Dear subscribers,
Our search for opportunities in the current environment continues, and it is hard to ignore the negative newsflow amidst the Senate hearings on FTX and increased mainstream hostility towards Binance. Bearish momentum has weakened due to continued seller exhaustion, yet a break to an upward channel seems unlikely considering the resistance above $18k.
Nevertheless, there is an attractive liquidity play and a coin with great potential. Caution is advised as the risk remains high.
Thank you for reading the Uncharted. Let’s dig in!
“We’re going to have to wait to see how this all plays out. (...) I actually believe most of the companies are not going to be around.”
- BlackRock CEO Larry Fink
At a glance
State of the System
Bitcoin is positioned at the bullish transition quadrant as the risk of a pronounced risk eased and bearish momentum weakened.
Bitcoin heads into the end of 2022 with low odds of breaking above $19k under the current conditions.
Supply and demand dynamics show a lack of activity as investors remain wary following the demise of FTX and the FUD around Binance.
The macro environment
The Fed raised interest rates by 50bps on Wednesday following a better-than-expected CPI print earlier this week. Risk-on assets gave up gains following hawkish remarks at the post-FOMC press conference.
Crypto’s course
Bitcoin is holding steady on the upper range of the trading channel, solidifying the support around $16.7k. However, as long as bitcoin remains sub $20k, we do not turn bullish.
Selling pressure above current levels (figure 8) poses greater resistance for an end-of-year rally, yet paves the way for an attractive liquidity play.
The crypto market has come to a halt as idiosyncratic forces continue to rattle investors, but one project shows potential amidst the shaky bitcoin season.
Outlook
The outlook for bitcoin is not assured for the year-end given the great resistance above $18k, despite the continued seller exhaustion.
While the news flow is frightening, we see an interesting range for bitcoin accumulation as volatility subdues. More below!
State of the System
In our previous publications, Uncharted 28 and Uncharted 29, we emphasized a lack of activity in a depressed; yet seemingly stable market. The seller exhaustion (Uncharted 28) coupled with the continued build-up of stablecoins on the sidelines (Uncharted 29) reflect investors solidly holding coins.
In Uncharted 30, the State of the System (figure 1) contextualizes the dormant market as more investors hold onto their coins. The risk of a pronounced drop subsided, but we likely remain in the bullish transition quadrant, given the macro picture and weak buying power, incapable of driving bitcoin above $19k.
It is unlikely that bitcoin climbs beyond $19k, despite progressing toward the upper range of the wider channel ($17-$18k, figure 2) earlier this week. The lack of demand and supply suggests an implicit gentlemen’s agreement that bitcoin is right where it should be - which is reinforced by bitcoin’s liquidity profile further ahead.
In the previous Uncharted, bankruptcies causing liquidation cascades were the concern; this has settled a bit, but Binance is in the timeline. In other words, the perceived risk eased but remains elevated, as can be seen by the Swissblock Risk Signal (figure 3).
Furthermore, Swissblock’s Altcoin Cycle Signal suggests a bitcoin-driven market (figure 4), given the keen caution in the market. Nevertheless, as noted in Uncharted 29, it is interesting to note the relatively low bitcoin dominance as stablecoins log further inflows in the shaky bitcoin season.
Enjoying the Uncharted so far?
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