Weekly Market Update: What You Need to Know (15-21 May)

Crypto & Economic Calendar

The events listed below inform governments, corporations, traders and investors on the health of the economy, which can lead to volatility in markets and currencies.

  • Monday
    • 2200 ET: [CNY] Industrial Production (YoY)
  • Tuesday
    • 0830 ET: [USD] Core / Retail Sales
    • 0830 ET: [CAD] Core Consumer Price Index (CPI)
    • 1950 ET: [JPY] Gross Domestic Product (GDP) (Q1)
  • Wednesday
    • 0500 ET: [EUR] CPI [YoY]
    • 1030 ET: [USD] Crude Oil Inventories
    • 2130 ET: [AUD] Employment Change
  • Thursday
    • 0830 ET: [USD] Initial Jobless Claims
    • 0830 ET: [USD] Philadelphia Fed Manufacturing Index
    • 1000 ET: [USD] Existing Home Sales
  • Friday
    • 0200 ET [UK]: Gross Domestic Product (GDP) (YoY, MoM and Q1)

Bitcoin Bounce From Key Levels

Note we continue to use the BTC:USD chart adjusted for the USA M2 money supply, due to more precise representation of high-timeframe key levels; and accounting for a variable money supply and it’s impact on price Chart: BTCUSD/FRED:M2SL*22

Bitcoin logged a slow step down from mid-April’s highs, landing at $25,800 on Friday. This saw price tapping the 38.2% Fibonacci retracement level, just above key moving averages (20 & 21-week MA band), before bulls sent price up an impressive 7% into Monday.

If $26,600 remains intact through the week, this could be the start of another rally towards $30,000. However if bulls lose $26,600 and set a lower low, that brings $25,500 into the picture. Closing under $25,500 will invalidate the bullish [flag] pattern developing over the past month, and indicate a high likelihood of steeper losses and a move towards the lower $20,000 range.

In another likely scenario: a weekly close above the $27,000 is neutral/crabby, but generally positive for the market as it gives bulls more time to build additional support in this range, and see consolidation just below the $30,000.

Looking at medium-term forecasts:

Bullish analysts maintain Q2 and Q3 price targets ranging from $35,000 to $40,000, with some outliers predicting price over $40,000. This is largely dependent on macroeconomic factors and general risk appetite, so it’s important to monitor the DXY, US Fed and European Central Bank (ECB).

Note at the end of the article we have tips for protecting your capital in volatile crypto markets. Trade smartly, manage risk and protect your capital.

US Dollar Index (DXY)

The US Dollar (DXY) moves slower than crypto, so our weekly forecasts will reflect incremental updates –

DXY continues contending with bearish pressures and a potentially less hawkish Federal Reserve. It remains rangebound at the historically significant 101 level. On seven occasions over the past four decades, a close below 101 resulted in a downtrend lasting at least one year.

Although the DXY is flirting with sub-101 levels, it consistently closes above the diagonal support extending from 2002. This pattern suggests the possibility of a relief rally as high as 105 before further decline. In the event of a relief rally, Bitcoin and crypto markets will drop.

To confirm a breakdown and sustained downtrend, we need to observe a monthly close below 100.4. With peak interest rates potentially upon us and recent banking instability causing some capital flight from US banks, it appears likely that the dollar will continue to weaken in the upcoming months, but not a guarantee.

The precise timing of any major momentum shifts will depend on economic data from the US, EU, and other major economic powers.

Market Sentiment

The Cryptocurrency Fear and Greed Index peaked at 69 last month, before dropping into the upper 40s and neutral sentiment. The move to neutral sentiment is a positive for bulls, as too much bullish sentiment leads to unstable rallies and large selloffs.

The neutral reading is also a reflection of the current indecision in markets, as recessionary worries and banking instability is spooking some investors; though some are cautiously optimistic that peak rates are here or close.

The overall risk appetite, including that of crypto markets, will be dictated by the macroeconomic climate, so monitoring of the US Fed and European Central Bank (ECB) as leading sentiment indicators is important.

Bitcoin Momentum

Bitcoin momentum reflects a recovering bullish sentiment. In line with the price, momentum indicators like the Relative Strength Index (RSI) and On-Balance Volume (OBV) hint at a recovery rally from the oversold conditions witnessed last week.

Momentum is likely to shift to a strong bullish stance in response to any news that leads to a decline in the DXY, including a more dovish stance from the US Federal Reserve, easing recessionary concerns, resolution of the Ukraine conflict, or a combination of these factors.

Memecoin Mania

Pepe is following a trend similar to the rest of the market, with a potential bull flag looking for a breakout to the upside, or a collapse to lower levels. While Pepe has a lot of potential support as a possible emerging memecoin of the next bull cycle, be very careful trading it – its still an unproven token that relies on hype or big events, like Coinbase posting, to move.

If you are interesting in meme communities but unsure about Pepe, you can also explore DOGE, Shiba, or my personal favorite – Bananos. But note the two traits that define a memecoin are 1.) a fun and lively community; and 2.) onboarding new traders to crypto. They may mature beyond that, such as DOGE’s community launching a L1 chain, but thats the exception.

BE VERY CAREFUL trading all the new memecoins in the market. I estimate 98% will rug, either intentionally or simply by failing to launch. There isn’t enough liquidity for another memecoin to repeat PEPE’s performance in the near term. Protect your capital, don’t gamble.

Trading Tips

Note: we provided this tip last week, but keeping it up one more week. If you haven’t experience large downside moves before, here are some tips:

  • If you are stacking spot or using a Dollar Cost Average (DCA) strategy, reduce your buying interval until we see momentum like RSI or TSI reset on the daily or weekly, or for the Fear and Greed Index to drop.
  • If you are swinging spot, monitor your stoploss and profit targets; be more judicious about moving them with price to avoid getting caught by sudden pivots in the market and maximize profit.
  • If you are day-trading or margin trading, you shouldn’t be too impacted. Just be careful not to marry a directional bias, like looking for longs when the market suggests it’s reversing. Its easier to trade the prevailing trend than against it.
  • If you are staking and have a large amount of rewards to claim, consider moving a portion into BTC, ETH or stablecoins over time. This will hedge against large downside moves in the future as BTC and ETH tend to be less impacted.

If you enjoyed this article and want more hot takes and interesting posts about the economy, web3, crypto, decentralized finance, NFTS and more – you can follow Papi on Twitter at https://twitter.com/1MrPapi.

Disclaimer: Nothing found on this website, or any sources linked to this website includes financial advice of any sort. We are not certified financial advisors, use our content at your discretion as entertainment, and as an educational resource. Do your own research.