Uncharted 12: Bites
02 April 2022
In this edition of Uncharted: Bites, we start by analyzing bitcoin’s run towards $47k and the breakout of the previous trading channel. We later analyze the catalysts of the run, focusing on stronger demand, coming from institutional investors, and the potential rotation to an altcoin season. All in the context of recession indicators emerging in the last week.
Let’s dig in!
Bitcoin broke out of the $42-$45k trading channel and holds the converted support level at $45k.
Institutional capital flowed into crypto despite the fragile macro environment.
Swissblock’s Altcoin Cycle Signal shifts to an altcoin regime.
Demand for physical bitcoin picks up, with Terra leading the way.
Derivative positions are skewed to the long side.
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Bitcoin kicked off the recovery in cryptos
Bitcoin finally broke out of its tightening trading channel between $38k-$42k, mentioned in Uncharted #11, and converted the $45k resistance level into support. Bitcoin decoupled from equities as it made its way steadily towards $47k. Towards the end of the week, however, safe havens reverted as equities logged the first losing quarter in two years, driving risk-on assets down.
Figure 1: Risk-on vs risk-off performance
Focusing on bitcoin, the risk of a pronounced drop subsided (Figure 2, bottom graph) as the price holds above $45k after the brief retrace. For now, we keep an eye on the $45-$48k range, considering that bullish sentiment reignited.
Figure 2: Bitcoin’s trading channel ($45-$48k) and risk
We should remain cautious as the macro environment drives crypto investor behavior and sentiment dropped in traditional markets. US equities saw the first weekly outflows (-$14 billion) since September 2021 as US fixed-income led the way in fund flows.
Figure 3: Capital flowing from US equities to US fixed income
Bitcoin, on the other hand, saw significant institutional inflows from Grayscale Bitcoin Trust and Purpose Bitcoin ETF (Figure 4, red areas). The latter signaled a stronger demand for bitcoin as an alternative risk-on investment.
Figure 4: Institutional investors buy bitcoin exposure
We see the potential of a sizable crypto-wide move forthcoming since bullish sentiment spread to other assets (Figure 5) in the space beyond bitcoin.