Bitcoin price bounced significantly over the past few days capitalizing from a few big US banks’ insolvencies.
This is not fear of monetary policy directly even though it is a reason, but it is fear of people not being able to get their deposited money back. This increased fear among hundreds of other banks and depositors. Risk assets were down, but this time both BTC and Gold surged.
Many Bitcoin fans, analysts and social media influencers are calling bitcoin the end of the banking system as we know it now – the fractional reserve banking system, which is considered one of the biggest legal frauds in modern history.
In a normal world, we know BTC well correlating with US indices, especially with Nasdaq, but this time that correlation break.
Let’s remember what may drive the BTC price before we dig into the current situation.
Macro fundamentals such as monetary policy, risks of recession and any macroeconomic data that may affect the central bank’s decision could have a significant effect on markets overall, including crypto.
Geopolitical tension and political decisions may also increase the buying and selling appetite among investors or short-term sentiment.
Most of the time the macro fundamentals are stronger than its improving infrastucture. Meaning investors are putting macros always or most of the time over micro fundametnals.
Lately, the BTC infrastructure improved drastically and became more valuable to the world than ever before, but due to the macro turmoil, that didn’t affect its price postitively though. Then, is the micro-analysis of BTC and its infrastructure important? The short answer is, yes but on the right time!
With the risk of ongoing recession and macro eonomic turmoil, the stock market, bitcoin and overall risk assets have always risks of falling due to Fed tightenning causing liquidy decline. The end of this contracting business cycle is considered the bottom of the markets, becuase very bad economic conditions e.g. recession is the moment when the central bank starts supporting the economy with QE and stimulating it with lowering interest rates. That’s the beginning of the new growth cycle And if the micro fundamentals improves on negative macro fundamental envoirnment, that can help the asset stays stable after the bubble burst and in the new growth cycle micro fundamentals emerge and are even more visible to investors, which could boost the forming bullish trend even stronger.
Short-term liquidy boost may create some short-term euphoria among traders and investors for the current bullish bounce. I strongly suggest traders to be carefull with those emotions. Even some banks go insolvent, the overal banking sector is very well prepared compared to 2008 crisis. Yes, there is always risk of the current panic deepens and crashed many other banks, but what I am trying to say is that the banking sector is 5-6 times stronger and better prepared than back in 2008 Great Finanical Crisis. I will talk about this on one of my next articles in upcoming days.
Now let’s have a look at what the technical analysis says:
On the weekly chart, the price bounced with the enormous 35% Marabozu type of weekly candle, breaking the weekly formed H&S accumulation pattern. The price is pretty close to the lows from 2021, which may act as technical resistance. If so, we could see a pullback back to the previous resistance (neckline) of 25,200, which could be new support.
Aggressive technical would be with a stop below the right shoulder at 19,300 or below the week’s low of around 20,200. Target around 32,600 and potentially 39,000 after that.
The conservative weekly chart strategy could be “buy the pullback”, as the expected support zone is 25,200 – 23,500. In order to buy on the pullback, the trader must wait for the bullish price action signal in the zone. For the stop-loss placement, the strategy from aggressive entry is suiting well. For the target, the only change is that the 29,000 level will be the first one.
Getting slightly to the lower time-frame charts, to confirm the analysis above, on the Daily chart we see that the impulse is trying to complete and potentially correct. If so, the first weekly aggressive strategy on the weekly is not the best option. Thanks to the lower time-frame analysis we see it.
The daily chart buy scenario is confirming the conservative entry on the weekly. However, this creates a short-term short-opportunity for counter-trend traders.
Looking to sell at the top with a bearish reversal candlestick pattern, which is still developing and might never happen. So, the trader must wait until it forms. The stop-level will be above the local highs and the bearish targets are 26550, 25,250, and 24,000 levels.
Moving on to the H4 chart, the local price action is getting even clearer. The recent rally from March 10 closed the “Three-line strike Bullish engulfing pattern” and seems like it is completed the motive wave cycle forming a nice bearish shooting star at the top, which price tested by making 50% retracing and DCC- pattern forming within the SS- range.
This is a clear short-term H4 sell setup.
The trend is developed bull-trend with a signal for getting into the corrective cycle. The initial pattern is the Shooting star reversal at the top of the 5th wave and it plays also as a signal with a confirmation after the 50% retracement and Dark Could Cover. The risk-to-reward ratio is a minimum of 2.5R for the first target, 6.5R for the 2nd target and over 10R for the major objective.
And the last confirmation for this setup is that the current lower time frame (H1 to M15) is down.
What are the risks of this setup?
Overall my base case for Bitcoin remains bullish for a 3-5 years horizon and I consider it as good buy as part of a well-diversified portfolio. I see this current environment more as long-term accumulation for BTC, than the bottom, even though many indicators already suggest that the bottom is here, I will rather still be more conservative. I dollar-cost-averaging on Bitcoin since last quarter of last year with good calculated position size.
Risks of a strong dollar, further economic turmoil, and crypto companies’ failure may be a short-term bearish catalyst, sell-off from overbought levels and etc.
This article and analysis is only for information purpose and it should not considered as an investment or trading advice! Please make sure you well understand the risks of trading and investing in financial markets before you take any trading or investing decision.