At This Moment
As I am writing, Bitcoin is trading above $22K, $22.212 to be exact. I know a lot of Crypto traders and speculators are all over this pump but I remain wary and have chosen not to go long. There are a few reasons for this, which I will disclose in this post. Even if BTC were to muscle up and push above $23K I don’t think it would be an actual reversal. Here are some of the reasons and data that I have based my decision upon.
Earnings Are Out
To some extent, Bitcoin remains correlated to the stock market and that will fade somewhat after a bottom is formed. They may move in tandem but eventually, Bitcoin’s move up will outperform the stock market. Look at the performance of the S&P against Bitcoin after the covid bottom. Even though they moved in tandem directionally, on a metric of percentage gains, Bitcoin completely destroyed the S&P. I do however think that it is too early to expect this, especially as earnings are coming out. Bank of America was bad but not as bad as expected, which helped the market today. Tomorrow is Netflix if I am not mistaken, and Wednesday is Tesla. Depending on how bad these reports are will factor into the performance of Bitcoin to some degree.
The Interest Rate Hike
We are also still to see the FED’s response to the 9.1% inflation print. There has been a lot of talk of a 100 basis points rate hike. There is a pretty good chance that this has already been priced in on the recent collapse to $18.900. However, it still remains to be seen if the market has indeed priced in 100 basis points or 75. These events can also often cause a knee-jerk response from the market.
Losing The $22.700 Level… Again
This is the second time that BTC has failed to breach this important level and though the day is not over, Bitcoin continues to retreat. BTC is now trading at $22.113. I will perhaps consider a move if BTC closes a daily candle above $22K but it will have to reveal a few indicators such as volume and appropriate price action.
As BTC has traveled north in the last few days the volume has been depreciating rapidly. However, the current daily candle is showing more significant volume, which could change things if tomorrow the volume persists and the price action remains above $22K. As you can see this is a key level and by no means an actual confirmed breakout at this point. I refer to the graph below.
We want to see BTC close above this pattern. It is premature to enter this trade if I am to ABIDE BY MY OWN TRADING RULES. Everyone should have these and if you don’t, it is perhaps time to admit that you are a gambler and not a trader. Trading is all about disciplines, it is the only thing that separates gamblers from traders. Confirm a breakout above $23K and I am in, long all the way to at least $25K. However, not yet!
Relative Strength Indicator
The RSI is at the highest level it has been since April. Corrections have occurred over the past months at the 50 to 52 level. The current RSI is not too far away from 60. Yes, 70 is a more well-known point of being traditionally oversold but when you factor in the climate it really is a bit of an ask to hit 70 on an RSI reading at this point.
The 200-Week Moving Average
Historically, the Bitcoin bottom has always coincided with a touch or breach of the 200-weekly. If BTC were to move above it and close a daily candle above it, chances are it could close a weekly candle above it. This would create a fair amount of FOMO in my opinion. However, with all the data against this scenario, it becomes highly unlikely. The wise move in my opinion is to pull the trigger on any of the confirmations that are yet to play out if and when they do. One also needs to bear in mind that Bitcoin can always surprise. All my years in this space have taught me that anything really is possible with Bitcoin. However, I would like to see some confirmations coming through first. This is how I am currently viewing the market and should not be considered investment advice. Thanks for reading!