Market report for traders

Jump to the Technician's Take

Jump to the Beginner’s Recap

What’s happening in the market?

Bitcoin bounces, but spirits are up

Bitcoin dipped under the closely watched AU$54k level while Ethereum and other major cryptocurrencies have taken a sharp drop following a volatile week of trading. Some experts blame the bearish activity to the Bitcoin network’s hashrate as a result of China’s blackouts that shut down some miners, while others attribute the shift to the ban of crypto payments in Turkey and the liquidation of crypto from leveraged traders. As a whole, since early April the crypto market  has lost AU$544b with some analysts predicting that any further catastrophe may well push bitcoin below AU$40k.

On the flipside of the coin, here in Australia, Allianz Chief Economic Advisor, Mohamed El-Erian says that the Federal Reserve’s response to inflation will cause the prices of cryptocurrencies, like bitcoin, to go higher. Economist El-Erian believes the concern for the crypto community is that the current decline is in alignment with the rise in gold prices. 

“The big argument for crypto is it’s a diversifier,” he posits. “At the time of inflation, it’s attractive. But recently, crypto hasn’t played that role.”

Crypto regulation growing

While US crypto regulation is growing, so too are Self-Regulated Organisations. It’s believed that SROs will eventually provide a much-needed link between the crypto industry and the U.S. government as regulatory infrastructure takes shape. This can be seen in its lobbying efforts and political action committees. SROs are taking the crypto industry and shaping it in a positive way and may eventually play a vital role in the crypto regulatory framework.

Meanwhile the International Monetary Fund (IMF) has proposed a series of measures aimed at regulating the decentralized finance (DeFi) sector. In its Global Financial Stability report, the body spelled out its preliminary recommendations regarding the rapid growth of fintech and the challenges for financial stability. The regulations will focus on elements of the crypto ecosystem that have enabled the development of DeFi such as stablecoin issuers, centralized crypto exchanges, and hosted wallet service providers.

Technician’s Take

After a sharp correction over the previous week, Bitcoin has stablised and has started ranging just below the 50 day moving average (MA) finding support around AU$53,600 which corresponds to the currently critical USD$40k mark. While BTC has dipped below this level, it quickly bounced to keep its head above this level for now. 

With a slight uptick in volume, it looks like there are more buyers stepping up at this level, signaling USD$40k is a level where buyers are sitting and happy to soak up any BTC sold down to this price. 

RSI is quite neutral and MACD is showing signs of  convergence which could signal a bullish cross if the price continues to move up in tow.

One feature of the indicators I have been using in this column has gone a little unmentioned, namely the RSI 14 period MA (in orange on the RSI panel). This is a good measure to take some of the noise out of volatility and show the trend the RSI is currently experiencing. If you look back through recent history, a cross above the MA by the RSI often signaled a pushup and conversely so with a cross below signaling a bearish trend forming. The RSI have made a bullish cross of the MA yesterday (circled) so it will be an interesting one to watch if Bitcoin continues this trend. 

As always, tight stops and good money management are paramount at all times, most particularly when the market starts seeing more volatility.

Beginners recap:

• Bitcoin (BTC) is ranging near the 50 day MA
• Relative Strength Index (RSI) is neutral but has made a bullish MA cross
• Moving Average Convergence Divergence (MACD) is bearish but converging, so looking for that bullish cross
• Watching for a bounce

Disclaimer: Information provided is for educational purposes and does not constitute financial product advice. You should obtain independent advice from an Australian financial services licensee before making any financial decisions.\ As cryptocurrencies remain volatile, all prices and percentages may have changed since the time of writing.