Bitcoin and Ethereum have shifted in the last week into a consolidation phase, after the aggressive rally the previous week driven by the institutional interest.
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Macro vs Technicals
Bitcoin and Ethereum have shifted in the last week into a consolidation phase, after the aggressive rally the previous week driven by the institutional interest. The macro backdrop has not changed, with rates markets forced to re-price the 2024 expectations of rate cuts.
While this dented optimism in equities, the pullback has been limited. Nasdaq is already pushing back to the year highs. However, bitcoin is negatively correlated to US equities, while most correlated to the Metaverse and Smart Contract indices.
Ethereum vs Bitcoin
The cross is pushing through range support levels. The oversold divergence in the momentum studies seen last week remains. As such, we could still see a correction develop.
However, while under 0.0638-0.6622 trend resistance, rebounds should remain limited and corrective in nature ahead of an extension towards the next Fibonacci support region around 0.057.
An impulsive move through 0.6622 is needed to suggest a false break of the range lows and a gradual move back towards the range highs at 0.0708.
After the aggressive reversal through channel resistance, prices have moved into another correction phase. As long as we hold over 28,950-28,250 trend support, we should develop a higher low for another test towards 33,000. My studies suggest moving to a more neutral stance once new highs towards that level have been achieved.
An impulsive decline through 28,250 would suggest that peak is already in place and a false break of the 31,000 highs from April, opening a move 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 in a choppy range between 15,000 and 30,000 for a number of months.
As with Bitcoin, the aggressive reversal back through wedge resistance re-energized the underlying bullish outlook. However, the last week or so we have moved into another consolidation/correction phase to unwind ‘overbought’ momentum.
While over 1800-1765 support, my studies look for a higher low ahead of a push to around 2000-2050 region and then review. A clear break there should allow a re-test of the 2100 highs, but its less clear in Ethereum that we set new highs.
A breakdown through 1765 negates the bullish break and takes us back into the previous choppy range type environment and likely a re-test of the 1650-1600 support region.
From a longer-term perspective, the reversal from last year’s lows targets ~2400/2450 resistance, but through there can extend towards 3000-3300. A decline back through 1370 negating this bigger picture outlook, signalling the gains have just been another 3-wave correction and keeping us in a wide but lower choppy range, potentially into the end of 2023.