Bitcoin and Ethereum Gave Back their Gains, but has Anything Actually Changed?

• Bitcoin and Ethereum Gave Back their Gains, but has Anything Actually Changed?

Bullish crypto momentum faded after Fed Chair Powell dashed investors’ hopes that a positive CPI report would precipitate a trend change, but longer time frames remain intriguing.

This week, crypto markets pulled a nice head fake by rallying into resistance on a “positive” Consumer Price Index (CPI) report, only to retrace the majority of those gains after Federal Reserve Chair Jerome Powell struck a surprisingly hawkish tone during his post-rate-hike presser.

The Fed raised interest rates by 0.50%, which was well within most market participants’ expectations, but the Fed Open Market Committee consensus that rates would need to reach the 5%-5.5%+ range in order to hopefully achieve the Fed’s 2% inflation target raised eyebrows.

This effectively put a damper on traders’ hopes for a Fed policy shift in the first half of 2023, and the effect was felt throughout the crypto and equities markets.

It’s also not surprising that the price action and market structure of BTC and ETH appear identical in lower time frames.

So, yes, markets retraced their recent gains in response to bad news, but has anything “changed?” Bitcoin is still trading within a narrow range, as is Ether, and neither asset has recently set new yearly lows.

When in doubt, zoom out, as the saying goes. So, let’s do that quickly and get a better sense of the terrain.

On a weekly basis, Bitcoin is still bouncing around in a falling wedge, a classic technical analysis pattern with a bullish bias. Within the framework of technical analysis, the price is doing pretty much what one would expect it to do.

Resistance is expected at the 20-MA, which is parallel to the descending trendline. The volume profile metric indicates that the majority of activity is in the $18,000-$22,500 range, and the lower arm of the falling wedge has so far served as support.

Similar price action was seen in May 2021-July 2021, but the circumstances were completely different, so that’s an apples-to-oranges comparison. The MACD and RSI are both diverging. In short, the price is trending down, while MACD and RSI are trending up on a weekly basis, which is something to keep an eye on.

The weekly timeframe appeals to me because candles form slowly and trends, whether bullish or bearish, are relatively easy to identify and confirm. It’s much easier to construct a solid investment thesis for the weekly time frame than it is to spend endless hours poring over four-hour, one-hour, and daily charts.