Market Update: What You Need to Know (02 to 08 October)

Crypto & Economic Calendar

The events below inform governments, corporations, traders and investors on the health of the economy. I only list events noted as “high volatility expected” in related markets.

  • Monday
    • All Day: China Holiday
    • 1000 ET: [USD] ISM Manufacturing
  • Tuesday
    • All Day: China Holiday
    • 1000 ET: [USD] Job Openings
  • Wednesday
    • All Day: China Holiday
    • 0815 ET: [USD] ADP Nonfarm Employment Change
    • 0945 ET: [USD] Purchasing Manager Index (PMI)
    • 1000 ET: [USD] Non-manufacturing PMI
    • 1030 ET: [USD] Crude Oil Inventories
  • Thursday
    • All Day: China Holiday
  • Friday
    • China: Holiday
    • 0830 ET: [USD] Nonfarm Payroll
    • 0830 ET: [USD] Unemployment Rate

Bitcoin Feeling Spicy but Indecision Remains

Summary: Bitcoin offered a spicy start to the week with a bit of green, up 5% at peak, and up over 15% since mid September. We are stuck under an immediate resistance along $28,069, and a more significant resistance looming overhead between $29,300 and $30,000.

Some weeks will be more red or green than others, but indecision remains the theme until invalidated. It is unlikely to give a definitive direction this year, unless the regulatory climate is clarified, or the macro outlook improves. Too many large players in a complex macro are sidelined, with a lot of cash, and waiting to see how these things play out.

While we are likely near peak US interest rates, there is room to climb a little higher, which would squeeze the dollar higher and crypto markets lower. This is why I recommend Dollar Cost Averaging (DCA) into crypto this year, you won’t get left behind and you avoid the chop that comes with trading.

The US Dollar Index (DXY) continues a gradual rise, on the back of “higher for longer” interest rates and hawkish chatter from the US Federal Reserve. Make no mistake, they are approaching the end state of this hiking cycle, but they will squeeze as much demand from US markets as possible, before relaxing.

This means the DXY will continue to flirt with a final move up, but unlikely to set new highs. The DXY was up 3% since early September, and despite this move Bitcoin bulls defended it against further downside, a reflection of growing interest in Bitcoin.

Bitcoin Levels: $30k marked the most important support level in 2021’s bull market, and is the most important resistance to overcome in 2023. Several rejections from $30k since Q2 2023 add to the importance of $30k. Looking at the weekly chart:

  • Immediate resistance: $28,069
  • Immediate support: ~$27,210
  • Current value range: $26,700 to $29,270
  • Support levels:
    • $26,500
    • $25,700
    • $25,000
    • $24,450
    • $22,200
    • $20,900
    • $20,400
  • Resistance levels:
    • $28,634
    • $29,044
    • $30,600
    • $31,300-$32,000
    • $34,000-$36,500
    • $37,500
    • $40,000

Bull Perspective: As noted in the the past two weeks’ articles – the price breakdown to around $25,000 was an opportunity for momentum and sentiment reset. Bulls were exhausted at $30k, and while it can take time to recover, this retreat to a lower prices brings in more buyers and interest. It means a consolidation in this range can reverse into a new rally. The past 24 day saw Open Interest (OI) for short trades, a measure of leveraged shorts (ie. bearish positions) get flushed from the market when price rallied; we often see one-sided markets punished, when you see OI reach unusually high levels in long or short positions, a move in the other direction often follows.

Bear Perspective: A bullish reversal over the next month cannot be ruled out, but this writer’s bias continues to be weakly bearish pending the interest rate decision or regulatory news. While a breakout is possible, its unlikely we see institutional money enter the market before the SEC issues a Bitcoin ETF. With that in mind, any moves beyond $30,000 will sit somewhere between low likelihood to short-lived (no more than a month) in the near term.

US Dollar Index (DXY)

The Dollar Index showed some short term strength through September, due to an indecisive but decidedly more hawkish US Fed, coupled with a struggling Euro. With the last FOMC confirming the US Fed intent on continuing with “higher for longer” interest rates, the DXY logged over 3% gains since early September.

The DXY nearly lost it’s most important support level between 100 and 101, but recently recovered to resistance around 106. Overlaying a Schiff Pitchfork, the DXY is barely clinging to the top channel, and any loss of the key support around 100 to 101 will correspond with a movement to the next lower channel, likely signaling a more prolonged downtrend.

From a technical perspective, the DXY is flirting with downside continuation; but entering the final stage of the current hiking cycle as the US Fed maintains a hawkish outlook as long as possible, we may see a prolonged “dead cat bounce” for the Dollar as the US Fed tries to thread the needle in squeezing demand but avoiding a recession. Historically over the past 50 years, losing support along 101 led to multi-month to multi-year downtrends.

Why do we care about the DXY?

The Dollar Index is a complex financial data point, a lot of external factors impact its value. But in the simplest terms, you can look at the relationship between DXY and risk assets like Bitcoin simply – they usually move inverse to each other. When DXY is up, BTC is down; and the opposite is true.

Market Sentiment

While things look up from late last year, there remains a pronounced uncertainty in the macroeconomic forecast, and regulatory climate. This is reflected in September’s sentiment low being 30, and this week flirting with 50, but little appreciable change in the macro or regulatory climate.

Its likely we see sentiment oscillate between 30 and 50 for the foreseeable future.

An ETF approval likely lead to improved sentiment and greed across Bitcoin and crypto markets. Further boosts to market sentiment will follow if the US Fed declares a pause on rates, peak rates, or if a recession is confirmed avoided.


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