Market Update: What You Need to Know (5-11 February)

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
    • 0945 ET: [USD] S&P Global Purchasing Managers Index (PMI)
    • 1000 ET: [USD] Non-Manufacturing PMI
  • Tuesday
    • All Day: Holiday New Zealand
  • Wednesday
    • 1030 ET: [USD] Crude Oil Inventory
  • Thursday
    • 0830 ET: [USD] Initial Jobless Claims
      • Forecast: 219k
      • Previous: 224k
  • Friday
    • All Day: Lunar New Year

Bitcoin – Welcome to the Post-ETF World

Summary: Once again, little is changed over the past week, as we oscillate inside the value range of $38k to $48k. In simple terms, price over $35k is high-timeframe (HTF) bullish, and over $32k is healthy. Don’t overthink it, and as long as we are under previous highs, we are in a good place to stack and wait. I’ll revisit HTF thoughts if we close a monthly under $32k. If you are curious about reasons for the short-term muted to bearish price action, scroll down to Market Sentiment.

Semantics: Sentiment is waning in the near term, but remains overall positive. The Bitcoin ETFs provided a boost to the perception of Bitcoin and crypto markets, and Bitcoin ETFs are now the SECOND LARGEST ETF commodity in the US after Gold. Also the crypto lobby is offering a strong counterpoint to the banking and anti-crypto lobby somewhat led by Senator Warren. While there is always that existential risk of oppressive crypto regulation, I’m comfortable betting future regulations won’t be as heavy-handed, and I will continue to double-down on red days until we approach previous highs.

  • Immediate resistance: ~$42,600
  • Immediate support: ~$42,000
  • Current value range: $38,400 to $44,800
  • Local support levels:
    • $42,069
    • $41,800
    • $40,360
    • $40,000 psychological & correlates with 2021 & 2017 levels
    • $38,482
    • $37,142
    • $36,800 (21w EMA)
    • $36,043
    • $35,700
    • $35,000
    • $34,271
    • $33,000
  • Local resistance levels:
    • $43,864
    • $43,200
    • $44,900
    • $45,300
    • $45,400
    • $45,800
    • $48,991
    • $52,619

Bull Perspective: The success of the ETFs, compounded with relaxing macroeconomic conditions and the Bitcoin’s halving on the horizon – we have the right conditions for an increasingly bullish market in 2024 into 2025.

Bear Perspective: While economic circumstances appear to be improving, there are still stressors and risks to monitor. If macroeconomic data comes back as weaker than expected, the US Fed can reconsider their retreat from peak rates, and even raise them further. Senator Warren and other leading politicians appear poised to continue an anti-crypto narrative into the next election cycle, potentially stifling investor appetite and bringing more divisive politics to the crypto markets.

Bottom line: Should you buy? Bitcoin remains under it’s previous high, historically that means you have time to stack crypto. Don’t wait, develop a dollar cost average (DCA) strategy you are comfortable with, and begin to buy now before institutions buy more.

Note: why do I rarely cover other coins and tokens on this weekly newsletter? As a cycle trader, I look at Bitcoin as a proxy for the larger crypto market. It drives the cycles that everything else follows, so by understanding Bitcoin, I understand the cycle at large. I do buy and hold altcoins, with my largest allocations in Ethereum and Bitcoin Layer-2 like Stacks.

US Dollar Index (DXY)

Change typically comes slow to the US Dollar. In this case it appears to have peaked in January 2022, and is trending down in accordance with a multi-decade downtrend and inflation/devaluation of the USD.

Over the past two years I discussed the inverse relationship between the strength of the US Dollar (DXY) and speculative markets like crypto and equities. Of particular importance, the ~101 level, arguably the most significant for the DXY. Almost every time in the past 50 years, when DXY rejected from, or closed under the 101 range, it led to a prolonged period of weakening dollar.

We continue to find the DXY on the cusp of losing 101, and if the Fed reduces rates several times in 2024, that will be the catalyst to send it lower. An intermediate target for such a breakdown is around 96. After years of watching the DXY, this man will throw a party when it finally loses 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 the worst of the bear market is behind us, we are seeing a small retreat from peak bullish sentiment in late 2023, but its still significantly elevated from a year ago and remains firmly bullish. Some cooling off is due to the ETFs finally being delivered, and a small selloff (in part due to Grayscale unwinding a large portion of their massive Bitcoin holdings).

In my opinion, this is a very healthy and overdue retracement in terms of sentiment. Most of the past year saw very bullish sentiment, which leads to other unhealthy market conditions like overleveraged traders; a retrace in sentiment and price will provide more longevity to any bull market. Also Grayscale distributing their supply of Bitcoin is a positive for the space.

We are currently oscillating around neutral sentiment with a weak greedy bias on fear and greed index (current sentiment is ranging between around the 80s this week.

Short term, we are observing a steady but muted bullish optimism, due to the bearish short-term price action following the ETF approval. That appears to be driven by a combination of Grayscale selling some of their massive Bitcoin holdings (including $1 billion of FTX’s GBTC), a ‘sell the news’ event on the ETF launches, and a relief rally by the USD Dollar (DXY) which generally stifles risk assets like crypto. In my opinion these are short term distractions, and the market is quite healthy.

Senator Warren’s anti-crypto bill, and [some] Democrat posturing around crypto, could shift the narrative to a negative tone as the election cycle ramps up. It’s unlikely to stick but introducing political bias to cryptocurrency could lead to other unforeseen issues.

Note: Remember Bitcoin, Ethereum, cryptocurrency is apolitical; its designed by and for the people. Governments, banks, funds, they are tourists here.


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