The bullish momentum that had been building in the cryptocurrency market died down as Fed Chair Powell dashed investors’ hopes that a favourable CPI report would initiate a trend change. However, higher time frames continue to be attractive.
This week, cryptocurrency markets gave investors a nice head fake by rallying into resistance on a “positive” Consumer Price Index (CPI) report. However, the majority of those gains were retraced immediately after Federal Reserve Chair Jerome Powell took on a surprisingly hawkish tone during his post-rate-hike presser. This caused cryptocurrency markets to throw a nice head fake.
The Federal Reserve increased interest rates by 0.50%, which was well within the expectation of most market participants. However, the consensus of the Federal Open Market Committee was that interest rates would need to reach the range of 5%–5.5%+ in order for the Fed to hopefully achieve its 2% inflation target. This consensus caused some market participants to raise their eyebrows.
A damper on sentiment was felt throughout the crypto and equity markets as a result of this development. Traders’ hopes of a Fed policy shift occurring in the first half of 2023 were effectively dashed as a result of this development.
The charts that follow demonstrate that Bitcoin and Ether underwent a path reversal on December 14, just as Powell began his press conference.
How would you rate those apples, if I may ask?
It should not come as a surprise that the price behaviour and market structure of BTC and ETH on the lower time frames are virtually identical to one another.
Therefore, it is true that the markets have lost some of their recent gains due to negative news; nevertheless, has anything genuinely “changed?” Both Bitcoin and Ether are continuing to trade inside a distinct range, and neither asset has lately established a new yearly low.
When in doubt, one should take a step back and look at the big picture. Therefore, let’s get that out of the way quickly and take a closer look at the topography of the area.
When in doubt, zoom out!
Bitcoin’s price is continuing moving sideways within a falling wedge on the weekly period, which is a traditional pattern in technical analysis that has a tendency to point toward bullishness. Within the context of technical analysis, the price is acting in a manner that is largely consistent with what one would anticipate the price to do.
The 20-day moving average (MA), which is aligned with the falling trendline, is likely to act as a barrier for buyers. The volume profile measure reveals that the majority of activity is occurring in the area of $18,000–$22,500, and the bottom arm of the falling wedge has been acting as support up until this point.
Price movement that was comparable to that experienced in May–July 2021 was observed, but of course, the circumstances were quite different, so comparing the two is a bit like comparing apples and oranges. The MACD and RSI are both showing signs of divergence. On a weekly period, the price action is indicating a downward trend, while the MACD and RSI are indicating an upward trend; this is probably something that should be monitored closely.
The fact that weekly candles form slowly and that trends, whether bullish or bearish, are quite simple to identify and validate are two of the things that I appreciate best about trading on a weekly period. It is simpler to construct a robust investing thesis for the weekly time frame than it is to spend uncountable hours poring over charts of the daily, one-hour, and four-hour time frames.
Anyhow, breakouts from the falling wedge are expected to be restricted at the descending trendline, while a breakdown of the pattern or drop below the lower support may see the price fall as low as $11,400. This might happen if the price breaks below the lower support. The majority of analysts agree that all of this falls within the parameters of the market consensus.
As for Ether, as I discussed in more depth in the Substack and newsletter I sent out the previous week, it is still engaging in the bull flag pattern, which entails oscillating between support and resistance and having breakouts capped at key moving averages as well as the descending trendline of its bull flag.
The majority of analysts continue to believe that $2,000 will eventually be reached, and a decline to the $1,100 level would hardly be surprising.
A price that falls below $1,000 is likely to cause people to raise their eyebrows and attract the attention of those who are searching for more determined shorts.
The price activity of Ether is essentially behaving in the same predicted manner as Bitcoin: there is nothing to see here, and trading should continue according to the plan (whatever that might be for you). A divergence can be seen on the MACD and RSI charts for Ether, just like it can be seen for Bitcoin; this is something that needs to be monitored.
My focus shifted to Litecoin a week ago when I became aware of an impending reduction in the network payout. Even though there has been a pullback in price from its local high of $85, the uptrend is still intact, and the GMMA indicator is still in the bright green zone on the daily timescale.
The bullish momentum of LTC leading up to halvings is tracked by the vertical black lines, as is any subsequent correction that takes place immediately after a halving takes place. Everything seemed to be going smoothly for the time being, at least according to the plan.
Naturally, none of this should be taken as financial advice. Be careful to conduct your own research, analyse your risk, consider the worst-case situations, evaluate your return on investment (ROI), take profit, and trim loss zones a few days before actually placing a deal. Keep in mind that a risk-to-reward ratio of between 1:3 and 1:5 is the ideal outcome that one should strive to achieve.
Ignore the short-term price activity and the FUD that is being spread. Expand your perspective and develop a compelling argument from that vantage point.
Big Smokey, writer of “The Humble Pontificator Substack” and resident newsletter author at Cointelegraph, is the author of this particular newsletter. Every Friday, Big Smokey publishes articles on the market that include market insights, trending how-tos, analysis, and early-bird research on potential developing trends in the cryptocurrency industry.