CRYPTO CORNER EPISODE 463
Market Analysis, Updates, News & Reviews
In today’s episode I take a look at the Bitcoin and Ethereum charts in the wake of the latest announcement by the US Federal Reserve of continuous interest rates increase. Bitcoin is still highly correlated to Tech Stocks and rising inflation, coupled with rising interest rates are in fact bad news for all crypto right now. Take a look:
Bitcoin dropped to $40,586 from a daily high of $42,965, while the total crypto market fell to $1.88 trillion in the hours that followed this announcement.
Bitcoin started another decline after it failed to clear the $43,000 resistance zone. The price is now trading below $41,000 and the 100 hourly simple moving average. We even fell below the 50 EMA on the daily, an important resistance band that we very briefly broke yesterday. For a moment, it seemed like we might be recovering as we pushed above this moving average yesterday, but as it often happens, the move was short-lived and left us with just a long wick on the daily candle – yet another sign of weakness in the bulls team, and today we are in bear territory once again. On top of that, Stochastic RSI is in the overbought region, signalling a further drop in price.
Overall, crypto continues to follow the recent trend of correlation to tech industry as the Nasdaq was also down 2% on the day in the sharpest drop since mid-March. Interest rates are predicted to reach as high as 3.5% by the end of the year – another sign that a crypto bull market might not return anytime soon. The FED would have to raise rates by at least 0.5% at each of their remaining meetings to get to this number, so we will be watching closely what happens. Given that Powell has indicated that a 0.5% increase is on the cards for May, this projection seems to be a viable prediction.
The goal of raising interest rates is to combat the rising inflation, which reached 8.5% last month. However, high-growth investments such as tech stocks are valued based on a discounted cash flow model. This model considers interest rates in its calculations, and higher interest rates mean lower valuations. Bitcoin is behaving like a tech stock for a while now, since late last year, so it is safe to say that the interest rates hike will most likely bring more dips on our charts.
And I saw a few comments in my previous video that were asking why rising inflation is bringing Bitcoin down, when it would make sense to push Bitcoin upwards, so let me address this.
With inflation going up, interest rates are going up. Investing in relatively safe products such as US Treasuries and other Government issued bonds becomes more attractive when interest rates go up. These returns are pretty much guaranteed, while crypto investments are much higher risk with elevated volatility. Bitcoin may be an inflation hedge for the long term, but as money goes into other investments instruments, there’s less demand for the riskier assets, hence why in the short term, Bitcoin is struggling to keep its upwards trajectory.
Does that mean we are heading toward another drop from current price levels?
I will look at the shorter timeframes too,
But before I do that, a quick reminder to get on board with Margex Exchange – cause you can make money not only on the way up, but also, by shorting the market and make profits when we’re in a downtrend, like the past few months.
Taking a look at the hourly timeframe of Bitcoin, we’re seeing greater volatility around $40,000 levels.
We’re also seeing a lot of accumulation below this level as noted by
On-chain data provider Santiment.
According to a report they just released, whales have been accumulating during the recent price drop under $40,000. The report claims that:
“Bitcoin whale addresses holding 100 to 10k $BTC have collectively accumulated 18,104 more $BTC since the April 10th price drop below $40k. However, their holdings are still down substantially since October. Meanwhile, $USDT buying power looks promising.”
Basically, Bitcoin needs to get back above $40,800 for a chance to rebound to $45,000 or even $50,000 so we can consider a recovery from this bear market. A decisive daily close below $39,400-$38,500 can invalidate the optimistic outlook and result in a retracement to $35,000 or even $30,000 for $BTC – yes, the much dreaded 30k price levels is still on the table. The longer we trade below 45k, the more chances we have of another drop to the lower 30k range.
Along with Bitcoin, the broader cryptocurrency market has come under pressure.
The world’s second-largest cryptocurrency Ethereum is down by 3% and is now breaking below its crucial support level of $3,000. On-chain data provider Santiment notes:
Ethereum’s address activity really picked up this week, with Wednesday’s 592 thousand addresses being the highest number of unique interactions in over a month. Meanwhile, social discussion for $ETH has hit its highest levels in over two months.
On the other hand, all other top ten altcoins have corrected anywhere between 3-5%. The altcoin market has seen active trading recently with altcoins like Terra ($LUNA) showing swift movements. Apecoin ($APE) also had a major pump of nearly 40% the other day, but a drop of Bitcoin below current support will send the altcoins into bigger corrections, so trade carefully, especially if you’re heavy into the alts.
In the short timeframes, Major Support Levels for Bitcoin are $40,250, followed by $40,000.
Major Resistance Levels – $40,750, $41,000 and $41,800.
If we look at the weekly, we fell below the 21 EMA – another bearish signal, and the stochastic RSI is making a drop from the overbought region, but that’s just started, so a further drop is to be expected in the next few days.
All in all, the weekend ahead is looking bearish, we are still low in volume too, and with that, weekends tend to be volatile, with fakeouts becoming the norm these days.
We’re now approaching the end of April too and by the look of it, this might be another negative April ROI – something that we don’t see very often. We’ve only had three negative April returns in the whole Bitcoin history so far.
I’ll revise this as we draw to a monthly close in about 10 days.
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