On this episode of our Friday Market wrap, Nick Mancini, Chief Community Officer of Trade the Chain, joined our host, Gordon Paul, to review a volatile week in the crypto markets and what sentiment might be indicating for future price action.
Highlights from the Week
(00:55) MicroStrategy has closed a $500 million bond sale to mostly purchase Bitcoin and other assets. The bond sale was three times oversubscribed. In addition to this bond sale, they also announced a $1 billion stock sale. Nearly $1.5 billion should enter the Bitcoin and cryptocurrency market now or soon as a result.
(02:27) Finally, the SEC continues to delay its ruling on a bitcoin ETF against high expectations from the market. Auxilliary exchanges in smaller markets like Canada, the UK, even Europe have launched crypto-asset ETFs and has since skipped interest in such an EFT, especially for bitcoin in the US. Although the SEC has not denied a ruling, the market outlook of the delay is slightly bearish as most people believe the ETF would be very bullish for the market and would signal the good graces of the SEC.
(04:38) Over the past few weeks, Bitcoin has tied closely with sentiment. News from El Salvador affected both sentiment and price last week. According to the charts, this has continued to remain mostly the same. The only difference is a slight divergence right due to Bitcoin’s riding on key support and news of MicroStrategy finishing its bond sale. The MicroStrategy announcement immediately seen as bullish ended up being slightly bearish in filling out the price action. “Bitcoin is in a very odd period, and I believe a lot of what came should have been bullish, but there are some actors that believe Bitcoin price should stay around the 37 K margin”
(05:24) Nick believes that as sentiment remains bullish, although not currently reflected in the markets, in the least, the news would push the narrative forward.
Bitcoin has been within the threshold of what the chart depicts as five separate channels of price action. “In three of the previous channels, Bitcoin has bounced on the lower end of the trend and immediately broken the higher end of the trend except for one time when it bounced off of the higher end of the trend rather than it bounced on the lower end. Currently, on the fifth channel in which Bitcoin is riding into the far-right side, it is bouncing on the lower end of the trend. It is bouncing on top of the 100-moving average, and it is bouncing on top of a massive liquidity level that we can see on the right side in which traders are very interested in Bitcoin around the USD 37k level,” Nick explained.
Nick remains bullish around in Bitcoin around USD 37k, but if it does break, it likely to settle around USD 34,500.
Bitcoin dominance shows how well Bitcoin is performing against the rest of the crypto market. Understanding the percentage level allows one to understand the effect that Bitcoin will have on the altcoin market. So, the higher Bitcoin dominance, the higher the impact a Bitcoin movement has on the rest of the market. And the more that you understand and track Bitcoin dominance, the more that you can anticipate those.
“If Bitcoin if it shoots down, I’m expecting alts to shoot down right. If Bitcoin shoots up, I’m expecting alts to take a hit. Just because of where Bitcoin dominance is right now, I cannot say that a Bitcoin move is going to support the rest of alts with the dominance and the impact level of Bitcoin rising,” Nick explained.
Nick believes Ethereum is a quasi-ETF for the altcoin market, a perspective that Alex Mascioli, his colleague at Trade the Chain, had already shared.
“So, we bounced off resistance with a hardline double top. We’re sitting in this support area of 2300k. We know Bitcoin dominance is continually rising. You can see on the right side where the order book levels are; there’s not a whole lot of interest in the near term in terms of price action or price levels. So, it does look likely that 2300k may break soon, and the next support levels are 2100 and 1900. If you’re looking for a short, probably not best to bet a lot of your money here. I would look for the support levels if you are bearish along with me,” Nick explained.
The Fed Meeting
(12:13) Until recently (a year or two ago), the Fed meeting didn’t matter in the context of the crypto conversation. However, due to institutional interest, macroeconomic factors are now closely related to how Bitcoin performs in the market.
Hawkish moves made by the Fed suggests they may be implementing deflationary pressures on the market. Deflationary measures would lead to a bump in the dollar relative to other commodities. The implication of this on the price of bitcoin would be based on the dollar index. A dollar gain would mean Bitcoin and other equities are worth lesser. It is expected that a continual increase in the dollar would mean continual hots on the value of bitcoin and other equities.
The promise of the crypto markets in the long term however is to decouple away from this narrative where everything is tossed into the pot.
(13:51) “The goal [for cryptocurrencies] is to a decouple away and to stop acting like equities and behave like a completely different asset class. And that is the goal moving forward,” Nick added.
Bitcoin - Risk on or Risk Off Asset
Bitcoin has for long been touted as a risk-off asset. Yet, it has not necessarily behaved as such as it fluctuated with news from the Fed.
(15:52) As the market becomes more efficient and gathers more data, a clear divergence would be seen, Nick said. “We’re seeing an immediate market shock right now, which I think everyone expected, and hopefully throughout the weekend and the next week, things will smooth out and we can get a much better grip on how Bitcoin compares to equities and the dollar,” Nick added.