Technical Analysis – CW #30 – last chance for Bulls & a look at fundamentals: Bitcoin ETFs

Last week we predicted that Bitcoin would move to the next Fibonacci level above 7800. Considering the unusual RSI indicator, we concluded that there was a possibility for a major pullback before this would happen. Instead, Bitcoin moved straight to above 8000 without any major pullback. It turned out that a small correction to 7800 occurred after touching the 8500 level.  It is nothing that should worry us at the moment. The price recovered fastly and we remain bullish. An analytical look onto the bearish trend channels since December reveals that Bitcoin has broken all negative trend lines.

By reaching above 7770 this week, Bitcoin has broken all bearish trend lines. Another bullish signal.

 

Last week’s analysis revealed that the signals for a trend reversal and a new bull market are much stronger than signals for a bear market. From the perspective of TA we have a high potential for a rally. However, the TA only reveals to us the necessary conditions for a rally. But of course not the sufficient conditions for it. The sufficient conditions are revealed to us by the fundamental analysis. The FA looks at conditions surrounding the market: politics, economy, crisis, war etc.

Could Bitcoin ETFs trigger a bull market?

Everyone is talking about Bitcoin ETFs at the moment. ETFs are funds that invest in different assets. They usually represent the index of a certain market. A NASDAQ ETF contains major important companies that represent the NASDAQ. Diversifying your portfolio reduces your risk, in general. And so do ETFs diversify your portfolio. Therefore, Bitcoin ETFs do not mean that these funds will be made up by Bitcoin in majority. But rather SEC allowing Bitcoin ETFs means that it will be possible to add Bitcoin to existing ETFs. As these are managed and maintained by reputational professionals, this investment option would bring in a lot of institutional investors.

But this option also means that investors might be invested into cryptocurrencies. But they will not own or even use them. Still, SEC allowing Bitcoin ETFs would legitimately be bullish news for Bitcoin.

Other bullish news could be that India or China change their unfriendly crypto policies. It would open huge markets once again.

A look at the other side

But what if the markets fail to realize this potential. How much room is there until we are bearish again. The correction on Bitcoin has shown us that the level around 5800 – 6200 is critical. As long as we remain above that level we are bullish, as soon as we go significantly below that level. We should expect Bitcoin to fall much lower. Testing resistance zones more than 3 times is a recurring pattern in charts. It happened to gold this year too.

Gold tested the level 1300 – 1320 4 times. People who ignored this signal got burned.

However, the fundamentals for gold were much more negative for gold than they are for Bitcoin. The fed announced that it would raise interest rates slowly at the beginning of this year. As gold doesn’t offer interest rates, other assets become more interesting. A good time to short gold for other assets that profit from higher interest rates.

So, in any case, be aware of how to trade. Set reasonable stop losses beneath the resistance level.

Hope you trade successfully!

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