Macro Environment
As I am sure most of you know, the stock market hit all-time highs (ATHs) last week. Today it looks like it will close above the trend line resistance. I foresee that there will be a sustainable move to the upside in the coming months. This creates a “risk-on” environment and with that I expect most assets to do well, including BTC and cryptocurrencies. During my last blog post, I spoke about how the SPX looks poised to breakout and how if it did we would see BTC follow.
The SPX is breaking out from a 22 month consolidation period. A similar consolidation period occurred in 2015 and 2016 which was followed by a 29% increase in the index. If similar price action followed now, then that would take the SPY to almost 400.
So what does this all mean for cryptocurrency? I mentioned in my last blog post that cryptocurrency had its best two years when the stock markets were in full bull mode and making new ATHs. This is a scenario we are now in. The stock market at ATHs is good for cryptocurrency for a variety of reasons. When people’s base portfolios are performing well they are more likely to put money in perceived risky assets like BTC or alts. If the stock market is performing poorly, people will liquidate their good performing assets to cover for the bad. Cash is king in a “risk-off” environment. As long as the SPY is hitting new ATHs, I would expect BTC to hit an ATH in the coming year as well. Now let’s move on to the BTC technical analysis.
Technical Analysis
Since the descending triangle breakdown, BTC consolidated for a bit near 8K and broke down again from that range. I thought another breakdown would be a fake-out and would turn a lot of people bearish. Turns out this analysis was correct. Any buys at or below 8K have turned out well. I was expecting bull div to play out like the 3K bottom. The bull div showed that bears were running out of steam and that there could be a reversal looming.
The bulls got their reversal with an impulse move that sent price straight to 10.5K. This was a pretty quick move that seemed to surprise most. The order book was pretty thin after 9.3K which helped the price seesaw so quickly between 9.3K and 10.5K then back down 9K.
200 DMA
During the last bull run, the price did not spend much time below the 200 DMA. It dipped below and spent 29 days below before breaking back above and now holding. This should be seen as a positive development.
Bollinger Bands
The bottom bband on the weekly has held. Bears tried to break it down but bulls rallied strongly. Now the middle bband is still acting as resistance. I am a cautious bull until that gets taken down and there is a weekly close above.
Horizontal Support/Resistance
I drew two supports in my last blog post. The lower one held perfectly and if you would have bought there you would be sitting pretty at the moment. Currently, the price is holding above the 9K support, but below the weekly 9.5K resistance.
Fibs
The 61% retracement held and was front-run slightly on the daily chart. On the weekly chart the 38% retrace has flipped support into resistance. There is a confluence of the weekly horizontal resistance and the weekly middle bband resistance.
Order Block
The order block did its job and held as support with no weekly closes below.
What To Expect Going Forward
I see a bull/bear battle going on now in the low 9Ks with a range of 9K to 9.5K. If the bulls can get daily closes above 9.5K, then we should see a strong rally going forward. If the bulls slip and bears can push the price below 9K support, then I think we could see a couple more months of consolidation in the high 7Ks and 8Ks before finally pushing up towards the ATH at 20K. When I saw the price going parabolic in late June I started getting worried about the sustainability of the rally. I thought that after such a strong move we needed a multi-month consolidation and re-accumulation. This is what has happened, and I think it will allow the market to be stronger going forward.