It has been quite the week in crypto. After a breakthrough of 40k in BTC over the weekend, Sunday saw a pullback, only for the market to get rocked (in a good way) by Tesla’s SEC filing detailing their 1.5Bn purchase of BTC providing fresh chum for the Bull Sharks. BTC prices rocketed to all time highs and challenged the psychologically important 50k level, but they have yet to break through.
The story since then has been a choppy one. While swing traders have rejoiced, easily scalping profits as prices have bounced between resistance and support, the price action has left more long term investors wondering what comes next, with the lack of explosive follow through after arguably the best news that maximalists could have hoped for feeling a bit anticlimactic. However, this morning just as I write this, things are looking up.
Just an hour ago, BTC briefly made a new all time high over $48k. While it did bounce lower after that spike, both the lows and the highs from the swings of this week have been steadily creeping up. While I personally tend to not focus on charts and technical analysis, I cannot deny that the trend still looks higher. From a psychology standpoint, I still expect there to be significant resistance around the 50k level, and it’s likely that prices struggle to break through that key number. But if the troughs of this wavy market come at higher and higher levels with each subsequent wave, even if the crests can’t break through 50k for a while, that is an indicator that the choppy price action is coming mostly from fast money day trading, people leaning on that 50k resistance knowing they have a backstop, so they are comfortable taking some short positions around there. But the bounces mean that they probably aren’t holding those shorts for very long, just trading in and out.
If the lows of the range continue to creep up, and the range condenses, to me that is an indicator that the upward trend is still intact, and eventually the resistance around 50k will fall. When that happens (maybe the second time if not the first), the short term traders will likely cover any shorts they have and we might see another leg higher.
Meanwhile, I’ll still be watching global risk markets. With a long weekend in the US coming up, there is always the possibility that risk off sentiment seeps into the market today and or tomorrow. If that does happen, and equities and other risk assets start to feel pressure as investors look to de-lever and give strength to the dollar, that could easily, if only temporarily, throw some cold water on this rally.
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