StrateG Update Week 28 - Q3 - 2023
Bulls gaining momentum
CONTENTS
Overview of this week
Supermacro context
Please note that while I can provide information and insights based on my knowledge, it's important to remember that I cannot offer specific financial advice. #nfa
Overview of this week
This past week has witnessed significant breakthroughs and developments that have the potential to further fuel the bullish trend for Bitcoin/crupto.
Europe is set to launch its first spot Bitcoin exchange-traded fund (ETF) this month, marking a significant milestone in the region's adoption of cryptocurrencies.
The US Dollar index (DXY) has broken below the key level of 100 for the first time in 14.5 months, indicating a potential weakening of the US dollar.
The S&P 500 index has surpassed the 4500 mark, signaling positive momentum and strength in the stock market.
In addition to these breakthroughs, there have been other significant news items:
In a significant development, a US judge has recently ruled that Ripple's XRP cryptocurrency should not be classified as a security. This ruling has brought regulatory clarity to the project.
This clarity is likely to have a positive ripple effect across the cryptocurrency market, benefiting other projects facing scrutiny over their classification as securities.
The Consumer Price Index (CPI) has shown a headline inflation rate of 3.0%, slightly lower than the expected 3.1%, while the core inflation rate stands at 4.8%, lower than the anticipated 5.1%.
The Producer Price Index (PPI) indicates that inflationary pressures may subside in the coming 2-3 months, potentially leading to a drop in the CPI below its target. It is worth noting that CPI tends to lag behind PPI movements.
Bitcoin (BTC)
Halving cycle theory
A cautionary note regarding the widely held belief in the Bitcoin halving cycle theory: According to this theory, bull markets are expected to follow each halving event. However, it is important to acknowledge that external factors and broader market cycles can overshadow the impact of halvings.
One key factor to consider is the upcoming recession anticipated in the fourth quarter of 2023 or the first quarter of 2024. This economic downturn introduces the likelihood of deviations from the expected patterns. It is important to note that Bitcoin has only existed during non-recessionary periods, which means that its behavior during economic downturns remains uncertain.
Moreover, the significant price drop experienced by Bitcoin during the COVID-19 pandemic, along with the correlation to stock market movements, has demonstrated that Bitcoin is not immune to volatility and vulnerability during uncertain times. This contradicts the widespread belief that Bitcoin will thrive during recessions.
Historically, recessions have often been preceded by blow-off tops, and this pattern is already evident in the NI225 index. Furthermore, with the recent decline in the US dollar, it is highly probable that the ongoing bull run in the S&P 500, which began in the first quarter of 2023, will result in the printing of fresh all-time highs. This positive momentum in the stock market is likely to extend to the cryptocurrency market as well.
2Y+ channel is broken
Last week I showed that Monthly Indicators Point to Bullish Momentum.
It seems like momentum is picking up indeed as this week the bulls have pushed once again above the 2Y+ downtrend and have succeeded to stay above. It’ll be important to watch how the week closes though.
Bullish X
Based on the analysis of the 200 S(D)MA (blue line) and the 200 S(W)MA (red line), it is likely that a bullish cross between these two moving averages is inevitable. The 200 S(D)MA is currently calculated over the price range indicated by the blue box, the average over the last 200 days. However, in the next 20 days, the calculation will shift to the price range indicated by the yellow box, excluding the lows from December 2022.
Unless the price drops below the lows within the yellow box ($16-19k), the 200 S(D)MA will continue to increase over the next 20 days. On the other hand, the 200 S(W)MA is a slow-moving average and is not expected to change significantly in the next two weeks.
In conclusion, unless the price decreases significantly to reach the lows of $16-19k, a bullish cross between the 200 S(D)MA and 200 S(W)MA is almost unavoidable.