August 7, 2023
Cryptocurrencies: Weekly Update
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The cryptocurrency market has been relatively boring for the past several weeks, with Bitcoin consolidating in a falling range while individual altcoins have seen a bit more volatility on their own smaller news events. Bitcoin looks similar over the past 40 or so days to how it did in a roughly 60-day range from April to June which saw BTC put in a new 2023 high and then trade in a descending range.
Unfortunately, BTC has temporarily lost the support of its 50-day moving average for the time being, but if you zoom out then you’ll realize that this has been the first requirement for Bitcoin to break out in 2023. Each of the 3 major breakouts for Bitcoin thus far this year has taken place after the 50-day moving average was lost and then flipped back into support.
The chart above shows that along with the 50-day moving average, the long-term parallel range on BTC has served as significant long-term support. Currently, Bitcoin’s sitting right above the bottom of its parallel channel and just beneath the 50-day moving average, a fairly significant inflection point.
A break lower beneath the bottom of our long-term channel would almost certainly result in BTC retesting the 200-day moving average which is currently trading right around $26,900. On the other hand, a reversal from here and a retake of the 50-day moving average would likely lead to a retest of the 2023 highs around $31,500 followed by new higher highs.
Our RealMotion momentum indicator has been effective when paired with BTC in identifying the previous 2 significant breakouts this year, by recognizing moments of confluence between price and momentum when both become deeply oversold at the same time. Currently, Bollinger bands are tight on price and show that price is sitting right on the lower band, while RealMotion continues to get closer and closer to its own oversold levels by the day. In the event that we do in fact see a 3rd significant breakout take place in the near future then you should look for either price or momentum to bounce strongly from current levels and retake their current trendlines, which would likely see several days of follow-through that could end in double-digit gains.
Although it seems like we’re likely to see a significant move in the next week or so, we may not end up seeing a huge increase in volatility until closer to the end of August if not even the beginning of September. This is due to the fact that other than the ARK application, the other 7 pending BTC ETF applications have initial decision deadlines within the first days of September.
It is possible to see the SEC make a decision on these applications sooner than their September deadlines, but it is generally believed that if the SEC approves one application then they’re likely to approve them all. Remember, the SEC doesn’t have to necessarily approve or deny these applications, as they also have the ability to delay their decisions until a later date in October.
Whichever way the SEC rules on these Bitcoin investment products, you can be certain that the price of BTC will either soar or crash following approval or denial of these applications. The good news is that experts believe that this round of ETF applications will finally see approvals after years of failed attempts, with Bloomberg analysts indicating that they see a 65% chance of a Bitcoin ETF launching this year.
Until we see a decision made on one of the many pending ETF applications or another significant news event comes along, expect BTC to continue trickling lower. Bitcoin is deceivingly up more than 75% year-to-date, but the majority of that positive price action has been confined to just a handful of brief breakouts that only last a few days each time.
For now, we’ll wait until the next catalyst bucks the current downtrend and gives another breakout opportunity, and in the meantime, you should consider looking at every dip as a potential buying opportunity.
Following BlackRock’s application for a spot Bitcoin ETF we’ve probably all become aware of the push for SEC approval in this realm, but what you may have missed this past week was an influx of applications for Ethereum Futures ETFs.
As of the time of writing, there are 11 filed applications for an Ethereum Futures ETF from the likes of Volatility Shares, Bitwise, Roundhill, Van Eck, and Grayscale, with ProShares filing 4 of its own applications in just the past few days. One of ProShares’ applications is even for an equally weighted BTC and ETH ETF.
It is important to remember that Proshares has already been operating a BTC futures ETF (BITO) since late 2021 thanks to the SEC viewing BTC as a commodity rather than a security, so if we see an ETH ETF receive approval that could potentially reclassify Ethereum as a commodity as well in the process.
It is also worth noting that the Ethereum vs. Bitcoin ratio has been slowly recovering from deeply oversold levels as it is now forming an ascending wedge. This could lead to a breakout in this ratio which would see Ethereum drastically outperform relative to Bitcoin, and likely even smaller and more speculative altcoins outperform both BTC and ETH.
We’ve already begun to see excitement starting to build for several small-cap altcoins which is typically a symptom of an upcoming bull market, but rather than having to stick your neck out by buying an obscure coin you can likely stick with those that are far more established and still expose yourself to significant upside.
One coin that has been on a tear in recent weeks has been Uniswap (UNI), the native token for one of the world’s largest decentralized cryptocurrency exchanges. UNI has been in a sustained rally ever since breaking out of a more than 1-year downtrend and has managed to remain above its 50-week moving average for the past 3 weeks.
It looks like UNI could continue its rally even if it is beginning to run a bit rich on the long-term timeframe, with the daily timeframe flashing some bullish indications. At the moment UNI is dipping beneath its 2-month trendline but is likely to catch support at its 200-day moving average which isn’t far away. Another positive feature of this chart is that we’ve just gotten a bullish cross on Uniswap’s momentum according to our RealMotion indicator, providing a bullish divergence relative to price.
With so many of the world’s established centralized exchanges taking reputational damage such as Binance and potentially even Coinbase as a result of SEC lawsuits, it wouldn’t be surprising to see UNI continue to rally and thrive as capital flows towards decentralized exchanges.
If you’re looking for an even riskier but potentially more exciting altcoin to sink your teeth into, look no further than our old friend Dogecoin (DOGE). The weekly chart on DOGE looks fairly similar to that of UNI as it looks primed to potentially break out from a year-long descending trendline.
A breakout of this long-term range could send DOGE flying, and many of us know from past experiences that this is one of the few large-cap cryptocurrencies that still has the ability to rally 100% in a single quick move.
Right now DOGE is sandwiched beneath its 200-day moving average but above its 50-day moving average, and depending on which way it breaks from here you can likely expect followthrough in that direction. Given that we’ve seen new and obscure meme-coins like BALD absolutely explode in just a matter of days, it definitely seems like the crypto market has an increasing appetite for this type of speculative play.
Whether you decide to take a stab at DOGE, UNI, or another altcoin, it is probably best to wait until we see some degree of improvement in the market benchmarks of Bitcoin and Ethereum. With so many ETF applications and other potential news in the run-up to Bitcoin’s next halving event, we’re almost certain to see opportunities for significant gains if we can pick the right coins based on their own themes and trends. Keep up with us to stay on top of major market news, trends and trading opportunities.
If you’re not yet subscribed to either our CryptoPulse Quant model or the new CryptoPulse Sprint trading strategies and would like to learn more about our products then you can talk to our Chief Strategy Consultant, Rob Quinn, here.