Bloodgood's Notes #146
Bitcoin breaks $90k as Ether fails to follow, where to next?
Fundamental Overview
Major stock indices had a bit of a dip last week, but the overall macro picture remains just as bullish—maybe worryingly bullish as almost every institution is max long stocks. Part of the reason behind the shakiness last week were Powell's comments on Fed policy, namely that they don't need to hurry with more rate cuts and that inflation is still a problem. Some months ago, I mentioned in the newsletter that the Fed will do everything it can to prop up markets leading into the election, so maybe it's no coincidence that Powell changed his tune right after Trump won.
In any case, Powell won't be able to do a lot of damage to the markets before the inauguration in January, and after that, it's anyone's guess what could happen. Trump isn't exactly a fan of Powell's recent policies, so if they clash, Trump will probably get his way. If we add to that the possibility that Elon and Vivek, who will be leading the Department of Government Efficiency (DOGE—yes, DOGE) manage to substantially reduce government spending, things could get very interesting post-inauguration. There might be some shakeouts—especially when positioning is so skewed—but there's nothing to be too concerned about yet.
Bitcoin
Bitcoin continues its path into price discovery.
In the previous issue of the newsletter, we discussed the potential for Bitcoin to come back down to its breakout area. Now, we look toward the $100k level, which will be a key milestone in BTC’s history.
So far, there has been no retrace worth mentioning, but given the two huge green weekly candles, we should prepare for a potential pullback and identify possible bid levels. Currently, besides the breakout area at $74k, the psychological level at $80k stands out as a potential target in case of a retrace.
Don’t get me wrong—we could see a third green weekly candle. However, in this case, we should closely monitor the daily chart to see how it unfolds. I’ll be watching the daily range for any sudden moves.
SPX, Gold, and DXY
Stocks are retracing from the euphoric post-election move up, but their structure remains bullish. As long as bulls defend the latest higher low, this bullish trend remains intact, and there’s no need to worry just yet.
Gold has dropped almost 10% from its all-time high, nearing the $2,500 level we previously discussed as a great bid opportunity. It will be interesting to see how gold reacts to the changing macroeconomic environment.
The Dollar Index continues to go strong, breaking yet another key weekly level at 106. As the dollar becomes stronger again, it will be interesting to see if it still impacts the prices of risk-on assets.
Ethereum
Ethereum fails to follow Bitcoin’s strength in the recent move.
Looking at the weekly chart, we see ETH rejected at a key weekly level around ~$3,200, which is preventing it from making a move toward $4k. A quick glance at ETH/BTC tells a simple story: Ether is underperforming relative to BTC.
In my opinion, we are still in the part of the cycle where Bitcoin leads, and other coins, including Ether, are just following.
When the time comes, Ether and the rest of the alts will take the lead.
Concluding notes
In the previous issue, we saw that the spot Bitcoin ETFs put in a record for net daily inflows, and this time it's Ethereum that's following up. Last Monday there was almost $300 million of net inflows into the spot Eth ETFs—definitely not as much as Bitcoin’s flows, but still a convincing record for Ethereum that could be a sign of things to come. Another encouraging piece of news is the fact that Bitwise (the issuer of the ETHW spot Eth ETF) acquired Attestant, an Ethereum staking provider with $4 billion in staked assets. It doesn't take much thought to see why an ETF issuer would buy a staking provider right as we're about to get some major changes in crypto regulations in the U.S. Like I said a while ago, Eth ETFs that offer staking yield are just a matter of time, and it looks like that time will be sooner rather than later.