Bloodgood's Notes #124
Bitcoin Halved, TradFi is not so optimistic and Paraguay proposes bill to recognize Bitcoin as legal tender
Fundamental Overview
When it comes to crypto-specific narratives, there’s nothing that compares to the oldest and most important driver of scarcity in the OG crypto asset itself, namely the Bitcoin halving. Against the backdrop of governments across the globe getting into ever more unsustainable levels of debt, leading to money-printing and inflation that constantly makes life harder, bit by bit, for everyday people, Bitcoin’s emissions were cut in half once again, demonstrating immutable scarcity as the world inches closer to the final 21-millionth bitcoin being mined. Halvings are, of course, mathematically certain and there’s absolutely nothing unexpected about them, but the reason they always play such a gigantic narrative role is that they bring more mainstream attention to the concept of a provably scarce asset, as opposed to the constantly devaluing scraps of paper that are still the only kind of money that most people are familiar with.
There are also some other upsides to the halving, independent of narrative—for instance, sell pressure from miners being halved—but the most important effect still has to do with thoughts and not bytes of code. Crypto cycles have always been centered around halvings and, while it’s possible that things will change at some point down the line, there’s still no reason to abandon the patterns that have proved so reliable from the start. This cycle is definitely somewhat unusual (in that ATHs normally don’t tend to happen before the halving), but the default assumption should still be that the cycle is far from over.
Meanwhile in TradFi, the main narratives are a lot less optimistic right now. Apart from geopolitical worries, the Fed’s John Williams shook up the market with a surprising statement. When asked about potential rate hikes, he opted not to repeat Powell’s recent comment that holding rates this high will be enough; instead, he said that raising rates isn’t the baseline option, but it’s possible depending on economic data. Given that everyone had only been arguing about the number of cuts that are coming up to that point, merely mentioning hikes was enough to spook traders.
Bitcoin
Bears forced a new low on Bitcoin, pushing it below $60k for a few hours.
A lower low on a higher timeframe doesn't bring good news for bulls; however, we see a hammer-like candle formation, which usually leads to a bullish continuation. Given that the halving happened over the weekend, I expect the trend to turn soon. If you look at the price action from previous halving events, you will notice that the price always retraced before or soon after the event by 10-15%. Following the retrace, we have seen months of upside.
The daily timeframe is bearish. A series of lower lows and lower highs with volume dropping means that there is a possibility of going further down in the short term, unless something huge happens. The level that we must monitor is $60k as it is a must-hold level if we want to see continuation.
SPX, Gold, and DXY
Stocks bounce after briefly dropping below the 5000 level.
As discussed a few weeks ago, given that we were seeing price discovery, it was hard to provide any levels as support; however, the round numbers are always a good place to start in such situations. The 5000 level will remain a level that we must monitor in the future. Let's see if we manage to reach previous highs with this pump.
Gold finally takes a breather after several weeks of insane growth.
Similar to what we discussed with stocks, the price is in discovery mode and I don't see any levels worth mentioning as targets for retracement. The level I will be monitoring in case of a bigger retracement is the previous all-time high of $2148, which was tested and confirmed.
DXY is also taking a breather after its giga green candle two weeks ago.
Last week, it printed a shooting star candle pattern which usually leads to bearish momentum, and at the time of writing, it seems to be breaking its important 105.77 level. Important times are ahead; I am really keen on seeing how DXY will perform and its impact on crypto.
Stay safe out there, fam.
Ethereum
Ethereum struggles to stay above its major level.
Weirdly enough, I find it bullish, given that it dropped halfway down towards the next significant weekly level which lies at $2600.
I am convinced that Ethereum remains a good investment as long as the dip is being bought heavily.
There are no major developments on the ETH/BTC chart as it remains below our level of interest. Will keep you updated when anything happens.
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Concluding notes
As the halving has been all over the media, it’s interesting to note that the mainstream attention on crypto has also been bolstered by some positive regulatory developments, from Paraguay, where a bill was proposed to recognize Bitcoin as legal tender, to the US, where more asset managers are adding Bitcoin ETF exposure to their funds. Meanwhile, multiple SEC lawyers resigned in the wake of the agency’s legal embarrassments, in a step that signals some hope for the direction of crypto regulation in the US (though probably not without a change in leadership at the SEC). In crypto itself, the halving was accompanied by a ton of hype about runes, a new token standard on Bitcoin that launched at the halving block. After Ordinals and BRC-20s, it’s clear that there’s a lot of interest in building stuff on top of Bitcoin.