The Crypto Comms #37; a Short Story

In just one week, the total crypto market cap added over $100 billion as Bitcoin reclaimed the $21,000 mark. It’s a reminder of how quickly markets can overturn months of bleeding. The simplest explanation is often best, and most evidence shows the sudden move was fuelled by a giant short squeeze. But do we look up or down from here?

In this issue:

  • Bitcoin analysis

Bitcoin analysis

Bitcoin increased 22% week-on-week, printing a robust reversal candle with high-time-frame implications. The bullish close suggests that Bitcoin’s visit to the teens was a symptom of a larger problem, namely FTX’s insolvency, and not a consequence of real innovation and pursuiant value discovery. FTX is now in bankruptcy proceedings, and Sam Bankman Fried is facing 8 criminal counts of fraud.

On a technical level, this price-action shows a failed breakdown, deviation and range reclaim (blue box). Price deviations tend to be rocket-fuel for a stab at the other side, especially when the market trends down without tapping high-time-frame liquidity blocs.

BTC/USD; HTF liquidity levels

Liquidity blocs or pockets are merely areas with left-over orders, stop-losses and margin calls — potentially. When investors and traders face margin calls, they must repurchase the asset and pay off the debt, adding buying pressure. This works both ways.

Zooming in, the bearish case is contingent on pushing prices below $18,400 on a daily-closing basis. This would open the door to fresh lows. Weekend trading is less liquid and generally unreliable, so a retest of the $19,000 area sometime this week is on the cards — though not guaranteed. Futures aggregated funding rates have turned positive, and relatively ‘late’ longs haven’t been tested.

That said, if the vertical trend continues without consolidation, immediate resistance rests at the 200-weekly exponential moving average ($25,000). High-time-frame moving averages delineate robust support/resistance zones, especially on the first test. When S/R zones are repeatedly tested, the probability of a breakout increases each time.

BTC/USD local levels of interest; 200-daily EMA test (blue line)

On-chain sneak-peak

The positive technical picture rests on various on-chain data points which show:

  1. Coins leaving exchanges

All in all, Bitcoin is seeing some of its largest relative strength since Q4 2020. This is happening amidst a backdrop of historically low volatility (B.VOL), which precedes a persistent trend-setting price trajectory. The US Dollar index (DXY) is testing a trendline first established in June 2021. If broken, assets priced in Dollars will rise.

Will Bitcoin witness a fully fledged bull market by Q2 2023? Nothing is certain and the future is unknowable, certainly to the degree that one would like. That said, it doesn’t take an expert to understand that these consequential, yet inexhaustive data points, are positive for the number one cryptocurrency.

Cheers.

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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 analysis a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.

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Journalist-turned crypto-writer & analyst; forging the narrative, stacking sats.

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Chris on Crypto

Journalist-turned crypto-writer & analyst; forging the narrative, stacking sats.