Post-Halving Boredom

Uncharted 60

Dear Subscribers, 

Bitcoin's price has only undergone slight consolidation, suggesting that the recent decline might be a corrective movement triggered by profit realization. It’s plausible that once the correction stage concludes, the price will likely initiate a fresh, impulsive surge.

In this Uncharted:

• We analyze why BTC had a highly negative start to May that culminated last Wednesday with a price dump to a two-month low of $56.5k.

• We expand how the U.S. central bank last week kept its policy rate in the 5.25%-5.50% range, and the likeness of interest rates to stay where they are for longer than previously thought.

• We go over the broader recovery in crypto market as ETH, SOL, XRP, DOGE, SHIB and other altcoin rebound.

Let’s dive in!

Markets

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State of the System

Picking up from the last Uncharted, the situation doesn’t differ much to the current one:

“The market has experienced a significant decline during the week, indicating ongoing volatility. However, amidst this volatility, the $60k level appears to be offering significant support. This presents a potential buying opportunity for players.

If the market were to break below the $60k level, it could signal a further decline towards the $52k level. The recent parabolic rise, fueled by increased interest from ETFs, has slowed down, resulting in a more stable market environment. While this may differ from the rapid gains seen in previous months, it ultimately fosters a healthier market.”

BTC has experienced fluctuations throughout the week, with the $60k level serving as a key support area. This level is one that many traders are closely monitoring, but overall, the market continues to maintain a bullish outlook, albeit with work to be done.

Looking ahead, there appears to be potential for the market to target the $73k level. Last week's price action formed a hammer candlestick, a bullish technical sign. Additionally, the recent influx of capital into the BTC market via the ETF has contributed to the positive sentiment. There has been a shift from the bearish quadrant to the neutral in the past weeks as price recovers.

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

BTC is currently testing resistance as the weekend approaches, and you should watch for a breakout with substantial volume to support continuation. There's potential for BTC to break out of the current liquidity area and then retrace. The current price action suggests this is not a strong downtrend, as the volume is decreasing alongside the price. The combination of price decline with a drop in volume is technically a bullish sign, indicating that the selling pressure may be easing.

Overall, it appears that BTC is undergoing a corrective phase rather than a significant downward movement. This period of correction is expected as the market stabilizes after previous gains. Monitor key levels and volume closely for signs of a potential breakout and subsequent continuation of the bullish trend.

If BTC manages to break above the $73k level, it could pave the way for a move towards $75k and eventually $80k. However, if the price breaks below the bottom of last week's hammer candlestick, it may open up a potential decline towards $52k, and possibly even as low as the 50-week EMA around the $46k level.

While a significant decline seems unlikely, short-term choppy and sideways trading is expected over the next few weeks. This period of consolidation would allow the market to digest the recent 92% run-up over six weeks. Once this consolidation phase is complete, the market is likely to continue its upward trend.

Figure 2: Bitcoin’s Price in Context.

Since December, most altcoins have been in a period of consolidation while BTC has taken center stage. With BTC now ranging, altcoins have not shown significant movement due to the influence of Bitcoin dominance.

A breakdown in BTC dominance is necessary to trigger potential gains in altcoins. The ETH/BTC trading pair printing its second bearish engulfing pattern on the daily chart within a week suggests that breaking through the 55% grand resistance on the BTC dominance chart could be imminent.

If BTC dominance continues to rise beyond 59% and the Altcoin Signal remains deep in BTC season, it indicates that an altcoin season is not likely in the near future. As a result, patience is advised as the market may need more time to shift focus away from BTC and toward altcoins.

Figure 3: Altcoin Cycle Signal measures whether the market favours Bitcoin vs all Altcoins.

BTC has recently experienced a modest bullish rebound from the substantial $59k support level, but encountered selling pressure that led to a retracement back to the critical 100-day moving average at $61k. Upon examining the daily chart, it is evident that BTC has been in an extended phase of sideways consolidation near the crucial $60k price range.

Price saw a decline after its recent bullish rebound from the $59k threshold, moving back toward a critical support region. BTC sellers have been challenged to breach this significant support area, which includes the 100-day moving average and the 0.618 ($59.395k) Fibonacci level, for several weeks.

A sudden decline below the critical $59k level could spark another notable downward movement toward the $56k threshold. However, this crucial juncture could also act as a turning point, providing mid-term support and potentially halting further downward pressures. The price action around this level will be key in anticipating BTC’s future movements, as it will either establish a base for a potential upward trajectory or signal further declines. Investors should monitor these levels closely to gauge the next phase of BTC’s price action.

Figure 4: BTC's price evolution with Cipher B, RSI and ATR indicators.

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The Macro Environment

The U.S. government reported that real GDP grew at an annualized rate of 1.6% in the first quarter of 2024, slower than anticipated and marking the slowest rate of expansion since the second quarter of 2022. The relatively weak growth was primarily due to a decline in business inventories, reduced Federal government purchases, and a sharp increase in imports that led to a negative net contribution from trade. Other components of GDP, such as household spending, showed positive performance. However, attention was mainly focused on inflation data.