Weekly Market Update: What You Need to Know (22-28 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
    • All-Day: [CAN] Holiday
  • Tuesday
    • 0430 ET: [EUR] German Manufacturing Purchasing Managers Index (PMI)
    • 0430 ET: [GBP] UK Composite, Manufacturing, Services PMI
    • 0945 ET: [USD] Services PMI
    • 1000 ET: [USD] New Home Sales
  • Wednesday
    • 0200 ET: [GBP] Consumer Price Index (CPI)
    • 1400 ET: [USD] Federal Open Market Committee (FOMC) Meeting Minutes
  • Thursday
    • 0200 ET: [EUR] German Gross Domestic Product (GDP) – Q1
    • 0830 ET: [USD] Initial Jobless Claims
  • Friday
    • 0830 ET: [USD] Core Personal Consumption Expenditure (PCE) Index

Bitcoin Continued Indecision

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 continues a sideways indecision. We observed a small breakdown following a head and shoulders pattern extending from March, but it quickly bounced from a low of $25.8k back to trading the current range around $27k.

Volume is decreasing, and momentum (RSI and TSI) reflect weak to moderate bullish divergence on the daily timeframe. This suggests a breakout will occur soon, with overall bias to the upside. However with uncertainty in the macro due to anxiety about the US Debt ceiling, any bullish sentiment must be taken with a grain of salt. While Bitcoin could respond favorably to a USD debt crisis, its more likely to crush US markets, and crypto with it initially, and would be on par with other black swan events.

Closing under $25k will likely invalidate the bullish [flag] pattern developing over the past month, and indicates a high likelihood of steeper losses and a move towards the lower $20k range.

In another likely scenario: a weekly close at or around the $27k range is neutral/crabby, but generally positive for the market. It would give bulls more time for consolidation, and probably let altcoins run a bit. This would also set the stage for another rally towards $30k.

Looking at medium-term forecasts:

Bullish analysts maintain Q2 and Q3 price targets ranging from $35k to $40k, with some outliers predicting price over $40k. 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). Bearish analysts maintain targets between a double-bottom at $15k and $20k.

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 saw a little rally in recent weeks, reaching ~103, but remains under the diagonal resistance from Q4 2022 that continues sending it towards the very important 101 support.

As noted in earlier market outlooks, the DXY rally would lead to a small Bitcoin correction, which is still playing out. Its unlikely we sustained DXY rallies beyond 105, but a monthly close over 104 could lead to steeper losses on Bitcoin and crypto markets, as it invalidates the current downtrend. On the other hand, a close below 101 would be bullish for crypto markets.

To confirm a breakdown and continued downtrend, we need 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 US debt ceiling also injects a bit of uncertainty into the macro that could disrupt any forecasts.

Market Sentiment

The Cryptocurrency Fear and Greed Index peaked at 69 last month, before dropping into a range around 50, with neutral sentiment.

The neutral reading is 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. There is also some anxiety about the US debt ceiling that needs closely monitored. If the US defaults on it’s debt, the market sentiment will surely turn to extreme fear.

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.

Trading Tips

Think about self-custody of your crypto, using technology like Ledger or Trezor. Storing your crypto on exchanges leaves it vulnerable to loss, if the company goes out of business. It also is used by exchanges to offer derivative services, which isn’t always beneficial to traders. Here are five reasons to consider hardware wallets:

  1. Control and Security: Hardware wallets are offline wallets that provide users with full control over their cryptocurrency assets, reducing reliance on third-party services which can be vulnerable to hacks or service disruptions.
  2. Privacy: With self-custody, users maintain their financial privacy. In traditional banking and some cryptocurrency exchanges, transactions and account details are known to the institution, which allows them to do things like sell their order book info to whales and institutions, or like FTX – they traded against their own customers.
  3. Direct Ownership: Self-custody of cryptocurrency means direct ownership. It represents the core principle of cryptocurrency – the idea of decentralization and eliminating the middleman in financial transactions. The user owns the keys and therefore owns the coins.
  4. Less Trust Dependence: With hardware wallets and self-custody, the security of your crypto assets doesn’t depend on the promises or competence of a third party. This becomes particularly important considering the history of security breaches on major crypto exchanges where users have lost their holdings. The author can speak to that one personally – I lost a lot of my portfolio when a third party who had custody of my coins was hacked
  5. Recovery and Redundancy: Hardware wallets often support recovery phrases to restore wallet data, allowing users to recover their assets in case the device gets lost, stolen, or damaged. This feature provides an extra layer of security and comfort for the user, knowing that their assets can be recovered and aren’t tied to a single piece of hardware.

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.