Bloodgood's Notes #144
How to play Bitcoin recent weekly breakout, U.S. elections and Fed meeting around the corner and more
Fundamental Overview
Volatility has been fairly low lately outside of BTC’s recent pump, with nothing much going on other than an orderly stepwise ascent of major U.S. indices on the backdrop of good economic data. This kind of environment can be very dangerous, however, since it’s easy to become complacent and stop thinking about risk management, which wouldn’t be the brightest thing to do given what we’ve got coming up in terms of headlines. Volatility could pick up quite a bit given that the first week of November will bring both the U.S. elections on November 5 and, just two days later, the next Fed meeting. As of now, the odds seem to favor Trump for the presidency (but this will be less impactful if it’s paired with a split congress rather than a Red Sweep) and, overwhelmingly, a single 25 bps cut by the Fed.
Bitcoin
Bitcoin’s higher high leads to levels not seen since June.
At the time of writing, we are seeing a breakout from the huge weekly bull flag, which could result in a major move up if it holds. Pay attention now, as I’ve seen people get rekt on moves like this too many times. Here are three possible scenarios:
1. This is the breakout, and we go up only.
2. We get a retest of the breakout level.
3. This is a fake breakout, and we’re heading back to test $64.5k.
If you’re looking to enter in spot and potentially catch the new swing, it’s ideal to wait for the next weekly confirmation to be on the safe side (Note: given the upcoming elections, some volatility is expected). For short-term trading, you can try to catch a retest (Note: observe volume on the retest—if there’s no volume, chances are support won’t hold).
SPX, Gold, and DXY
Stocks continue their slow but still decent performance while crypto is on a roll. While Bitcoin seems to be reaching for its ATH, stocks are taking a breather, with no clear level as a target except around ~5,700. Looking at the bigger picture, bulls have nothing to worry about as the structure remains bullish.
Gold has reached a new all-time high, which was just a matter of time given its weekly structure. With current global conditions, it’s no surprise to see it performing well. DXY remains in bull mode as elections approach, breaking its 103.5 level, but so far, this hasn’t impacted risk-on assets much.
Ethereum
Ethereum finally makes progress.
A few weeks after Bitcoin printed its first higher high on the weekly, Ether follows with a high around ~$2,800. This is a positive sign that could indicate further growth, although the ETH/BTC chart still isn’t showing much strength. However, that’s not expected to happen until Bitcoin completes its part of the cycle.
Concluding notes
Given Bitcoin’s recent performance, it’s hardly surprising that the spot ETF flows are looking even better, with $870 million of net inflows yesterday, not too far from the all-time highest value of just over $1 billion in a day—a record that I won’t be surprised to see broken fairly soon. As for what this means for the broader crypto market, a continued BTC pump could easily make BTC dominance spike up above 60%, providing a great foundation for some variant of the well-known cycle dynamic where BTC takes up all the capital, which eventually starts flowing into majors and then alts further out on the risk curve. In other words, we could be in for a great ride, so stay vigilant and keep watching the charts.