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Friday Inferno market update

Friday Inferno market update

Analysis

Is the picture finally changing for bitcoin?

 

Bitcoin has been trading in a very tight range for some time, bumping up against that daily 50 MA. We’ve seen a remarkable lack of volatility over the past three weeks, after the Tether-fuelled spike shoved the market out of its previous range and the immediate risk of breaking downwards.

 

As often happens – and encouragingly in this instance – the former resistance zone has now become support. On Wednesday, when bitcoin dumped from the $6,400 level at which it had sat for many days, it found strong demand at $6,200 and bounced hard.

 

Right now we’re at an interesting point in the cycle. We’ve had an 11-month bear market, with repeated strong demand at $6k. That large wedge on the chart that formed at the beginning of February has played out very reliably; $6k has been hit multiple times, as has the down-sloping ceiling. It’s textbook stuff. BTC is currently flirting with that sloping ceiling once again. There’s plenty of indecision in the air, with traders hoping for a break upwards – perhaps fuelled by the many new infrastructure projects coming online at the end of the year – but equally concerned we may break the $6k floor instead and take a leg down.

 

There are some anecdotal indications of OTC buys picking up as larger and institutional traders seek to capitalise on low prices (compared to the $20k peak). Plus those platforms like Bakkt and Fidelity, which will offer conduits for institutional money for the first time, will soon be up and running. So the picture is positive – especially the long-term picture, if you didn’t already know that.

 

But this is a market, people, and as we’ve often said, the market exists to make fools of as many people as possible. What the majority expect won’t happen – that’s a logical reality. In this instance, there’s enough uncertainty that we can’t take a reliably contrarian view, but we might imagine a few scenarios that surprise traders. A last shakeout, or a final plunge and period of consolidation at lower prices, is by no means unlikely. Is it also not unlikely that the launch of Bakkt would see precisely zero impact on the market in the short term – or even desperate traders selling the news and inducing capitulation or further loss of confidence. We have to add to this picture the instability in the global stock markets and the degree to which bitcoin is treated as a risk-on asset now (which we recently explored in more detail).

 

What we’re saying is that bitcoin’s period of stability will end, soon. And we know how this story ends. We just can’t say what the plot twists will be between the two.

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