After selling off throughout the week, Bitcoin got a major +4.75% bounce off of the key 200-day moving average on Saturday. As of the universal close to the week on Sunday night, Bitcoin has closed green on the week and has maintained the key 50-week moving average as we get ready to close out the year.
Bitcoin got oversold on both price and momentum according to RealMotion this week, which is a good sign for a potentially explosive reversal to end the year. BTC has already closed above its 10-day moving average which is a good start to confirming a potential reversal, especially with momentum looking likely to mean revert.
The target for Bitcoin to stay on pace for a bullish reversal is $52,700, with the psychological $60,000 level as the target to regain before attempting to reclaim the late October trading range.
Don’t be discouraged just yet by last month’s selloff in the crypto market, all things considered the space has held up extremely well. It was only 33 days ago that Bitcoin was making new all-time highs at $69,000, and the currency is still up over 100% year to date.
A year of rebuilding economies on a global basis has caused unprecedented rates of inflation that are sure to start bursting bubbles at some point in the not so distant future. However, don’t be so sure that the ‘Crypto Bubble’ is ready to burst just yet.
People, institutions, banks, and even governments have embraced and are continuing to adopt cryptocurrencies, decentralized finance, and blockchain technology in mass. Don’t be surprised if the current global macroeconomic environment ends up serving as a catalyst for a further transition into a new digital financial system beyond the strong push we’ve already seen this past year.
When major global economies reach their boiling points, will we see a divergence between crypto and traditional equity markets? One thing that's for sure is that the world is adopting new decentralized technologies and financial systems at a time where faith in traditional systems is at its weakest in a very long time.
For now we’ll continue to wait and see if Bitcoin and other cryptocurrencies can still end up being used as a flight-to-safety from the stock market. Bitcoin didn’t get the nickname ‘digital gold’ for no reason.
Biggest Winners: Polkadot (DOT) has recovered +8% on the week, leading the top 25 cryptocurrencies by market cap. After briefly dipping below the 200-day moving average, DOT looks poised for a major bounce in the short-term.
Biggest Losers: Solana (SOL) and Algorand (ALGO) were the worst performing large-cap cryptos this week, down -13.2% and -12.8% respectively. Most likely, traders have been fleeing more speculative defi cryptocurrencies and favoring Ethereum as it is the largest defi.
What to watch: Monitor whether defi’s track Bitcoin as it bounces from key support. Rather than Bitcoin, Ethereum has been leading the market the past several weeks, so we may see that hot streak ending here soon.
The most important theme to watch in the cryptocurrency market this week is whether the whole market will bounce, or if Bitcoin is going to recover on its own. Although nearly the whole market has been down the past month, we have still seen Ethereum outperforming Bitcoin on a relative basis the whole time.
Bitcoin lost the psychological $60,000 level, and then it lost the $50,000 level. Meanwhile, Ethereum has only seen 1 daily close below the $4,000 level since mid-October. We’ve been following this divergence by tracking the ETH/BTC ratio (which also happens to be a tradable pair on most crypto exchanges).
The ETH/BTC ratio maxed out to the highest level since February of 2018, but looks to be cooling off. Interestingly, when using RealMotion on the ETH/BTC ratio throughout 2021, you would have identified overbought signals in both May and September that turned into extended selloffs.
Now, we’re seeing ETH/BTC get overbought on RealMotion for the 3rd time this year, indicating that we are likely to see Bitcoin relatively outperform Ethereum through the end of the year. Be weary when trading altcoins right now, as Ethereum underperforming Bitcoin could see other major altcoins follow suit.
To track our CryptoPulse Quant trading strategy or use our crypto tools and resources, please check everything out here:
CryptoPulse Quant
*Simply click a symbol on either the Sectors Radar or Coin Rankings in order to see an interactive chart*