Crypto markets flipped a nice head this week, plunging into resistance against a “positive” Consumer Price Index (CPI) report before reversing the bulk of those gains, right after Federal Reserve Chair Jerome Powell, struck a surprisingly restrictive tone during his tenure. Rate Hike Presser.
The Fed hiked interest rates by 0.50%, well within expectations for most market participants, but eyebrow raising was the Federal Open Market Committee’s consensus that rates are entering the 5% to 5.5% range and beyond to have any hope of hitting the Fed’s 2% inflation target.
This basically threw cold water on traders’ lustful dreams of a policy shift by the Fed in the first half of 2023, and the mood dampener was felt across crypto and equity markets.
As the charts below show, Bitcoin (BTC) and Ether (ETH) reversed course exactly as Powell began his press on Dec. 14.
BTC/USDT and ETH/USDT 4 hour chart. Source: TradingView
how do you like the apples
It is also not surprising that the price action and market structure of BTC and ETH on the lower timeframes also look identical.
So, yes, markets have retraced their recent gains on bad news, but has anything actually “changed”? Bitcoin is still trading in a clear range; Ether is doing the same, and neither asset has made new yearly lows recently.
As the saying goes, when in doubt, zoom out. So let’s cut this short and take a closer look at the state of the country.
When in doubt, zoom out!
On the weekly time frame, Bitcoin is still bouncing around in a falling wedge, a classic technical analysis pattern that tends to be bullish. The price is doing pretty much what one would expect the price to be based on technical analysis.
Resistance is expected at 20-MA, which is in line with the descending trend line. The volume profile metric shows much of the activity in the $18,000 to $22,500 range and the lower arm of the falling wedge has acted as support so far.
Similar price movements were observed in May 2021 to July 2021, but of course the situations were completely different, so this is a bit of an apples-and-oranges comparison. There is divergence between MACD and RSI. In short, the price is sloping down and the MACD and RSI are sloping up on the weekly timeframe which may be worth keeping an eye on.
BTC/USDT 1 week chart. Source: TradingView
What I like about the weekly timeframe is that candles form slowly and trends, whether bullish or bearish, are fairly easy to spot and confirm. It’s easier to build a solid investment thesis on the weekly time frame than it is to spend endless hours poring over four-hour, one-hour, and daily charts.
Related: Ethereum and Litecoin make a move as bitcoin price looks for a firmer footing
Anyway, breakouts from the falling wedge are likely to be capped at the descending trendline, while a pattern breakdown or a drop below the lower support could send the price as low as $11,400. That’s all within the market consensus for most analysts.
As for Ether, as I covered in more detail in last week’s substack and newsletter, it’s still doing the bull flag thing: bouncing between support and resistance and seeing breakouts that occur at major moving averages and the descending one trend line of his bull flag are limited.
$2,000 remains the ultimate target on most analysts’ radars and the move down to $1,100 is far from shocking.
A drop below $1,000 is likely to raise eyebrows and attract the attention of those looking for more determined shorts.
ETH/USDT 1 week chart. Source: TradingView
Ether price action is basically doing the same predictable one as bitcoin: nothing to see here, stick to the plan (whatever that may be for you). Similar to BTC, there is also a divergence in Ether’s MACD and RSI – something worth keeping an eye on.
Litecoin update
Last week I also kept an eye on Litecoin (LTC) due to the upcoming network reward halving. While the price has retreated from its local high of $85, the uptrend remains intact and on the daily timeframe, the GMMA indicator is still light green.
LTC/USDT 1 week chart. Source. trading view
The vertical black lines show LTC’s bullish momentum leading up to halvings and the corrections that occur right after the halving. For now, everything seems to be going according to plan.
Of course, none of this is financial advice. Make sure you do your own research, calculate your risk, think about the worst case scenarios, weigh your ROIs and take profits and cut losses a few days before actually trading. Remember that 1:3 and 1:5 is the optimal risk/reward ratio to chase.
Ignore the short-term FUD and price action. Zoom out and build a strong thesis from that vantage point.
This newsletter was written by Big Smokey, author of The Humble Pontificator Substack and resident newsletter writer at Cointelegraph. Every Friday, Big Smokey writes market insights, trend guides, analysis, and early bird research on potential emerging trends in the crypto market.
The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.
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