Crypto’s bullish momentum crumbled after Fed Chairman Powell drizzled with cold water on investors’ hopes that a positive CPI report would trigger a trend reversal, but more timeframes long remain interesting.
Crypto markets reversed their heads this week, plunging into resistance against a “positive” Consumer Price Index (CPI) report before reversing the bulk of those gains, just after the President of the Federal Reserve, Jerome Powell, adopted a surprisingly restrictive tone during his tenure. Rate Hike Presser.
The Fed raised interest rates by 0.50%, well below most market participants’ expectations, but the Federal Open Market Committee’s consensus that rates fall in the 5% to 5% range, 5% and beyond to hope to reach the Fed’s 2% raised eyebrows. inflation target.
This essentially threw cold water on traders’ lustful dreams of a Fed policy change in the first half of 2023, and the sentiment was felt in the crypto and equity markets.
As the charts below show, Bitcoin
reversed course to the right when Powell began his press on December 14.
BTC/USDT and ETH/USDT 4-hour chart. Source: Trading View
how do you like apples
It is also no surprise that the price action and market structure of BTC and ETH on the lower timeframes also look identical.
So, yes, markets have retraced their recent gains on bad news, but has anything actually “changed”? Bitcoin is still trading in a clear range; Ether is doing the same, and neither asset has recently hit new yearly lows.
As the saying goes, when in doubt, zoom out. So let’s cut it short and take a closer look at the state of the country.
If in doubt, zoom out!
On the weekly timeframe, Bitcoin always bounces off a falling wedge, a classic technical analysis pattern that tends to be bullish. The price is doing roughly what one would expect the price to be based on technical analysis.
There is expected resistance at 20-MA which coincides with the descending trendline. The volume profile gauge shows a lot of activity in the $18,000-$22,500 range and the lower arm of the declining wedge has acted as support so far.
Similar price movements were seen from May 2021 to July 2021, but of course the situations were completely different, so this is a bit of an apples and oranges comparison. There is a divergence between the MACD and the RSI. In short, the price is down and the MACD and RSI are up on the weekly timeframe, which may be worth watching.
BTC/USDT 1 week chart. Source: Trading View
What I like about the weekly calendar is that the candles form slowly and trends, whether bullish or bearish, are quite easy to spot and confirm. Building a solid investment thesis on the weekly timeframe is easier than spending endless hours poring over four-hour, one-hour, and daily charts.
Related: Ethereum and Litecoin take a step forward as Bitcoin price seeks stronger footing
Either way, breakouts of the descending wedge are likely to be capped at the descending trendline, while a pattern break or drop below lower support could send the price down to $11,400. That’s all within the market consensus of most analysts.
As for Ether, as I explained in more detail in last week’s substack and newsletter, it’s still doing the bull flag thing: bouncing between support and resistance and seeing breakouts that occur at Key moving averages and the descending trendline of its bull flag are limited.
$2,000 remains the ultimate target on most analysts’ radars and the drop to $1,100 is far from shocking.
A drop below $1,000 is likely to raise eyebrows and attract the attention of those looking for more determined shorts.
ETH/USDT 1 week chart. Source: Trading View
Ether’s price action essentially does the same predictable thing as bitcoin: nothing to do here, stick to the plan (whatever that may be for you). Similar to BTC, there is also a divergence between the MACD and the RSI of Ether – something worth watching.
Last week I also kept an eye on Litecoin