Are you ready to hold the bag?

已更新

Over the past few days, the market situation calmed down a bit, and stocks reacted positively to the rescue of Credit Suisse and regional banks in the United States. We previously noted that a relief in Bitcoin would be closely tied to the rebound in stocks, which continues to be the case. People remain bullish, arguing that the recent aggressive uptick in prices only shows how bullish the market has become. One of the common arguments is that Bitcoin would not rise so steeply (and so fast) if we were in a bear market. However, we want to remind our readers that the enormous magnitude of the move-up does not necessarily mean we are out of the woods.

For example, during one particular correction in 2018, Bitcoin jumped almost 100% within two weeks. Yet, despite that aggressive move (accompanied by euphoria and bullish forecasts), Bitcoin still managed to erase over 73% of its value in the following months. The reality is that bear market rallies are well-known for their deceptive nature, which causes market participants to reassess their views, hook them on, and then surprise them with an abrupt change of direction (leaving them to hold the bags). We expect the current rally to be no different.

Why? Because in the big picture, nothing has changed. The FED is still poised to increase interest rates next week, further pressuring the (already) weak economy. As a result, we anticipate investors to sober up once they find out there is still no pivot on the table and more signs of recession appear. In turn, we expect this to weigh heavily on the stock market, which stays highly correlated to Bitcoin, dragging it down with it.

Illustration 1.01

Illustration 1.01 shows the correction of the downtrend in 2018 when Bitcoin rose nearly 100% within two weeks. Despite this enormous move, Bitcoin did not cease the bear market and ended up erasing over 73% of its value in the next 298 days.

Technical analysis
Daily time frame = Bullish
Weekly time frame = Neutral/Slightly bullish

Illustration 1.02

Illustration 1.02 displays the daily chart of Bitcoin around 2014/2015. A rally of more than 160% can be observed, taking place only within 19 days. Again, despite this abrupt move up, Bitcoin declined more than 84% over the course of the following year.

Illustration 1.03

The picture above shows the daily chart of Bitcoin. The yellow arrow hints at declining volume, which is highly worrisome.

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.

交易开始

Recently, the banking crisis and stablecoins breaking their peg caused massive inflows into Bitcoin. However, yesterday, UBS agreed to buy Credit Suisse, bringing a banking crisis in Europe closer to an end. Despite that, we continue to see a myriad of comments claiming that retail will punish big guys and we will see a banking collapse. This level of confidence and overly bullish claims from the same people who failed to acknowledge a bear market last year is scary to watch. As if it was not enough, people seem to forget that the U.S. economy is progressing deeper into recession, and the FED can not cut rates with inflation running at 6%. We see people like Balaji Srinivasan making $1 million bets that Bitcoin will hit a $1 million price tag in 90 days. If this does not show you how incredibly irrational (and full of hubris) the sentiment is becoming, then nothing will.

交易开始

Today, there is a much anticipated FOMC meeting and central bankers are expected to hike interest rates by 25 basis points, bringing the hiking cycle closer to an end. Many people seem to ask whether this will lead to Bitcoin jumping above $30 000. While we do not know the answer to this question, we know that the price continues to rise while volume keeps declining (raising a question about the sustainability of the current rally). From our perspective, it seems as if somebody was luring in small investors, convincing them how bullish the market is while slowly unloading holdings into retail's hands (at profit).

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