Expect the Unexpected

Uncharted 48

Dear Subscribers,

It’s been a busy week for everyone; BTC’s volatility has been over the roof and the awaited Fed’s decision on the hike was as expected.

In this Uncharted:

• We looked at the bullish momentum we went through this week; what was the catalyst for the price action? 

• We analyse the Federal Reserve's decision to hold interest rates steady, while also indicating it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.

• We outline ethereum’s current situation and possible risky strategies, now that there’s interest in the spot ETF request.

Let’s dive in!

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Courtesy of Substack’s new AI feature

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State of the System

Let’s pick up where we left off last time in the Uncharted 47’s outlook on September 8th:
“Bitcoin is in no man's land, with no clear sign of direction in the short term. The price is trading within a narrow range, and there is no strong momentum in either direction. We remain within the bearish quadrant, depicting an unstable environment. The volatility in the last three weeks presented the State of the System to the bearish quadrant. Despite the current bearish sentiment, there are some signs that the bearish momentum is fading.”

Bitcoin is showing strength as it broke over $27k and held over $26.5k despite the brewing external pressures - see macro section. The risk of a pronounced drop eased, but we're not out of the woods just yet.

There is significant resistance around $27.4 - $27.5k, which requires great power to break. We lack the necessary momentum at the moment to break over. Could this be the beginning of the end (of the correction)? We are back within the bullish quadrant.

Figure 1: State of the System distinguishes between bullish and bearish regimes and transitions depending on bitcoin’s performance.

A hold over $26.3k would imply that the correction has ended. However, we have to keep in mind that the bearish trend remains in play - fast-moving averages are below the slower - and cannot exclude the possibility of another leg down to revisit the lower end of the current channel ($25k), especially with the brewing external pressures.

Figure 2: BTC price evolution and Trading Volumes.

From a price structure perspective, high rewards are potentially possible. We have had a green September despite being the worst month for bitcoin. We've ended a long streak of weekly red candles (4) and are on the brink of the first buy signal in Cipher B since March of this year.

Figure 3: BTC's price evolution with Cipher B, RSI and ATR indicators.

Overall, we can make the case that we're in a favorable risk-reward environment, given the decreasing Risk Signal and bitcoin's price structure. However, the environment is not stable. The Risk Signal remains in the high-risk zone, and we lack bullish momentum to continue driving the price higher. This could lead to a premature overbought state. Caution is advised.