Dear subscribers,
Since Uncharted 34, a lot has happened. The banking crisis spread to Europe, the Fed raised 25 basis points, and the SEC's witch hunt for crypto continued. Despite all this, bitcoin remained resilient and, as we supposed in our last Uncharted, shook off its dip below $20k that had just happened at publication. It went on to reach $28.3k and the extreme of the bullish quadrant. The mid to long-term bullish trend remains at play, but there may be a pullback in the short run, as the system lacks fresh liquidity/capital.
Let’s dig in!
“We cannot direct the wind, but we can adjust the sails.” – Dolly Parton.
At a glance
State of the System
Bitcoin's price has remained resilient, bouncing back from a dip below $20k to reach the extreme of the bullish quadrant at $28.3k, although the intense bullish momentum is expected to fade in the short run.
The Bitcoin Risk Signal has dropped fast, indicating an easing risk and subdued selling pressure, although external factors could increase risk and destabilize bitcoin.
While the market is optimistic about bitcoin's mid to long-term performance, altcoins have yet to experience this optimism, with the Altcoin Cycle Signal hovering around 0, but once bitcoin stabilizes, altcoins may steal the thunder.
The macro environment
The FOMC's recent rate hike and Chair Powell's guidance suggest a different Fed that fears a disinflationary recession and raises questions about whether this was the last hike.
The US02Y's dip below the Fed Funds suggests the bond market is already pricing in a pause in the tightening cycle.
Bitcoin has flourished under the uncertain environment and strengthened its ties to gold while equities lag.
Crypto’s course
Bitcoin's long-term and short-term bullish trends remain in play, but with weakening momentum that could lead to a potential retrace if fresh liquidity does not enter the system.
Sector rotation shows capital flowing to safer bets (figure 10), suggesting the market taking a safer stance due to a shaky short-term outlook.
There is a specific alt that is worth tracking during this environment as a bridge between altcoins and bitcoin and is showing bullish momentum with higher traded volume (figure 12). Whale favorite.
Outlook
Bitcoin's resilience in a challenging macro environment is a major long-term bullish signal, but without evidence of new liquidity, the next logical move is down with the most likely support being around high $24k and $25.5k, although in the mid-term, once traditional markets settle, bitcoin is expected to cross the $30k level.
State of the System
A lot has moved since Uncharted 34. The banking crisis spread to Europe, the Fed hiked 25bps, and the SEC crypto witch hunt endured. Bitcoin’s price action was resilient, shaking off the dip below $20k, leading to the fast revisit of the bearish quadrant, and thrusting toward $28.3k and the extreme of the bullish quadrant (figure 1). The mid to long-term bullish trend remains at play, yet we expect the intense bullish momentum to fade in the short run. We might be up for a pullback as the system lacks fresh liquidity/capital.
Bitcoin is nearly +40% since the last Uncharted. The price bottomed at $19.8k and logged three bullish moves: one to the $24.4 - $25.5k significant level, another to $27k, and a final move toward $28.3k hours before the FOMC outcome. These moves defined our potential ranges (figure 2). Each leg up logged less volume, with the first showing the most backing, suggesting that each subsequent logged weaker momentum. The $22 - $25.5k range is the most liquid that will act as a magnet. However, there is significant bidding around $25.5k, which should impede drops to the lower channel of this range.
The Bitcoin Risk Signal dropped fast after Uncharted 34: it crashed from 100 to 0, indicating an easing risk and subdued selling pressure (figure 3). The price reverted, and the risk signal started its decline. Where do we stand now? The signal is at the lower extreme, suggesting the odds of a pronounced drop is less likely. However, there are external factors pressuring bitcoin and crypto; if selling pressure reignites, as bitcoin fails to break through $28.3k and retraces to lower ranges, the risk signal could increase, suggesting a destabilizing bitcoin.
Whether selling pressure intensifies depends on the market’s sentiment, which according to the entity-adjusted NUPL is optimistic (figure 4) due to the increased unrealized profits to unrealized losses. However, sentiment can change to anxiety if bitcoin becomes unstable (higher volatility). This could encourage investors to realize their profits or losses, pressuring the Bitcoin Risk Signal and taking us to a state of fear, particularly in the absence of fresh liquidity.
The market is optimistic, and bitcoin looks strong, in the mid to long term. Yet, this sense of optimism hasn’t spread to altcoins. Notice how the Altcoin Cycle Signal hovers around 0 (figure 5) as bitcoin’s dominance tests a significant resistance level. Large caps and bitcoin show the highest impulse as the market is still positioned to the safe side, given that bitcoin has yielded extremely high returns (+40% since Uncharted 34). We believe that once bitcoin stabilizes, be it in a lower range, altcoins will steal the thunder. We first want to see the Altcoin Cycle Signal increase and the Risk Signal stable below 25.
Enjoying the Uncharted so far?
👍 | 👎
The macro environment
This week's big story is the FOMC on Wednesday, the 25bps rate hike, and Chair Powell’s guidance into April’s blackout period. The stance changed from ongoing hikes to some additional hikes: it’s time to focus on the may and some. We face a different Fed, one that fears a disinflationary recession. Could this have been the last hike? How will bitcoin react?
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