The cryptocurrency market threw a nice headfake this week by rallying to resist a “positive” Consumer Price Index (CPI) report. rate increase presser.
The Fed hiked interest rates by 0.50%, which was within expectations of most market participants. Meet the Fed’s 2% inflation target.
This basically threw cold water on traders’ lustful dreams of a Fed policy reversal in the first half of 2023, and a waning sentiment was felt across cryptocurrencies and stock markets.
As the chart below shows, Bitcoin (BTC) and Ether (ETH) reversed course shortly after Powell started the presser on Dec. 14.
how about an apple?
It should also come as no surprise that the price action of BTC and ETH and the market structure on the lower timeframes look similar.
Yes, the market has bounced back from its recent rally against bad news, but has it really “changed”? Bitcoin is still trading in a definite range. Ether has done the same, with neither asset hitting annual lows recently.
As the saying goes, when in doubt, zoom out. So let’s take a quick look at the land situation.
If in doubt, zoom out!
On the weekly timeframe, Bitcoin is still bouncing around a falling wedge. This is a classic technical analysis pattern that tends to be bullish. Price is pretty much what you would expect it to do within the framework of technical analysis.
We anticipate resistance at the 20-MA, which is aligned with the downtrend line. The volume profile metric shows most of the activity in the $18,000 to $22,500 range, with the lower arm of the falling wedge acting as support so far.
A similar price action was seen between May 2021 and July 2021, but of course the situation is quite different, so this is an apples-to-oranges comparison. There is a divergence between MACD and RSI. In short, the price is trending down while the MACD and RSI are trending up on the weekly timeframe, which is probably worth noting.
What I love about the weekly timeframe is that the candle forms slowly and the trend, whether bullish or bearish, is easy to call out and confirm. It’s easier to build a solid investment theory on a one-week timeframe than spend endless hours on 4-hour, hourly, and daily charts.
Related: Ethereum and Litecoin Move, Bitcoin Price Seeks a Solider Base
In any case, a breakout from the falling wedge is likely to be capped at the downtrend line, while the breakdown of the pattern or a break below the lower support could send the price down to $11,400. It’s all within the market consensus of most analysts.
Ether remains bullish as detailed in last week’s substack and newsletter. It oscillates between support and resistance, confirming a breakout capped at major moving averages and a bullish downtrend line.
$2,000 is still the ultimate goal for most analysts, so the $1,100 drop isn’t shocking.
Anything below $1,000 is frowned upon and may attract the attention of those looking for a more determined pair of shorts.
Ether’s price action is basically the same predictable behavior as Bitcoin. Similar to BTC, there is also a divergence in his MACD and RSI for Ether. It’s worth noting.
Last week, we also focused on Litecoin (LTC) as the network reward halving loomed. Although the price has bounced back from the local high of $85, the uptrend remains intact and on the daily timeframe the GMMA indicator is still bright green.
The vertical black line traces LTC’s bullish momentum into the halving and shows the correction that occurs shortly after the halving. For the time being, everything seems to be going according to plan.
Of course, this is not financial advice. A few days before you actually trade, do your own research, calculate your risk, think of worst-case scenarios, and weigh your ROI to make a profit and cut a loss zone. Remember that 1:3 and 1:5 are the optimal risk-reward results to pursue.
Ignore short-term FUD and price action. Zoom out to create a powerful thesis from that perspective.
This newsletter is humble pope Author of Cointelegraph Substack and Resident Newsletter. Every Friday, Big Smokey writes market insights, trend how-tos, analysis, and early research on potential emerging trends within the crypto market.
The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views or opinions of Cointelegraph.
This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making decisions.