Bloodgood's Notes #126
Bitcoin reclaims $60k, Ethereum shows bearish signs and macro is uncertain. Where next?
Fundamental Overview
The macro pendulum just keeps on swinging between hope for a soft landing and dovish Fed policy on the one hand and fears of inflation coming back with a vengeance on the other. Lately the movement has been largely in the direction of fear, as hopes for substantial rate cuts this year began to evaporate, but then the push that bulls needed was the Non-Farm Payrolls (NFP) report that came out on Friday. The NFP revealed that the U.S. economy added 175,000 jobs in April 2024, a deceleration from the upwardly revised 315,000 jobs added in March and much lower than market expectations, which anticipated a 243,000 increase. Normally, a weaker job market isn’t what most people would consider great news, but in this context, it’s great for stocks and crypto since it pushes the Fed towards a more dovish approach.
Meanwhile, BTC ETF flows are another much-needed bit of good news: on Friday, the seven-day streak of net outflows was finally broken with $378 million net inflows, followed up by another couple hundred million on Monday. Even more interestingly, Friday was also the first ever net inflow day for Grayscale’s GBTC, which somehow managed to stay net positive on Monday as well, although with only about $4 million compared to Friday’s $63 million.
Bitcoin
Bitcoin prints another big wick and closes the weekly candle above $60k.
Buyers stepped in aggressively below $60k, liquidating late shorts. The weekly level of $58k-$59k holds for now, however, continuation is needed or else sooner or later we will drop back towards it.
At least for now, the level we discussed last week, $51,800, is out of the picture. The daily level that interests us now is slightly below $65k, which will tell us whether this bounce takes us higher or if we drop back below $60k.
On the daily chart, we can see that a clear downtrend is continuing, as a new low was made below $57k. Bulls will want to see a higher high formed, which means that we need to see Bitcoin above $67k, and bears will want to see this daily resistance hold and take us back below $60k.
It’s going to be a fun week.
SPX, Gold, and DXY
Stocks are waking up.
The "round numbers" have worked great for us in this case as the 5,000 level has held and the S&P 500 bounced towards the highs. We will have to wait and see whether this bounce breaks the high or not, but if it gets rejected, I am almost sure that we will see a new low below the 5,000 level.
Gold remains fighting at the range low.
I have marked a range after an apparent low was formed soon after its all-time high, and it seems to hold for now. The volume keeps decreasing, which is not a good sign when an asset trades near support - usually, a breakdown is what follows.
DXY breaks the 105.77 level.
At the beginning of May, DXY broke its major level and dropped down below 105, which worked well for risk-on assets. After DXY dropped, Bitcoin gained momentum and reclaimed $60k. As discussed in the previous letter, 105.77 was an important level, and losing it positively impacted the markets.
Ethereum
Ethereum continues its path to $2,600.
Ethereum was unable to reclaim the weekly level, which lies at $3,150-$3,300, and continues to make lower lows on the daily chart. There’s no good news here for Ethereum enthusiasts since I don’t see anything bullish. However, I am convinced that if we get a chance to scoop some Ethereum at $2,600, we should take it.
ETH/BTC paints a similar picture as ETH/USDT. A strong rejection of the green zone doesn’t look promising, and we could expect another test of the 0.046 level with a possible breakdown.
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Concluding notes
Given Gensler’s recent remarks (and disappointing price action on ETH), it won’t surprise anyone to learn that the SEC delayed its decision on Invesco & Galaxy’s Spot Ethereum ETF application, which means that the next deadline to watch is now May 23, the final deadline for VanEck’s ETH ETF. Along with trying to delay Ethereum ETFs, the agency has also continued its series of Wells notices (formal letters that express their intent to prosecute), this time targeting Robinhood. It’s hard to see exactly what Gensler’s game plan could be with all these lawsuits, but it’s starting to look even more likely that it could just be a way for him to gain favor with the anti-crypto crowd in Washington. His time as the head of the SEC could be coming to an end, and these are actions of desperation more than anything else.