With inflation cooling down a tad after successive interest rate hikes by the US Federal Reserve, Bitcoin was promptly back to business. BTC had undergone one of the least volatile periods in its history with prices swinging between $15,470 and $18,000. However, with improved market sentiment post new year, BTC’s price catapulted by a remarkable 28% in the month of January. This move by BTC has caused liquidations worth more than $500 million since Friday as exchanges across the world had to close traders' leveraged position due to evaporation of initial margin provided by the traders. In today’s article, we will analyze the price actions of Bitcoin (BTC) and Ethereum (ETH) in detail.
The 200-day simple moving average (SMA) has been one of the most important technical indicators widely used to spot macro market trends. Basically, the price of BTC whether it's above or below the 200-D SMA has been synonymous with bullish or bearish market trend. Crypto markets, especially BTC, express cyclical behavior consistently. BTC broke the strong psychological level at $19,500 last week. Coincidentally, the crypto market leader has been trading below 200-D SMA till 13th Jan for a total of 381 days which is just 5 days shy of 2018-19 bear market at 386 days. So, one can be cautious if BTC falls back below the 200-D SMA as it would mean bad days ahead for BTC.
Ethereum is a decentralized, open-source blockchain platform that facilitates the creation of smart contracts and decentralized applications (dApps). The platform is powered by its own crypto asset, ETH, which is used to pay for transaction fees and computational services on the network. Ethereum also supports the execution of complex financial transactions, such as decentralized exchanges (DEX) and prediction markets.
ETH is currently trading at nearly $1600, up by more than 20% from about a week ago. Banking on the sudden surge of Bitcoin, ETH seems to have taken on a bull run itself. In classic crypto style, ETH broke out of its multi-month triangle formation several times, deceiving bulls and bears with deviations on both sides. It ultimately now trades firmly above its triangle (and its 200-day EMA at $1400), but is yet to convincingly claim a return of the bull market - which, at the moment, require 2 other confirmations. The first, being the claim of resistance at $1600, and another, with market structure change on the longer time frame with a high of $1675 or more.
But with a ton of support below it, ETH may well be on its way to a prolonged uptrend after going through a rough crypto winter. Strong support below include its 50 and 200 day moving averages (at $1263 and $1400, respectively), and psychological support at $1,500.
But the large gap between ETH’s 50 and 200 day moving average indicates that it might be stretched, and with not much to look forward to, bears would hope for a rejection (while late longs would want to wait for terests below for entries).
The daily relative strength level (RSI) levels of BTC and ETH are above 80 which means its in overbought territory. Only a few times in history, it has gone up to these levels. But interestingly the weekly RSI is just above 50 for both and has been going up even though the price of BTC was going down till end of 2022. So, daily and weekly RSI’s are not a lot helpful when it comes to price and RSI correlation.
Under these conditions, it's important to keep an eye on the macro factors like inflation, employment rates, FOMC decisions etc to judge the overall direction of where markets are heading. Just because BTC registered an explosive growth in two weeks doesn’t mean markets are back to bullish. It’s better to set up trades that you can benefit from a sudden upside like January’s move.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.