This is the market update. Obviously, bitcoin stocks and even bonds are down this week, all being sold off, and this just continues the route that we’ve seen since the start of this year. I want to look at the short, medium, and long term. There are three charts that really show where we might be going.
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QQQ vs Bitcoin BTC
I want to start with Bitcoin versus the Nasdaq. You can see that since the beginning of the year, these two have been correlated one for one, both down within a percentage point of each other since, you know, January. So in the past, there have been times when Bitcoin has become very uncorrelated.
During times like this, when the Fed is basically manipulating things when they were printing money and now when they’re actually starting QT (quantity of tightening) taking money out of the system, everything’s correlated right, so everything’s selling off bonds, stocks, and Nasdaq. Even though the Dow Jones and Bitcoin fears of a recession are at their peak, we’ve got a way to go, especially if economic figures start coming down. Everyone’s going to be competing to see how bearish they can be.
I want to look at the medium and long term because this really shows a massively different picture, so it depends who you are as a trader. If you’re a short-term trader, you just have to have a bias towards basically selling rallies and going short on rallies because we are not in a market that can really go up over the short to medium term now. The very big danger of this, and I’ll get onto this now, is that really, over the medium term.
Bear market Bitcoin
Bear market rallies do happen. You may have actually seen one right here from this level at $37,000 really straight up to $47,000. That happened to coincide with the Luna Foundation essentially market buying Bitcoin.
There was some kind of manipulation or something in the market that was affecting that, but those things can happen in bear markets. When you want to short, what you want to be doing is, you know, after the rally happens and there are bear market rallies, but obviously, once we’re still in this regime of Fed tightening, you really do have to short the rallies and not buy the dips. If that makes sense in the previous years when the Fed was printing, you would just wait for dips and buy for the next leg up, but this is very different. You will probably have a better probability of winning trades if you go short on those rallies, but obviously, you know, you might not want to trade short, especially if you are a beginner or if you are a trader and you trade futures.
What I want to get to is a head and shoulders pattern that I can see for Bitcoin, which is usually a bearish pattern, especially if you’re at the end of a cycle, which we are because the Fed is now tightening, which is definitely a change in cycle. How much of this will affect the kind of medium-term future for Bitcoin?
What I’m talking about here is you can really see what I would say is a head and shoulders. We have a shoulder, we have the head and then a potential shoulder here, but that could actually come down to this point as well, and we could have just played out this shoulder.
I don’t think this is the case. I think we actually entered a new paradigm at this level, and we’re now in kind of uncharted territories. So usually a head and shoulders is kind of bearish. We’ve already got that kind of sell-off. I do think we’re in a new paradigm, but obviously what we’re seeing right here is a support level that really does have to hold around $34,500. That is obviously a very big support level under that. It really is clear sky down to probably $30,000.
I actually heard the head of Nexo come out and say that they’ve got a very large number of institutional orders around 30K around this level, so if the price does get down there, he’s expecting quite a lot of activity to take place and probably a flaw around that level. So, just some good insights from a very large player in the industry that has a lot of buyers coming in at $30,000. I think there are a lot of other buyers around that level as well. If you have a ton of buyers at $30,000, it probably means that you’re going to see it trade around that, maybe 10 or 15 above that, trying to get them to pay up. So that will be an interesting move over the next few weeks to see if we can hold this $35,00 level, maybe have a little relief rally here. He seems to think that we’re getting close to kind of a bottom, especially with a lot of institutional players around the 30 level.
Bitcoin long term
If you’re a long-term trader or investor, this is really just an opportunity to dollar cost average and get in at some better prices than what we were seeing at $60K, which was just way too much money sloshing around. I want to highlight this post by ADA whale:
Now apparently this person is actually a trade fire person and fixed income. These people look at all of these emerging market currencies and rates all the time. It’s interesting to see this very long-term trend that you can see here.
What it is essentially is a line of the dollar vs. emerging market currencies and a line of bitcoin vs. the dollar. Now you can see they’re fairly correlated here. I think it shows a picture really clearly that, essentially, the dollar just strengthens continually against emerging market currencies, and that makes a lot of sense. The vast majority of currencies are really just very poor; they have extremely high inflation, way more than the dollar. They’re just much worse economies overall than the dollar, U.S. treasuries and the American economy.
They just continually debase themselves versus the dollar. What’s also interesting is that when the dollar itself, which is the best fiat currency, the best of a bad bunch, comes up against what is very clearly the hardest money ever created in Bitcoin, it also devalues at the same pace. When you’re in it, when anyone wants fiat currency, they want the dollar vs. the Argentine peso or anything else. You don’t want to hold those. You want to hold the dollar vs. those, but over the long term you also want to hold Bitcoin versus the dollar because it also appreciates to around the same extent.
That’s why I think Bitcoin, over the long term, really is more of a savings account for the world. I think it unlocks a lot of potential growth in emerging markets. Emerging markets have always been seen as a very good place to invest because they have growth, but in reality they’ve been terrible to invest in because you have to take your dollars and put them into a rubbish currency that inflates away. No one wants to do that.
But now we have Bitcoin, and people can save their own wealth that they create, and people can invest in those countries with Bitcoin, which is a strong asset also. This may unlock the growth from those markets that we actually need rather than just debasing all of that growth. This is the unlock for me, and this is the way over the long term that we actually get out of this deflation that’s happening in the west.
ETH / BTC
Now, if you just looked at this chart and the people in the group were saying, “Wow, this is quite a bullish chart.”
You know, if we can come and actually see just ignore that, we can actually see these higher lows coming here, so this is this is a theorem against bitcoin, and what we’re really seeing here is a lot of interest in Ethereum. It’s becoming more valuable than Bitcoin. I think as the merge comes, you’re just going to see a huge amount of interest in Ethereum. They’re very different assets, but Ethereum really is extremely strong in terms of its price in relation to Bitcoin, which is why I hold both. I think Ethereum has a ton of value and clearly is appreciating in value quite heavily, and the merge is going to absolutely supercharge that.
[This article is a transcription of a video made by MoneyZG]
Original video: https://youtu.be/4zibNLxuVvc ]