Bloodgood's Notes #112
FOMC is back after holiday break, the importance of US session for BTC, and more
Fundamental Overview
I assume most people enjoyed taking a break from thinking about the Fed over the holidays, but like it or not, the next FOMC is tomorrow, and everyone will be waiting to see what Powell will signal for monetary policy going forward. As for tomorrow’s meeting itself, the market seems to be pretty much certain that the Fed will hold rates steady, but what will really matter are any comments that might indicate the direction they will take for the following meeting. Regarding that one, which will be on 20 March, expectations are pretty much split down the middle between keeping rates unchanged and a 25 bps rate cut. There’s no doubt that the March decision will also largely depend on economic data that will come out in the meantime—especially the CPI reports for January and February—but the fact that a cut is very much on the table means that any comments by Powell tomorrow will have an outsized impact on the market.
Another thing relating to the world of TradFi is that the US session has become much more important for BTC now that the ETFs are live. If you’ve been around in the space for a while, then you’ll know that different time zones have had different effects on the market—for example, the infamous Asia session was particularly brutal for quite some time—and while NY exchange hours were always fairly important, that is becoming even more the case now. Especially on Coinbase, volume is becoming more concentrated in TradFi trading hours, so we’re likely to see thinner moves and overall less decisive price action outside that time window.
Bitcoin
Bitcoin bounces back above its key weekly level.
Just a few hours after I sent the previous newsletter, bulls stepped in to defend the $38k level. As discussed previously, the $38k and $36,500 levels are MUST hold zones if we want to see continuation soon. And it seems that whales know that. Bitcoin price pumped 12% since the newsletter which was sent on Friday. Day traders are certainly excited to see that much volatility.
At the time of writing BTC is trading inside the weekly range between $42k and $47k, with the local high at $49k. The local high has been formed slightly above the range high and will be a key level to break if we want to see $50k soon.
The daily chart paints a clear picture of how the breakout above $42k occurred—in fact, it was a textbook breakout. The bottom was formed with a hammer candle formation which was soon followed by a decent pump. In my books, the bullish scenario is back on the menu, as long as we remain above the weekly leve
SPX, Gold, and DXY
Stocks pushed higher since the last update, but there isn’t much news regarding the S&P 500. Something similar holds for gold, which is trying to break the short term downtrend since it was rejected at the highs.
Lastly DXY is fighting the 103 resistance which will decide whether BTC goes up or down in the coming days. Ideally, we see a lower high printed here and go for new lows, but in any case let’s wait and see what happens this week with the FOMC and jobs data.
Ethereum
Ethereum bulls managed to defend the $2100 breakout area.
Although Bitcoin recovered better than ETH, it is important that the breakout area was intact and we are still inside the $2100-$2500 range. At the time of writing it seems that Ethereum is waking up and slowly pushing towards the resistance. The plan is simple here: regardless in which direction the range breaks we will trade a retest, meaning that if a breakdown occurs we short on the retest and if there’s a breakout we long the retest if given the chance.
ETH/BTC closed below the 0.055 BTC level (again). I will keep you updated if anything happens, but for now 0.055 is resistance and 0.045 is support that we bid if it is reached.
Blood’s content recap
My routine after a losing trade.
“Loosing a trade hurts, but it’s an important step towards greatness.
Finding winning trades isn’t easy and many are scared of losing their hard earned money.
You are so focused to find the perfect trade that you rarely take one.
Action will deliver an outcome.
Trade.”
Make a routine.”
BTC spot etf thougths
“Despite the recent #Bitcoin price action, Spot ETF will impact the industry heavily.
More capital will flow in BTC which will reduce volatility, but in general, we will slowly grind upwards
The king is maturing, hence ETH and other alts will prosper due to Bitcoin's stability.”
Concluding notes
Even though Grayscale selling was far from the only driver of the recent correction on Bitcoin, as I discussed in the previous newsletter, it’s still worth noting that it seems to be slowing down. While GBTC outflows have averaged between $500 and $600 million, the dumping slowed to just under $400m on Thursday and only $255m on Friday. Friday was also the only net positive day last week, with $14m net inflows overall, but Monday is when things really turned around: Grayscale sold less than $200m, while net inflows were $254m.
The key thing here is that Grayscale running out of clips to dump is definitely bullish: regardless of how much of a role that sell pressure played for the correction itself, there’s no doubt that having it dry up will be good for the price action going forward. If we also see higher net inflows sustained in the coming days, that will make the market more confident that the interest in the ETFs is here to stay.