Bitcoin has rallied ~75% since its bottom in November 2022. It seems to have completed the first wave, which was the spike up to $25.2k. The second wave took it just below $20k in a 50% retracement before it rocketed higher in what we think is smaller wave 1 of wave 3. This sets bitcoin up for a retest of $24-$25k area in a smaller wave 2 pullback before the strongest move of the entire structure sets in.
Smaller wave 3 of wave 3 is the strongest rally if the count is correct – and it could take bitcoin first to 35k, which is also the minimum target for Cup&Handle-pattern, and soon after (perhaps as early as late April 2023) to 45-46k. If 24-25k is broken to the downside with conviction, then the scenario above is invalidated.
DXY seems to have bottomed in smaller-wave B as part of a correction pattern, which began in early February. It is expected that a bounce up to either 106.8 or even 108.2 is in the cards for as long as DXY does not move lower than 102.
The bounce in DXY is financially tightening on the economy, however, it may not be felt by markets and especially risk assets to the expected degree, as Fed has been very accommodating in its monetary policy over the last couple of weeks. It is however possible that the bounce in DXY will cause short-term pain, especially for bitcoin to correct in the short term. In the long run, we expect the decline in DXY which started in Sept. 2022 to continue down to the 91-93 area.
Equities are said to Climb a Wall of Worry. This is exactly what we have experienced in the last couple of weeks. Despite (or rather because of) extreme fear in the market this week and last week, SP500 has moved higher. Up about 4% from the lows over the last 2 weeks.
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