Market Update: What You Need to Know (27 November – 03 December)

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
    • 1000 ET: [USD] New Home Sales
  • Tuesday
    • 1000 ET: [USD] Consumer Confidence
  • Wednesday
    • 0800 ET: [EUR] German Consumer Price Index
      • Forecast: -0.2%
      • Previous: 0.0%
    • 1030 ET: [USD] Crude Oil Inventories
    • 2030 ET: [CNY] Purchasing Managers Index (PMI)
  • Thursday
    • 0500: [EUR] CPI
    • 0830: [USD] Personal Consumption Expenditures (PCE)
      • Forecast: 3.5% (year); 0.2% (month)
      • Previous: 3.7% (year); 0.3% (month)
    • 0830: [USD] Initial Jobless Claims
    • 1000: [USD] Pending Home Sales
  • Friday
    • 1000 ET: [USD] PMI
    • 1100 ET: [USD] Fed Chair J. Powell Speech

Bitcoin Spice – Is the Bull Back?

Summary: Yesterday’s weekly close was the 6th weekly green candles (the most since November 2020). They represent a collective 40% gain at peak. For the 4th week, price remains below a key resistance, just under $40,000. We see some compression of price, potentially signaling a larger move coming. You are hearing chatter about this being the early stage of a bull market, but we can’t rule out significant pullbacks on the way up.

Bitcoin Levels: Price currently occupies a value range between $30k and $40k, closer to bull market territory.

  • Immediate resistance: $36,800
  • Immediate support: $37,750
  • Current value range: $30,009 to $39,325
  • Support levels:
    • $37,000
    • $35,967
    • $35,700
    • $35,000
    • ~$34,800
    • $33,000
    • 30,170
    • $29,379
    • $26,145
    • $25,100
    • $22,240
    • $20,981
  • Resistance levels:
    • $37,592
    • $37,993
    • $38,094
    • $40,400
    • $42,354
    • $46,967

Bull Perspective: This is virtually unchanged from last week. Price saw a steep retracement on Tuesday before fully recovering with a 6% rally the following day. Expect to see more scattered volatility like this in the coming days and weeks, as big players sometimes hunt liquidations to aid with their trade. In the most bullish of uptrends we typically see price retrace to between the 38.2% and 23.6% fib retracement level. Less pronounced uptrends can still have healthy corrections as low as the 61.8% to 50% fib retracement, which is typically where you see liquidations.

Did you know: liquidations are often healthy for sustained uptrends in a market. They correct overleveraged positions, resetting the market sentiment/bias, and maintaining a balanced trading environment. Big players can use the market bias to their advantage by strategically placing large orders that trigger liquidations, allowing them to profit from the resulting price move and volatility.

Papi Insight

An argument could be made that closing the monthly chart over $30k signals the start of a bull market, especially as we also remain over the 20w SMA and 21w EMA, which generally signal rising bull sentiment. But this sentiment is likely aligned to the potential Bitcoin ETFs and if they are rejected or delays, may stifle short term bullish sentiment. From a technical perspective, the chart looks bullish, and the range between $30k and $40k is historically a heavy accumulation range; an ETF approval would be extra spice. If we retrace here, I prefer to see no lower than $33k, but prefer $34k or higher for support. To the upside, $38k is a key resistance and flipping it would be a very bullish signal.

Bear Perspective: The chart looks bullish, sentiment is rising – all positives. However, while a continued upside move 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 and up to $40,000 could be short lived, if the ETFs are rejected or delayed, or the macro degrades further and Bitcoin is impacted.

Bottom line: Should you buy? Bitcoin remains at half of it’s previous high, and even a conservative growth of 3x this cycle means you have plenty of time to stack crypto. Don’t wait, develop a DCA strategy and begin to buy now before institutions do.

US Dollar Index (DXY)

The Dollar Index showed some short term strength through September, due to an indecisive but decidedly more hawkish US Fed, but that rally faded in October as market sentiment pivoted and through November it’s clear that markets are forward looking to 2024, with the expectation of a reduction in rate hikes during H1.

The US Dollar Index (DXY) continues a gradual retreat, after peaking in October at 107.113 on the back of “higher for longer” interest rates. But make no mistake, they are approaching the end state of this hiking cycle, its just a question of when. As such, the DXY was down nearly 3.6% at peak in November.

While its not impossible to see the DXY rise again, if November closes under 106.6, we’ll see a proper lower high set, and the emergence of a downtrend, with a downside target of upper 90s possible in 2024. Key levels to monitor on DXY are closing the monthly over 106, or under 104.8, which would lend additional confirmation of either a longer rally, or impending downside towards the next key level around 101.

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 measure of uncertainty in the macroeconomic forecast, and regulatory climate. That said, it is clear the market sentiment is shifting, with growing confidence in the Bitcoin ETF approvals, and Ethereum following it in 2024, and with the worst of the bad news behind us in terms of bad players like FTX and the SBF trial.

We are currently oscillating around mid to upper 60s (moderate greedy), with a high of 74 in November – this is the highest sentiment has been since Q4 of 2021, nearly two years ago.

An ETF approval will 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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