Dear Subscribers,
Bitcoin is currently bracing for upcoming volatility as the Fed keeps signaling delays in rate cuts. Federal Reserve Vice Chair Philip Jefferson stated on Thursday that he is still considering rate reduction “later this year”. The statement comes just a day after the FOMC minutes of the meeting had indicated a similar stance.
In this Uncharted:
We analyze bitcoin’s highly favorable few weeks until the start of this one, in which it soared by more than ten grand and charted a new multi-year high at $53k, for later have a retracement to $51k.
We expand how all hope for the Fed's next meetings has been dashed by the Fed's decision to postpone rate decreases. It will be crucial to understand the Fed's potential perspective on the economy at its meeting in March.
We outline the near future of the altcoin season, most possibly happening after the bitcoin halving.
Let’s dive in!
🇨🇭 Join our Swissblock Telegram Group! Get daily updates, in-house content, and technical analysis on crypto & macroeconomics. Tap into a hub of knowledge and insights. Stay ahead with Swissblock. Sign up now! 🚀
State of the System
First things first, let’s recap where we were on our wrapped up in the last Uncharted:
“After all bitcoin in general is going through a bullish momentum despite having received downward pressure after the ETF announcement, making us stay in the neutral quadrant. Obviously what has happened is that bitcoin had risen almost 90% before the announcement and therefore people sold when the actual announcement came, so now we are waiting for another factor to move it as we don't seem to have any.
In this regard, we will have to keep an eye on the central banks and their monetary policies because if they start to cut interest rates bitcoin would get that factor capable of pushing it up. Remember that bitcoin has been very sensitive to what central banks do with their currencies because the general idea is that bitcoin would solve the problem of the devaluation of the dollar, so now we will have to be very attentive to what they do.”
Bitcoin is currently finding support at a critical level around $50.8k after facing challenges in breaking through the liquidity-rich zone near $53k. This lack of strong demand has led to a period of price stagnation. However, with the crucial support holding firm, bulls may seize another opportunity to push for a breakout towards $58k, potentially marking the onset of a pre-halving rally. With 2024 shaping up to be the breakout year for bitcoin, expectations are set for for a new all-time high this season as we remain in the bullish quadrant.
On the U.S. market scene, despite Powell’s recent stance against rate cuts, the anticipation surrounding the fourth Bitcoin halving and the reduction in miner outflows is setting the stage for a bitcoin rally like no other.
It's anticipated that there will be wicks downward to capture liquidity just below the $49.6k mark. However, as long as we avoid closing a daily candle below the range lows of $50.6k, a significant correction isn't expected. Instead, the likelihood of an eventual upside breakout remains higher. Spot flows primarily involve limit selling into bounces, particularly around the $50k level, which is evident in spot order book data.
Interestingly, during dips, there's an uptick in taker buy volume, suggesting that the market views these dips as buying opportunities.
Moving forward, it's crucial for bulls to see follow-through from buyers, indicated by increasing buy volume (limit spot buying) and takers actively chasing prices higher. This would signify buyers re-establishing control in the market.
The broader crypto market is bullish, sparked by the encouraging bitcoin rally. Altcoins are known for volatility, and many of them have significantly outperformed bitcoin during previous cycles. For example, since the beginning of 2023, Solana has performed considerably better. This is just one instance, and altcoins are set to rally this 2024, as the Altcoin Signal continues to increase.
Elevated funding rates for altcoins indicate increased speculative activity, but sustaining these levels can be challenging. Following the strong moves in BTC and ETH, some Altcoins have experienced price pullbacks. The moment bitcoin dominance continues to decline while bitcoin remains relatively stable or exhibits bullish signs, it could signal a favorable environment for altcoins.
Bitcoin's oscillators and moving averages depict a nuanced sentiment in the market. Indicators like the relative strength index (RSI), Stochastic, and commodity channel index (CCI) currently linger in a neutral zone, indicating a phase of consolidation or indecision among traders. Despite this, the momentum indicator signals a bullish sentiment, while the moving average convergence divergence (MACD) level hints at a potential sell-off, revealing a divided perspective on bitcoin's immediate price direction.
Moving averages present a more optimistic outlook for BTC, with a majority signaling that positive upward momentum is likely to persist. This includes both exponential moving averages (EMAs) and simple moving averages (SMAs) across various time frames, ranging from 10-day to 200-day periods. The bullish consensus from the moving averages suggests underlying strength in bitcoin's price trajectory, notwithstanding short-term fluctuations.
A thorough analysis of the daily chart indicates a general uptrend for bitcoin, even though it faces resistance around the $53.015k level. This resistance becomes a crucial juncture for bitcoin, as a breakthrough and sustained position above this threshold could signify the continuation of its bullish momentum. Conversely, the charts indicate a potential buying opportunity at $38.505k if the price dips to this significant low level, providing an opportune moment for investors to act. Zooming in on the 4-hour chart reveals a short-term bearish trend marked by consecutive lower highs and lower lows. This pattern advises caution for short-term bitcoin traders, urging them to watch for signs of a bullish reversal or a climb above the current trend of lower highs to identify a viable entry point.
The Macro Environment
While the US economy entered 2024 with solid momentum, noisy economic data at the start of the year has made the outlook more difficult to assess. We believe the inflation picture is likely not as hot as the latest Consumer Price Index (CPI) and Produce Price Index (PPI) reports suggest while the labor market picture is not as rosy as painted by the strong January jobs report. But neither is the state of housing, consumer spending and industrial production as weak as the January data indicates.
The view remains that a soft landing is likely as economic conditions gently cool, and inflation gradually reverts to the Fed’s 2% target. Consumers will show more caution with their outlays as “cost fatigue” gradually curbs their willingness to spend but ongoing disinflation should support positive real household income growth. And business leaders will continue to exercise more scrutiny with their investment and hiring decisions amid still-elevated interest rates and softer final demand growth. They will also look to drive stronger productivity growth via more efficient production, organization processes and the integration of generative AI (GenAI). We now see the US economy growing 2.2% in 2024, partly reflecting the strong carry-over from 2023, following real GDP growth of 2.5% last year.
Keep reading with a 7-day free trial
Subscribe to Swissblock Insights to keep reading this post and get 7 days of free access to the full post archives.