Ranges Are Meant to Be Broken

Crypto Compass 110

"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." - George Soros

• BTC prices rebounded from bear market territory over the weekend due to a sharp drop in the dollar following weaker-than-expected nonfarm payrolls data. Despite this, bearish sentiment persists and the Risk Signal remains high. This bearish movement led to the liquidation of many long positions and a cooling-down period in the perpetual markets.

• Short-term gains in BTC were held back due to expectations of further cues on U.S. interest rates, particularly from upcoming statements by Fed officials. If BTC consolidates in the current range, a breakthrough of the $65k resistance could pave the way for a move back to the $70k level, potentially reviving momentum for the cryptocurrency.

Figure 1: Speedometers indicating market sentiment, risk signal and onchain fundamentals.

• The U.S. Dollar Index (DXY) continued its downward trend today for a fourth consecutive session, influenced by a softer-than-expected U.S. jobs report from last week. This aligns with recent comments from Federal Reserve Chair Jerome Powell and the dollar's recent strengthening against other currencies, potentially due to suspected interventions.

• The dollar's weaker position is likely to persist as long as economic data remains supportive of that direction and as long as Federal Reserve officials don't counter Powell's stance. The labor market is showing signs of loosening, but more hawkish Fed voices could still push for keeping rates higher for longer, which may impact the dollar's trajectory.

Figure 2: Source FED, interest rates through the years.

• The 4-hour chart shows increased selling pressure after BTC failed to break above the $68K level, resulting in a downtrend and a drop below the wedge's lower trendline to around $59K. This led to long position liquidations and a sharp decline, testing the $56K level.