Bitcoin and Ethereum gave back their gains, but has anything actually changed?
Bullish crypto momentum fizzled after Fed Chair Powell poured cold water on investors’ hopes that a positive CPI report would trigger a trend change, but higher time frames remain interesting.
Crypto markets threw a nice head fake this week by rallying into resistance on a “positive” Consumer Price Index (CPI) report, before retracing the majority of those gains right after Federal Reserve Chair Jerome Powell took on a surprisingly hawkish tone during his post-rate-hike presser.
The Fed hiked interest rates by 0.50%, which was well within the expectation of most market participants, but the eyebrow-raiser was the Federal Open Market Committee consensus that rates would need to reach the 5%–5.5%+ range in order to hopefully achieve the Fed’s 2% inflation target.
This basically threw cold water on traders’ lusty dreams of a Fed policy pivot taking place in the first half of 2023, and the damper on sentiment was felt throughout crypto and equities markets.
How do you like them apples?
It’s also not surprising that BTC and ETH price action and market structure on the lower time frames also look identical.
So, yes, markets retraced their recent gains over bad news, but has anything actually “changed?” Bitcoin is still trading with a clear range; Ether is doing the same, and neither asset has made new yearly lows recently.
As the saying goes, when in doubt, zoom out. So, let’s do that briefly and take a better look at the lay of the land.
When in doubt, zoom out!
On the weekly timeframe, Bitcoin is still bouncing around in a falling wedge, a classic technical analysis pattern that tends to lean bullish. The price is doing pretty much what one would expect the price to do within the framework of technical analysis.
There’s expected resistance at the 20-MA, which is lined up with the descending trendline. The volume profile metric shows a bulk of activity in the $18,000–$22,500 range, and the lower arm of the falling wedge has so far functioned as support.
Similar price action was seen in May 2021–July 2021, but of course, the situations were entirely different, so that’s a bit of an apples-to-oranges comparison. There’s a divergence on the MACD and RSI. In short, the price is trending down, and MACD and RSI are trending up on the weekly timeframe, which is possibly something worth keeping an eye on.
What I like about the weekly timeframe is that candles form slowly, and trends, whether bullish or bearish, are pretty easy to call and confirm. It’s easier to build a solid investment thesis of the weekly time frame than spend endless hours pouring over four-hour, one-hour and daily charts.
Anyhow, breakouts from the falling wedge are likely to be capped at the descending trendline, while a breakdown of the pattern or drop below the lower support could see the price fall as low as $11,400. That’s all within the market consensus for most analysts.
As for Ether, like I covered in greater detail in last week’s Substack and newsletter, it’s still doing the bull flag thing: bouncing around between support and resistance and seeing breakouts capped at key moving averages and the descending trendline of its bull flag.
$2,000 remains the eventual target on the radar of most analysts, and downside to the $1,100 is far from shocking.
A dip under $1,000 is likely to raise eyebrows and draw the attention of those looking for more resolute shorts.
Ether price action is basically doing the same predictable thing as Bitcoin: nothing to see here, stick to the plan (whatever that might be for you). Similar to BTC, there’s also a divergence on Ether’s MACD and RSI — something worth keeping an eye on.
Last week, I also put eyes on Litecoin (LTC) due to its upcoming network reward halving. While the price has retraced from its local top at $85, the uptrend remains intact, and on the daily timeframe, the GMMA indicator is still bright green.
The vertical black lines track LTC’s bullish momentum leading into halvings and the corrections that occur right after the halving occurs. For the time being, everything looks to be proceeding according to plan.
Of course, none of this is financial advice. Make sure you do your own research, calculate your risk, think about the worst-case scenarios, weigh your ROIs and take profit, and cut losses zones a few days before actually making a trade. Remember that 1:3 and 1:5 is the optimal risk-to-reward outcome one should be chasing after.
Ignore the short-term FUD and price action. Zoom out and build a strong thesis from that vantage point.
This newsletter was written by Big Smokey, the author of The Humble Pontificator Substack and resident newsletter author at Cointelegraph. Each Friday, Big Smokey writes market insights, trending how-tos, analyses and early-bird research on potential emerging trends within the crypto market.