June 23, 2023
Cryptocurrencies: Weekly Update
Bitcoin has reversed 2 months' worth of negative price action after the announcement that the world’s largest asset manager, BlackRock, has applied for a spot Bitcoin ETF. The news of the multi-trillion-dollar investment firm’s ETF application couldn’t have come at a better time for Bitcoin and the rest of the cryptocurrency market, as the announcement was made on June 15th right as BTC was at risk of breaking below its long-term 2023 support level of $24,800.
This application came as sweet relief to crypto traders worldwide, as the SEC enforcement actions directed towards Binance and Coinbase in the first week of June appeared to suck all of the air out of the room in regard to overall sentiment in the crypto market.
To make things even better, BlackRock’s application appears to have been the catalyst that convinced the rest of the traditional financial world to finally embrace the adoption of Bitcoin. June 20th saw the announcement of a new digital asset platform called EDX which is the product of collaborations from some of the biggest names on Wall Street including Charles Schwab, Citadel, Fidelity, Paradigm, Sequoia Capital, and others.
This has created a tumultuous situation for long-term cryptocurrency and blockchain enthusiasts because even though the public shift from all of these major firms into the crypto realm is guaranteed to introduce new capital into the crypto markets, it will also allow for the world’s largest financial players to drive out crypto-native companies in order to gain a large degree of control over digital asset markets. It really is convenient that within just 2 weeks of the SEC bringing major lawsuits against the world’s 2 largest cryptocurrency exchanges a coalition of the biggest names from Wall Street happens to launch their own cryptocurrency platform.
Most analysts believe that the BlackRock ETF application will likely be the first to be approved, despite a long history of the SEC rejecting applications from countless groups such as the Winklevoss twins, VanEck, ProShares, Direxion, Bitwise, and most famously Grayscale.
Without going too far down the rabbit hole, it is looking safe to say that there is some degree of coordination between regulators and traditional financial institutions to displace the existing cryptocurrency industry in order to reappropriate it into the hands of those that already control the vast majority of global financial systems. This will also assuredly make it easier for governments and central banks to retain a large degree of control in the growing cryptocurrency industry.
Regardless of how obvious this manipulation of the cryptocurrency market may seem at this moment, what is becoming obvious is that institutional interests are looking at Bitcoin as a valuable asset and not just mere internet money. If you’re a doubter that thinks that Bitcoin or the rest of the cryptocurrency market is doomed to fail, have fun telling that to the likes of BlackRock, Fidelity, Charles Schwab, and all the others. This is likely to be the beginning of the narrative that delivers us the next cryptocurrency bull market.
BlackRock’s ETF application has inspired other previous ETF applicants to reapply for their own ETFs including the likes of Invesco, Bitwise, and WisdomTree in just the past week. This has launched Bitcoin back above the psychological $30,000 level where it briefly tested and rejected the $31,000 yearly high that was set back in April.
After the onslaught of positive news for Bitcoin, the coin is now back in a bullish phase on price for the first time since early May as it is back above its 50-day moving average. The momentum of BTC has also regained a bullish phase in the past 2 days after our RealMotion indicator improved back above the 200-day moving average for the first time in 2 weeks and the 50-day moving average for the first time since late April. Most important of all is that BTC absolutely flew through the 2-month-long flag pattern that has seen Bitcoin saunter downwards since mid-April.
If you’re looking to buy Bitcoin right now then you’re going to want to see its price respect the $29,500 support level that served as the range high for the month of May.
Upside on BTC is clearly capped at $31,000 for the moment, and a bit of digestion may occur now that Bitcoin is looking to confirm its largest weekly gain since March.
Aside from Bitcoin, we also got a slightly delayed breakout across several of the largest altcoins such as Ethereum. ETH was also able to takeout its downtrend that had been intact since mid-April, however, the breakout in Ethereum was somewhat lackluster relative to the performance of BTC.
Ethereum was desperate for a bounce off of its 200-day moving average when BlackRock came along and propped up the entire cryptocurrency market. This allowed ETH to retake the $1,780 level that had served as support from the end of March until it was lost on June 10th. Aside from this impulse that allowed Ethereum to retake $1,780 and invalidate its long-term downtrend, it did not continue to follow Bitcoin’s lead higher.
Ethereum has run into clear resistance at the $1,933 level on price but has also run into resistance on momentum according to our RealMotion indicator which shows that ETH was able to reclaim its 200-day moving average as support but not the 50-day moving average that would have established a bullish phase for both price and momentum.
Trading ETH in the short term comes with some relatively clear price targets, which require a close above $1,933 on the daily timeframe in order for $1,995 and the 2023 high of $2,141 to become viable next targets. More than anything, we’re looking for ETH to reestablish itself above the crucial psychological price level of $2,000 which could come in the following days if the market continues to remain propped up by positive news.
The Ethereum vs. Bitcoin ratio has been continuously breaking down since the SEC sued Binance and Coinbase at the beginning of the month which spooked the crypto market and deterred many traders from holding onto their altcoins. This hasn’t come as any surprise, as we expected Bitcoin to outperform the rest of the market as a safer asset in the wake of regulatory uncertainty.
This ratio has continued to sink lower this week in response to institutional interests clearly pursuing BTC as opposed to altcoins, however, the ETH vs. BTC ratio is now sitting right at the same level that acted as support in both March and April of this year. This means that if we see the ratio reverse course then you’ll want to go long on your favorite altcoin rather than in Bitcoin. If you’re debating between buying Bitcoin or altcoins right now then you’ll want to monitor this ratio in the coming days to see if it reverses course back to the upside, or if it continues to break down which would indicate continued outperformance in BTC.
Whichever one you choose, we are now within 1 year from the next Bitcoin halving, which has historically served as an accumulation and expansion period that eventually leads to a new bull market cycle and new all-time highs.
Right now is when you should be looking to accumulate and stack on your favorite cryptocurrency because there is a solid chance that the market continues to accelerate upwards as we get closer and closer to the next halving date.
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.