is strong. The real move has not materialised yet. I continue to expect volatility to be resolved as a large upside price-move in Bitcoin, Litecoin and other cryptocurrencies. This doesn’t rule out a downside fake-out.
Remain vigilant.
Latest happenings
Censorship Resistance is Mission Critical to Open Finance
Listening material
Dear readers,
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.
Thank you for reading.
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