Fundamentals and expected events: week 09
Crypto markets: Bitcoin regained new strength and rallied back above $41,000 this afternoon after last week’s brutal selloff across the risk asset markets. BTC’s price jumped by over 9% to reach $41,300, in part, as traders reacted to the ongoing development in the Russia-Ukraine crisis. In doing so, the cryptocurrency briefly broke its correlation with the U.S. stock market indexes to perform more like safe-haven gold, whose price also went higher in the last several days. Altcoins followed the leader of the market with smaller or larger deviations.
Stock and commodity markets: The US stock markets rose strongly today with the main indices rising by about 2%. Investors mainly considered the financial risks of the ongoing conflict in Ukraine. The US stock markets, especially in the beginning of the crisis, overreacted and got into a state of oversold. This subsequently triggered a strong wave of buying. The major markets have thus largely recovered the initial losses caused by the escalation of the situation on Ukrainian borders. Russia is the world’s second largest oil exporter, accounting for more than 10% of production. Sanctions have hit the electronic chip industry. On the day of the invasion, gold prices soared to more than $1,970 an ounce, signalling market risk aversion, only to fall to pre-attack levels under pressure from sellers who moved their money to protect other assets. Russia is also a major gold producer with 9% of world production. However, next to gold, Russia is the largest producer of palladium with 45% of world production. Palladium is used in catalytic converters to reduce pollution. This conflict may therefore cause problems for the automotive industry.
Important events: Over the weekend, Western countries decided to freeze the Russian central bank’s foreign exchange reserves, and some Russian banks will be excluded from the SWIFT system. The Russian central bank has accumulated foreign exchange reserves worth around USD 650 billion over the years. The impossibility of using them in a wartime environment is an automatic burial of the ruble. Two Chinese state-owned banks, the Industrial and Commercial Bank of China (ICBC) and the Bank of China, are suspending dollar financing of Russian raw material exports and partially suspending Chinese currency financing of these exports. Goldman Sachs raised its consumer price forecast for 2022. The bank’s analysts believe that rising energy prices caused by the conflict in Ukraine are likely to drive eurozone inflation to a new high in May. Russia’s central bank decided today to hike its base rate sharply to 20% from the current 9.5% in a bid to support the weakening ruble. The Russian ruble weakened another 30% against the dollar today.
Cryptomarkets and marketcap: week 09
BTC / USD
At first glance, it looks like BTC is taking a bit of a shot at us. It broke a key TL and back within 15 hours we are back above that key TL after the fakeout and heading towards our TP of $41700. We have already reached strong resistance. And the next move is being decided. The longer we stay above $41300, the greater the probability for another continuous move. Given the current world situation, I rather expect a fall to a new local bottom. The Decision Box suggests us a price session where BTC will meet a key TL, bearish divergence and most likely a rejection of the golden cross at one point. We are now above the 50 and 200EMA, but after such a steep move that doesn’t look too healthy, this is no argument for further significant price gains.
ETH / USD
The situation with ETH is very similar to that of BTC. The only difference is that ETH is not yet above 200EMA and is now facing more massive resistance. We accurately tested the bottom of the channel in which ETH has been moving since last February during the correction. It must be said that this support is key and also forms a bridge between the bull and bear market. We would not like to see ETH close below the 2149 daily candle. We have currently tested this support at $2320 4 times, which could indicate an intense attempt to break it. The top of this channel is at $5200 and we have only tested it 2x. Certainly at the bottom of the channel we should not consider selling, but buying. With the eventual fall in price, there should be more buying and averaging of the purchase price. The bottom is near and the potential for upside is great. We have broken the local TL and are heading towards the $3000 level. A break of $2,698 could mean a further drop to the bottom of the channel, greatly increasing the probability of a channel break and a return to $1,750 for ETH. I would see this move, if it occurs, as very quick with a very intense bounce off the local bottom.
Disclaimer: This is not an offer for concluding a contract. Trading cryptocurrencies is a highly risky business and as such you are the only person bearing the risk and responsible for your own decisions. Do not engage in trading unless you do your own research and are fully knowledgeable of the risks.