Bitcoin and Ethereum remain in a consolidation/correction phase, but the underlying structures remain bullish at this stage.
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Macro vs Technicals
Bitcoin and Ethereum remain in a consolidation/correction phase, but the underlying structures remain bullish at this stage. The XBT/XET cross looks to have moved into a range too, so my studies suggest the two currencies can work in unison for the coming week.
The macro backdrop to this slightly shifted this week. US yields staged another leg higher, with 2-year yields setting new highs for the year, which for the first time saw a meaningful pullback in equities, which in turn triggered a meaningful reversal in risk-on currencies like MXN and BRL. So far, crypto remains unfazed with the risk-off move, but I suspect that will change if we saw a meaningful shift lower develop in equities. After a mixed US employment report, all focus now turns to the inflation report next week and core inflation within that, as headline is still falling due to base effects.
Ethereum vs Bitcoin
While the cross had broken range support, my studies last week suggested we can still see a correction develop. That has been the case, with prices reversing just ahead of daily trend envelope resistance at 0.0646. As such, while that resistance holds, we can develop into a sideways range before another leg lower towards the next Fibonacci support region around 0.057.
A move back through 0.0646 would negate, see an extension back into the previous range, and suggest we have seen a false downside range break.
Prices remain in a correction phase after the aggressive rally through channel resistance. Last week, my studies were looking for a move towards 33,000 in wave five and that may still be the case if we can hold the 29,500 area of support. However, risks are increasing that the cycle is over with the repeated failure above 31,000. Either way, 31,000-33,000 is strong resistance and we should see a broader correction phase, potentially back to support in the 26,000-25,000 region.
Long-term, my studies suggest the bear cycle from the 2021 highs completed last year around 15,500. First targets and resistance in the bull move lies in the 33,000 region, but the main target is 36,000 (that being Fibonacci and head and shoulders projection). I suspect we see that region hold on the first test, but ultra long-term targets are 42,000-48,000. To change this long-term outlook, we would need a decline through 19,500. Such a move would suggest we are in a choppy range between 15,000 and 30,000 for several months.
The underlying structures remain bullish, as with Bitcoin, however, I can make a stronger case that Ethereum has completed an internal five-wave rally phase. As such, we look to already be in a correction from 1623. This can chop around more in the week ahead, but while that previous low holds the outlook is bullish for an eventual move through 2160 towards 2450 next resistance. Ideal region for a higher low to develop is the 1815-1720 region.
A breakdown through 1623 would open a direct move down to 1400 area again. From a longer-term perspective, the reversal from last year’s lows targets ~2400/2450 resistance, but can extend towards 3000-3300. A decline back through 1370 negating this bigger picture outlook, signalling the gains have just been another three-wave correction and keeping us in a wide but lower choppy range, potentially into the end of 2023.