The Beginning of the End

Uncharted Lite 5

Key Takeaways

• The risk-on sentiment in equities (Nasdaq climbing) can easily spill over to crypto as uncertainty over the debt ceiling subsides.

• Many market participants are sitting on the sidelines waiting to jump in. Is there any room for shorts?

• A break and hold of the $27k level is unlikely under this environment, however, it’s a great opportunity to position in selective alts (narrative-driven alts) like the ones mentioned below.

Quick reads:

CryptoSlate

‘s dive into Lawsuit against US Treasury and from

Ecoinometrics

a look into bitcoin’s decoupling from risk assets

• Bitcoin is back at the high $26k level, however, it’s not clear whether this marks the end of the weak price action. Spot demand is low, open interest is flat suggesting a lot of sidelines waiting, thus a follow-through seems unlikely.

• This is the beginning of the end and shorts are forced to double down (we noted some weak shorts coming in as the price bounced). Time is against them, we are getting close to the moving averages and the 600 BTC sell wall at $27k shrunk to 129 BTC, so a bullish trend reversal is around the corner. A short squeeze could trigger the next big move.

• BTC has seen further headwinds as crypto investors’ sentiment remains risk-off, resulting from the market pricing a more aggressive Fed (another 25bps rate hike priced at a 50% probability for June) and the DXY gaining traction.

• However, the correlations to TradFi are very weak at the moment. So, even though the negative DXY and US02Y effects could spill over to crypto, the Nasdaq can pull us higher.

• Liquidity improved despite the rumors of a deal in the making. This is a crucial metric to keep an eye on, considering that if the Fed raises rates and the debt ceiling goes through, liquidity could contract once again.

• It should be remarked that BTC is highly sensitive to liquidity, so if liquidity were to contract, BTC should retrace or have further resistance to breaking higher.

• Even though bitcoin struggled throughout the week, altcoins were resilient. Many altcoins saw an increase in interest as investors began to seek higher-yielding opportunities in a flat market. We await further confirmation