Short-Term Pullbacks an Opportunity, But Caution Warranted
- By Robin Wilkin
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- 2 min read
Macro vs Technicals
The recent banking crisis and loss of confidence, which has caused the US market to price in rate cuts starting in the summer, has so far had little knock-on effect into crypto. Meanwhile, equity markets have also held up well.
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Macro vs Technicals
The recent banking crisis and loss of confidence, which has caused the US market to price in rate cuts starting in the summer, has so far had little knock-on effect into crypto. Meanwhile, equity markets have also held up well. While the short-term pause in Bitcoin and Ethereum is viewed technically as a correction, we must monitor events in the other asset classes. If equities start to break down meaningfully, crypto will struggle to completely ignore it – liquidity and a move to cash will be sourced from everywhere. So, while the current mindset is to use pullbacks in crypto as an opportunity to build length, caution is warranted in the size of those positions until we get greater clarity from the current issues.
Ethereum vs Bitcoin
The downside breakout of the triangle has seen the ratio extend to first Fibonacci support around 0.063, and prices are now consolidating at this level. This ‘flag’ type consolidation is expected to give way to another leg lower towards monthly trend support in the 0.0609 region, with the risk of an overthrow to Fibonacci support in the 0.057 region. However, the broader studies suggest monitoring this area for signs of a base and reaction back higher. A direct move now back through 0.067 would negate downside risks and take us back into the previous range environment.
Bitcoin
The rally from the higher low around 20,000 completed a micro term 5-wave rally sequence, with bear divergence in the daily momentum studies, suggesting a pause and correction. That process has developed and is ongoing. Main support is seen in the 25,200-24,000 type region. Ideally, we should see this area hold, a higher low develop and the market extend the bull phase. A decline in 5-waves through this support region is needed to worry the bullish outlook and suggest a peak has developed as part of a broad medium-term range process.
From a long-term perspective, the bear cycle from the 2021 highs completed last year at 15,574. We now look to be in the next bull phase, so once the latest short-term correction is complete, we should head up to next targets around 33,000, with Fibonacci targets above there around 36,000.
Ethereum
As with Bitcoin, prices have moved in a choppy correction phase after the recent aggressive rally to ~1850. Short-term studies are still in unwind mode and as such further corrective action is expected, with upper support lying in the 1670-1590 region. This is the ideal region to look for a higher low to develop as part of the bigger picture C wave rally targeting ~2400/2450. An impulsive (5-wave) decline through this support would be the first warning this bullish outlook is wrong and the risk that we see a deeper setback towards the March 1370 reaction low. A break there negating the bullish outlook and suggesting we are still in a wide medium-term range environment since June last year.
From a long-term perspective, the decline from the 2021 high at 4866 completed a bear cycle at 880 in June 2022. Ideally, we should see prices build on the recent rally phases as highlighted above.