Bitcoin analysts give three reasons why BTC price below $20K may be a ‘bear trap’

September 20, 2022 Coin Telegraph

Bitcoin

A set of technical indicators see Bitcoin price ending its prevailing bearish cycle.

Bitcoin (BTC) recovered above the $19,000 mark on Sep. 20, a day after falling to its lowest level in three months.

Bitcoin struggles after dropping below $20K

On the daily chart, the BTC price rose from $18,255 to $19,650. This 7.5% price rebound mirrored similar rebound moves witnessed in the stock market, suggesting that investors have been coming to terms with another significant rate hike by the Federal Reserve expected on Sep. 20-21.

*BTC/USD daily price chart versus ACWI and Nasdaq. Source: TradingView*

However, opinions differ on the longevity of Bitcoin's rebound. Independent market analyst Jonny Moe stressed that BTC's ongoing price action is similar to its sideways consolidation moves at the beginning of this year.

In other words, Bitcoin's current price rebounds around the $20,000 mark do not make a long-term bull case.

This is definitely still lurking out there $BTC pic.twitter.com/UkJ4s312zS
— Jonny Moe (@JonnyMoeTrades) September 19, 2022

Rudy Takala, former Fox News executive and opinion editor at Cointelegraph, also warns crypto traders to prepare for more "dark times" due to worsening economic conditions globally.

On the other hand, some analysts believe Bitcoin is staring at a strong bullish reversal in the times ahead. Let's take a closer look at the three optimistic market outlooks.

Bitcoin prints "bullish hammer"

Bitcoin's Sep. 20 candlestick is a bullish hammer, which suggests weakening downside momentum, according to pseudonymous analyst Trader Tardigrade.

A bullish hammer candlestick forms when the asset drops significantly lower from its opening value but recovers to close near the same level. Traders see the hammer as a sign of bearish rejection, given its history of preceding market bottoms.

Trader Tardigrade applies the same theory to Bitcoin's recovery move on Sep. 20, noting that its bullish hammer may usher in a reversal.

#Bitcoin updates:

On daily chart, a “BULLISH HAMMER” candle was printed, which may bring us a reversal.

BULLISH Characteristics:
❇️ Long lower wick
❇️ White candle
❇️ Low below previous swing low

This indicates a strong price rejection below the candle.#BTC #Cryptos pic.twitter.com/8TkfoegZrb
— Trader Tardigrade (@TATrader_Alan) September 20, 2022

Pi-Cycle bottom

Another technical signal that anticipates Bitcoin to rebound sharply is the Pi-Cycle bottom.

Specifically, the open-source indicator tracks two long-term simple moving averages (SMA): the 471-day SMA and the 150-day EMA. History shows that Bitcoin price bottoms out for the market cycle when the 150-day SMA crossed below the 471-day SMA.

Meanwhile, the price heads for a strong bullish reversal in the days leading up to and after the 150-day SMA closes above the 471-day SMA. Pseudonymous analyst, Titan of Crypto, highlighted that Bitcoin is eyeing a 150-471 SMA bullish crossover sometime by 2023.

*BTC/USD weekly price chart featuring Pi-Cycle Bottom. Source: TradingView/Titan of Crypto*

"1st cross occurred in July," he noted, adding:

"2nd cross is yet to occur. Reversal might be closer than we think."

Wyckoff Cycle

Aurelien Ohayon, the CEO of investment strategy firm XOR Strategy, anticipates Bitcoin to reach $45,000 by early 2023, arguing that BTC price has been following the popular Wyckoff Cycle pattern.

A Wyckoff Cycle has four phases: accumulation, markup, distribution and markdown. After the markdown phase, the cycle repeats with the accumulation phase, which, as Ohayon points out, is the case with Bitcoin's ongoing price rebound.

*BTC/USD illustrated in the Wyckoff Cycle phases. Source: XorStrategy.com*

"Bitcoin is entering the Final Bullish Phase of the Wyckoff Cycle," the analyst concludes.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Goldman Sachs’ bearish macro outlook puts Bitcoin at risk of crashing to $12K

September 18, 2022 Coin Telegraph

Bitcoin

Bitcoin derivatives data also shows sentiment shifting in favor of a massive crash below $20,000, the current psychological support.

A sequence of macro warnings coming out of the Goldman Sachs camp puts Bitcoin (BTC) at a risk of crashing to $12,000.

Bitcoin in "bottom phase?"

A team of Goldman Sachs economists led by Jan Hatzius raised their prediction for the speed of Federal Reserve benchmark rate hikes. They noted that the U.S. central bank would increase rates by 0.75% in September and 0.5% in November, up from their previous forecast of 0.5% and 0.25%, respectively.

Fed's rate-hike path has played a key role in determining Bitcoin's price trends in 2022. The period of higher lending rates — from near zero to the 2.25-2.5% range now — has prompted investors to rotate out of riskier assets and seek shelter in safer alternatives like cash.

Bitcoin has dropped by almost 60% year-to-date and is now wobbling around its psychological support of $20,000. Some analysts, including a pseudonymous trader Doctor Profit, believe BTC's price has entered the bottom phase at current levels. However, the trader warned:

"Please consider FEDs next decisions. 0.75% [rate hike] already priced in, 1% and we see blood."

*BTC/USD price performance comparison between 2012-2016 and 2020-2022. Source: Doctor Profit/TradingView*

On the other hand, Bitcoin's consistently positive correlation with the U.S. stock market, particularly the tech-heavy Nasdaq Composite, poses deeper correction risks.

Sharon Bell, a strategist at Goldman Sachs, suggests the recent rallies in the stock market could be bull traps, echoing her firm's warning that equities could crash by 26% if the Fed gets more aggressive with its rate increases to fight inflation.

Interestingly, the warnings coincide with a recent rise in Bitcoin short positions held by institutional investors, according to CME data highlighted in the Commodity Futures Trading Commission's (CFTC) weekly report.

*CME Bitcoin derivatives held by smart money. Source: CFTC/Ecoinometrics*

"Definitely a sign that some people are counting on a risk asset meltdown this fall," noted Nick, an analyst at data resource Ecoinometrics.

Options consensus see BTC at $12K

Bitcoin options expiring at the end of 2022 show most traders betting on the BTC price dropping all the way down to the $10-000-12,000 area.

*BTC options open interest by strike price. Source: Coinglass*

Overall, the call-put open interest ratio was 1.90 on Sep. 18, with call options for the $45,000 strike price carrying the maximum weight. But strike prices between $10,000 and $23,000 showed at least four puts for every three calls — which is perhaps a more realistic, interim evaluation of market sentiment.

From a technical perspective, Bitcoin's price could drop by roughly 30% to $13,500 as the price forms a convincing inverse up-and-handle pattern.

*BTC/USD daily price chart with inverse cup-and-handle breakdown setup. Source: TradingView*

Conversely, a decisive rally above the 50-day exponential moving average (50-day EMA; the red wave) near $21,250 could invalidate this bearish setup, positioning BTC for a rally toward $25,000 as its next psychological upside target.

The floppening? Ethereum price weakens post-Merge, risking 55% drop against Bitcoin

September 16, 2022 Coin Telegraph

Bitcoin

A classic bearish reversal pattern suggests pain ahead for the ETH/BTC pair despite Ethereum's milestone Merge event.

Ethereum's native token Ether (ETH) has been forming an inverse-cup-and-handle pattern since May 2021 on the weekly chart, which hints at a potential decline against Bitcoin (BTC).

*ETH/BTC weekly price chart featuring inverse cup-and-handle breakdown setup. Source: TradingView*

An inverse cup-and-handle is a bearish reversal pattern, accompanied by lower trading volume. It typically resolves after the price breaks below its support level, followed by a fall toward the level at a length equal to the maximum height between the cup's peak and the support line.

Applying the theoretical definition on ETH/BTC's weekly chart presents 0.03 BTC as its next downside target, down around 55% from Sept. 16's price.

Can ETH/BTC pull a Dow Jones?

Alternatively, the ETH/BTC pair could nevertheless deliver some large gains in the years to come.

On the weekly log chart, the ETH/BTC pair is painting a potential cup-and-handle since January 2018. In other words, a rally toward 0.5 BTC in 2023 is on the table, up more than 520% from current price levels.

Unlike its inverse counterpart mentioned above, cup-and-handles are bullish reversal patterns with their upside targets located at levels equal to their maximum height when measured from their breakout point.

Veteran analyst Tom Bulkowski notes that these patterns have a 61% success rate of meeting their upside targets.

For instance, the cup-and-handle pattern that formed on the Dow Jones chart during the Great Depression of the 1930s and 1940s — wherein the cup took nine years to develop and the handle another four years — reached its upside target in the 1950s, as shown below.

*Dow Jones Industrial Average cup-and-handle pattern. Source: StockCharts.com*

Potentially, ETH/BTC could now be in the handle stage of a similar cup-and-handle pattern, as shown via the shaded purple descending channel area in the chart below.

*ETH/BTC weekly price chart featuring cup-and-handle breakout setup. Source: TradingView*

The pair awaits a breakout move above the pattern's resistance level of 0.08 BTC. For now, it has been fluctuating lower inside the handle range, eyeing a pullback toward its lower trendline at around 0.05 BTC after testing the upper one as resistance this week.

Flippening or floppening?

Ethereum's potential to overtake Bitcoin by market capitalization has been commonly dubbed as "the flippening."

Ethereum is competing with Bitcoin to become the so-called "inflation hedge," according to Joshua Lim, head of derivatives at Genesis Trading. Lim cited Ethereum's EIP-1559 update from August 2021 that introduced a fee-burning mechanism into its protocol.

According to Ultrasound.Money, Ether's supply growth now stands at minus 1.43% per year. In other words, the token could be becoming "disinflationary" with time. Lim argues that it makes Ether an attractive alternative to Bitcoin among institutional investors.

12/ can BTC remain king going fwd? only time will tell if the ETH narrative post-Merge is strong enough to overthrow the status quo

in the meantime, expect BTC to continue to trade like a funding asset and preferred hedging instrument for the entire asset class
— Joshua Lim (@joshua_j_lim) August 29, 2022

But many argue against the flippening narrative, including Rahul Singh, the co-founder of Defi platform FINtokens. He told Cointelegraph Bitcoin would continue existing as a "digital gold" while Ethereum would become an "Internet 2.0" project.

Never Ever...
B'coz#Bitcoin in Digital Gold
&#Ethereum is Internet 2.0

So,
There's a lot of difference between Digital Asset Values, &
Digital Soft. Values
— AskToRahulSingh©️ (@AskToRahulSingh) July 13, 2022

As of September 2022, Ether's market cap is $175 billion compared to Bitcoin's $372 billion.

Elon Musk, Cathie Wood sound ‘deflation’ alarm — is Bitcoin at risk of falling below $14K?

September 12, 2022 Coin Telegraph

Bitcoin

Bitcoin price could resume its downtrend if the Fed keeps on hiking rates against the prospects of a rising unemployment rate.

Bitcoin (BTC) has rebounded by 20% to almost $22,500 since Sep. 7. But bull trap risks are abound in the long run as Elon Musk and Cathie Wood sound an alarm over a potential deflation crisis.

Cathie Wood: "Deflation in the pipeline"

The Tesla CEO tweeted over the weekend that a major Federal Reserve interest rate hike could increase the possibility of deflation. In other words, Musk suggests that the demand for goods and services will fall in the United States against rising unemployment.

A major Fed rate hike risks deflation
— Elon Musk (@elonmusk) September 9, 2022

Rate hikes have been typically bad for Bitcoin this year. In context, the period of the Fed raising its benchmark rates from near zero in March 2022 to 2.25%-2.50% in August 2022 has coincided with BTC price declining over 50%.

To this point, the labor sector has been very resilient. Nonetheless, the latest Bureau of Labor Statistics report shows that the jobless rate has risen to 3.7% from 3.5% in August. Even Alphabet (Google) warned that they could turn to layoffs soon to stay 20% more efficient.

But Fed Chairman Jerome Powell has asserted that the central bank could hike rates further to bring inflation down to their preferred target of 2%.

As of July, the U.S. consumer price index (CPI) was 8.5% year-over-year. The August inflation data is scheduled to release on Sep. 13, with a Reuters poll of economists predicting it would fall to 8.1%, citing a recent drop in energy prices.

That is still far from the Fed's 2% inflation target, which according to David Blanchflower, a former Bank of England rate setting committee member, will lead to a hard landing. Thus, a hawkish Fed could usher in rising joblessness and an economic recession, similar to what Musk predicts about deflation.

Along the same lines, Ark Invest CEO Cathie Wood, who sees Bitcoin hitting $1 million by 2030, cited the latest Manheim data, noting that the used car prices dropped 4% in August and roughly 50% in 2022. The metric again indicates waning consumer demand.

Deflation in the pipeline, heading for the PPI, CPI, PCE Deflator: from post-COVID price peaks, lumber -60%, copper -35%, oil -35%, iron ore -60%, DRAM -46%, corn -17%, Baltic freight rates -79%, gold -17%, and silver -39%. https://t.co/nVpU1cdf1L
— Cathie Wood (@CathieDWood) September 12, 2022

Bitcoin could feel the pain of a deflation-led recession, with Ecoinometrics' analyst N suggesting that companies with cash holding would not dip their toes in a volatile asset until the economy has bottomed.

He explained:

"From 2020 to 2021, there is a large number of new entrants in the space of digital assets, which pretty much doubled the total hodlings in treasuries. And as the market slowed down, everything stopped."

*Bitcoin treasury holdings since 2020. Source: Ecoinometrics*

Retail investors could follow a similar strategy, notes Q.Ai, a Forbes-backed investment service.

In other words, higher borrowing rates would increase the flow of people's monthly incomes toward debt repayment (mortgages, credit cards, etc.), decreasing their cash allocation for riskier assets like Bitcoin.

Bitcoin to $14K?

Macro fundamentals may also trigger Bitcoin's bearish technicals to play out, particularly on the daily chart.

Bitcoin appears to have been forming an inverse-cup-and-handle bearish reversal pattern, confirmed by a flipped U-shaped price trend (cup) followed by a short uptrend (handle), all atop a common support level called the "neckline."

As a rule of technical analysis, an inverse cup-and-handle pattern's profit target is measured after subtracting the neckline level price by the maximum cup's height, as shown below.

*BTC/USD daily price chart featuring inverse-cup-and-handle setup. Source: TradingView*

Therefore, from a technical perspective, BTC's price risks new multi-year lows below $14,000 in 2022, down about 37.5% from today's price.

Moreover, Filbfilb, creator of trading suite DecenTrader who accurately predicted Bitcoin's bottom in 2018, told Cointelegraph that BTC can drop as low as $11,000 later this year, based on the historical volume around this level.

"As it stands, the price of Bitcoin is heavily correlated to the 'legacy' markets, in particular the NASDAQ, which we know is under huge pressure due to the Federal Reserve’s monetary policy," he explained. "So this time 'it’s a bit different' due to the high correlation and external economic forces."

Will Ethereum keep rallying versus Bitcoin? ETH price technicals hint at 60% gains ahead

September 8, 2022 Coin Telegraph

Bitcoin

Ether could enter the pattern's breakout stage in the days leading up to the highly-anticipated Merge.

Ethereum's native token Ether (ETH) shows the potential to log major gains versus Bitcoin (BTC) with the ETH/BTC pair nearing yearly highs.

Ether paints classic bullish reversal pattern

The bullish cues come from a classic technical pattern called the inverse head and shoulders, which develops when the price forms three troughs below a common support level known as neckline. The middle trough, or head, is deeper than the other two, called the shoulders.

An inverse head and shoulders setup resolves after the price breaks above the neckline while accompanying an increase in trading volume. As a rule of technical analysis, its profit target comes at a length equal to the maximum distance between the head's lowest point and the neckline.

So far, Ether has painted a similar pattern, and it now awaits breakout above the neckline, as illustrated in the chart below.

*ETH/BTC weekly price chart featuring "inverse head and shoulders" breakout setup. Source: TradingView*

If ETH's price climbs decisively above the neckline, then the Ethereum token's upside target in 2022 will be around 0.136 BTC, up approximately 60% from current price levels.

Merge enthusiasm boosts ETH/BTC pair

The breakout moment could come ahead of Ethereum's switch from proof-of-work (PoW) to proof-of-stake (PoS).

While the Merge is touted by proponents as a less energy-intensive alternative to PoW, the update could also reduce Ether's annual issuance by 4.2%.

Moreover, the demand for ETH as the means to receive any potential forked tokens following the Merge has seen the ETH/BTC pair rise by more than 55% since the Merge's release announcement on July 14.

*ETH/BTC daily price chart. Source: TradingView*

Matt Hougan, chief investment officer at Bitwise Asset Management, believes Ether's switch to a less energy-intensive protocol could boost its appeal among institutional investors. In turn, it could ensure Ether overtakes Bitcoin by market capitalization.

"It's entirely possible that we'll see Ethereum flipping Bitcoin at some point in the future," Hougan told Forbes, adding:

“It is going after, in my view, a larger addressable market."

For now, Ethereum's $200 billion market cap trails Bitcoin's $369 billion.

Sell the Merge news?

On the flip side, Ether has been trading near a resistance area with a long history of exhausting price rallies against Bitcoin, notes analyst Riteable. In addition, the ETH/BTC's ongoing uptrend accompanies declining volumes and relative strength index (RSI) readings.

In other words, a bearish divergence that could mean ETH/BTC's price rally could be nearing exhaustion, resulting in a correction post-Merge.

Potential Bitcoin price double-bottom could spark BTC rally to $30K despite ‘extreme fear’

August 31, 2022 Coin Telegraph

Bitcoin

The selling pressure in the Bitcoin market is not as bad as it was during the Terra and Three Arrows Capital crises.

Bitcoin’s (BTC) price may climb by more than 50% in September, a month otherwise considered ominous for the cryptocurrency due to its poor historical returns.

BTC price double-bottom and then to $30K?

The conflicting upside signal comes from a potential double-bottom pattern on Bitcoin’s longer-timeframe charts against the United States dollar. Double-bottoms are bullish reversal patterns that resemble the letter W due to two lows and a change in direction from downside to upside.

*Double-bottom illustrated. Source: ThinkMarkets*

Bitcoin’s decline below $20,000 in July, followed by a sharp recovery toward $25,000 and a subsequent return to the $20,000 level in August, partially confirms the double-bottom scenario. The cryptocurrency would complete the pattern after rebounding toward $25,000.

A W-shaped price move in an ideal scenario could be followed by another sharp move higher — a double-bottom breakout.

Meanwhile, a double-bottom’s upside target is found after measuring the distance between the pattern’s peak (neckline) and lowest levels and adding the outcome to the breakout point, as illustrated below. In other words, a potential 50% price rally.

*BTC/USD daily price chart featuring double-bottom breakout setup. Source: TradingView*

As a note of caution, double-bottom setups carry a small degree of failure risks, about 21.45%, according to Samurai Trading Academy’s study of popular charting patterns.

Market slips back into “extreme fear“

Bitcoins bullish reversal scenario occurs amid general price depreciation across the risk-on markets.

Originally, BTC’s descent to $20,000 started after Federal Reserve Chair Jerome Powell reasserted his hawkish stance on inflation at Jackson Hole last week. It further prompted the Bitcoin market sentiment to fall into the “extreme fear” category, according to the popular Fear and Greed index, or F&G.

The market is not enjoying $BTC hanging around $20k. Back into Extreme Fear today.

Live chart: https://t.co/Jr5151zN7I pic.twitter.com/UnztrZP7FP
— Philip Swift (@PositiveCrypto) August 31, 2022

But, to Philip Swift, creator of Bitcoin data source LookIntoBitcoin, the market sentiment is not as fearful as it was in June due to a “huge amount of forced selling” at now-defunct crypto hedge fund Three Arrows Capital and the stablecoin project Terra.

“The F&G score is nowhere near as intensely fearful as it was back when the score dropped to as low as 6; it is currently at 23,” Swift explained, adding:

“There was blind panic back then, whereas we are currently in a period of apathy where people are tired of the bear market and are more interested in their summer holidays and/or the cost of living crisis.”

The statement aligns with Bitcoin investors selling their holdings at a $220 million daily average loss, according to data tracked by Glassnode.

“Investor psychology appears to be one that is keen to simply ‘get my money back,’ with a great degree of spending taking place at and around their cost basis,” the on-chain analytics firm stated in its latest weekly report, adding that the Bitcoin bulls are fighting an uphill battle.

That includes whales, entities that hold anywhere between 1,000 and 10,000 BTC. They have been accumulating Bitcoin lately as the price wobbles around $20,000, according to data resource Ecoinometrics.

The whales addresses controlling 1k to 10k BTC are starting to accumulate coins on-chain again.

For sure that won't cancel the bear market but apparently some people love #Bitcoin at $20k. pic.twitter.com/7oQmAZ4T5K
— ecoinometrics (@ecoinometrics) August 29, 2022

“In this bear market, you want to either dollar cost average in a position or straight up buy the dip and wait,” wrote Nick, an analyst at Ecoinometrics.

Why September is shaping up to be a potentially ugly month for Bitcoin price

August 26, 2022 Coin Telegraph

Bitcoin

Bitcoin has closed its previous five months of September in losses and could suffer similar pains if history repeats.

Bitcoin (BTC) bulls should not get excited about the recovery from the June lows of $17,500 just yet as BTC heads into its riskiest month in the coming days.

The psychology behind the "September effect"

Historic data shows September being Bitcoin's most worst month between 2013 and 2021, except in 2015 and 2016. At the same time, the average Bitcoin price decline in the month is a modest -6%.

*Bitcoin monthly returns. Source: CoinGlass*

Interestingly, Bitcoin's poor track record across the previous September months coincides with similar downturns in the stock market. For instance, the average decline of the U.S. benchmark S&P 500 in September is 0.7% in the last 25 years.

*S&P 500 performance in August and September since 1998. Source: Bloomberg*

Traditional chart analysts have dubbed this annual drop-off as the "September effect."

Analysts argue that investors exit their market positions after returning from their summer vacations in September to lock gains, or even tax losses, ahead of the year's close.

Meanwhile, they also note that individual investors liquidate their assets in September to pay for their children's annual school costs.

Bitcoin's correlation with the stock market has been largely positive during and after the coronavirus pandemic. Therefore, in addition to the September effect, these mirroring price trends could also increase BTC's likelihood of dropping high in the ominous month.

So expect low volume, chop & random violent moves in either direction. The point of this post isn't to fearmonger anyone. Always a green markets somewhere. I'm sharing insight on what to expect to save newer retail traders from excruciating pain. Be patient and embrace the suck
— Seven V. Matos (@Sevenvmx) August 22, 2022

Fed eyes 75bps rate hike

Bitcoin's losses in 2022 were drawn from fears of the Federal Reserve's rate hikes and the complete unwinding of its $120 billion monthly bond-buying plan to tackle rising inflation.

But the market's narrative shifted to hopes that inflation had peaked. The belief strengthened after the July U.S. consumer price index (CPI) came at 8.5% versus 9.1% in the month prior, leading to speculations that the Fed would tone down its tightening plans.

It coincided with Bitcoin and S&P 500 recouping small portions of their yearly losses, as illustrated below.

*BTC/USD versus S&P 500 (SPX) daily price chart. Source: TradingView*

But several analysts believe that Bitcoin's recovery could be a bull trap, a "relief rally " that will trap investors who think the market has bottomed.

The psychology of a relief rally

Price gets just bullish enough to fool you that this rally is the real deal.

There could be an end to the pain.

Then BLAMO, the market rugs you shattering your hopes.

Expect this a few more times during the bear!#bitcoin #crypto
— Lark Davis (@TheCryptoLark) August 22, 2022

Moreover, most Fed officials still favor raising by 75 basis points at their next meeting in September, given their pledge to bring inflation down to 2%.

As a result, Bitcoin and S&P 500 risk continuing their prevailing correction trend in September, eyeing more yearly lows.

Bitcoin technicals hint at drop to $17.6K

From a technical perspective, Bitcoin will decline toward $19,250 by September if it breaks out of its current "bear flag" pattern. The bearish continuation setup is illustrated in the four-hour chart below.

*BTC/USD four-hour candle price chart featuring "bear flag" setup. Source: TradingView*

Meanwhile, on the daily chart, BTC has been breaking down from its rising wedge pattern since Aug. 19. The bearish reversal setup's profit target comes to be near $17,600, as illustrated in the chart below.

*BTC/USD daily price chart featuring rising wedge breakdown setup. Source: TradingView*

Overall, September looks like it could once again be a red month for Bitcoin based on technical, fundamental and macro factors.

Ethereum price rises by 50% against Bitcoin in one month — but there’s a catch

August 6, 2022 Coin Telegraph

Bitcoin

The rise in the ETH/BTC pair is painting a bearish technical pattern, hinting at a potential correction.

Ether (ETH), Ethereum's native toke, has been continuing its uptrend against Bitcoin (BTC) as euphoria around its upcoming network upgrade, "the Merge," grows.

ETH at multi-month highs against BTC

On the daily chart, ETH/BTC surged to an intraday high of 0.075 on Aug. 6, following a 1.5% upside move. Meanwhile, the pair's gains came as a part of a broader rebound trend that started a month ago at 0.049, amounting to approximately 50% gains.

The ETH/BTC recovery in part has surfaced due to the Merge, which will have Ethereum switch from proof-of-work (PoW) mining to proof-of-stake (PoS).

Ethereum's "rising wedge" suggests sell-off

From a technical perspective, Ether stares at potential interim losses as ETH/BTC paints a convincing rising wedge.

Rising wedges are bearish reversal patterns that occur when the price trends higher inside a range defined by two rising, converging trendlines. As a rule, they resolve after the price breaks below the lower trendline by as much as the structure's maximum height.

*ETH/BTC daily price chart featuring "rising wedge'' breakdown setup. Source: TradingView*

Moreover, a declining volume and relative strength index (RSI) against a rising ETH/BTC further increases bearish divergence risks. This gives weight to the wedge's bearish setup for a target of 0.064 BTC, or down 11% from today's price.

Ether looks stronger vs. dollar

Meanwhile, technicals paint a brighter picture for Ethereum against the U.S. dollar. The potential of a 10% breakout for ETH/USD looks strong in August due to a classic bullish reversal pattern.

On a four-hour chart, ETH/USD has formed what appears to be a "double bottom." This pattern resembles the letter "W" due to two consecutive lows followed by a change in direction from downtrend to uptrend, as illustrated below.

*ETH/USD four-hour price chart featuring "double bottom" breakout setup. Source: TradingView*

Meanwhile, a double bottom pattern resolves after the price breaks above its common resistance level and—as a rule of technical analysis—rises by as much as the distance between the first bottom and the resistance.

As a result, ETH could rally toward $1,940 in August, up 10% from today's price.

MicroStrategy stock MSTR hits 3-month high after CEO’s exit

August 3, 2022 Coin Telegraph

Bitcoin

Poor earnings coupled with overvalued fundamental metrics pose long-term bearish risks for MSTR.

MicroStrategy (MSTR) stock opened higher on Aug. 3 as investors digested the news of its CEO Michael Saylor's exit after a depressive quarterly earnings report.

Microstrategy stock up 142% since May lows

On the daily chart, MSTR's price surged by nearly 14.5% to $324.55 per share, the highest level since May 6.

The stock's intraday gains came as a part of a broader recovery that started on May 12 at $134. Since then, MSTR has grown by 142% versus Nasdaq's 26.81% gains in the same period.

*MSTR daily price chart. Source: TradingView*

Bad Q2, Saylor's resignation

The Aug. 3 MSTR rally came a day after MicroStrategy reported a billion dollar loss in its second quarter (Q2) earnings call. Interestingly, the company's major Bitcoin exposure was a large reason for its poor quarterly performance.

To recap: MicroStrategy is an information technology firm that provides business intelligence, mobile software, and cloud-based services. But one of its primarily corporate strategy is to invest in Bitcoin to hold it long-term.

Unfortunately, holding Bitcoin has cost MicroStrategy an impairment loss of $917.84 million from its 129,698 BTC holdings in Q2, primarily due to the crypto's 50% year-to-date (YTD) price drop. In comparison, MSTR plunged 42% in the same period.

*BTC/USD daily price chart. Source: TradingView*

Furthermore, MicroStrategy's revenue fell 2.6% year-over-year to $122.07 million. The net quarterly losses prompted Saylor—who has strongly backed the Bitcoin investment strategy since August 2020—to quit as the firm's CEO and become an executive chairman.

MSTR responded positively to Saylor's resignation and the appointment of Phong Le, President of MicroStrategy, as his replacement, suggesting that investors are comfortable with the change in leadership.

What's next for MSTR?

MSTR's course for the remainder of 2022 depends largely on Bitcoin's performance, given their consistently positive correlation in recent years. But several metrics are hinting at a correction ahead.

*The weekly correlation coefficient between MSTR and BTC/USD. Source: TradingView*

For instance, MicroStrategy's enterprise value-to-revenue (EV/R) ratio was at 10.76 on Aug. 3, or in "overvalued" territory.

Similarly, MSTR's forward price-to-earnings (P/E) ratio has reached 54.95, more than double the market average of 20-25. In other words, the market expects MicroStrategy to show enormous future earnings growth despite its underperformance in recent quarters.

MicroStrategy also has amassed $2.4 billion in long-term debts with $46.6 million in interest expense. Therefore, the company could find it unable to meet its debt obligations if it continues to suffer losses at the current pace.

*MSTR long-term debt table. Source: S&P Capital IQ*

In other words, MicroStrategy could pledge its nearly $2 billion worth of Bitcoin holdings as collateral or sell them to raise capital.

"Nonetheless, crypto and MSTR bulls may remain invested," noted Juxtaposed Ideas, a Seeking Alpha contributor, in its latest analysis, saying that most are willing to "gamble on Bitcoin's eventual recovery to $40,000" or beyond by 2023 or 2024.

"That would be a positive catalyst for its future stock recovery, returning some much-needed capital to the highly volatile investment."

3 Bitcoin trading behaviors hint that BTC’s rebound to $24K is a ‘fakeout’

July 28, 2022 Coin Telegraph

Bitcoin

BTC price surged above a key resistance cluster, but its market structure and technical analysis suggest the move is just another trap.

Bitcoin (BTC) price rallied toward $24,200 on July 28 after a near 10.5% surge that began a day earlier.

The gains appeared after Federal Reserve Chairman Jerome Powell signaled intentions to slow down their prevailing tightening spree. They prompted some Bitcoin analysts to predict short-term upside continuation, with CryptoHamster seeing BTC at $26,000 next.

It seems that the downside breakout was a false one, and the bullish flag has been validated. Let's see how fast $BTC can reach those targets. #bitcoin $BTCUSD $ETH $ETHUSD #ビットコイン #биткойн #比特币 https://t.co/v6x4Ka23L7 pic.twitter.com/nKoEV8440X
— CryptoHamster (@CryptoHamsterIO) July 28, 2022

But BTC's potential to recover entirely from its ongoing bearish slumber appears low for at least three key reasons.

Bitcoin bulls have been duped before

Bitcoin established its record high of $69,000 in November 2022. Since then, the cryptocurrency has declined by more than 60% while undergoing several mini pumps on its way down.

On the daily chart, Bitcoin has rebounded at least five times since November 2021, securing 23% to 40% gains on each recovery. Nonetheless, it has continued its correction every time after forming a local price top around its exponential moving averages (EMA) and then falling to new yearly lows.

*BTC/USD daily price chart featuring 'fakeouts.' Source: TradingView*

This time looks no different, with Bitcoin facing a bullish rejection in June and recovering nearly 17% a month later. Notably, BTC price faces interim resistance in its 50-day EMA (the red wave) at around $23,150, with a breakout clearing its way toward $27,000, coinciding with the 100-day EMA (black).

At $27,000, the price would still form a lower high compared to the previous local tops. So, that technically raises the possibility of another bearish continuation move.

High selling, low buying volume

Interestingly, the volume behavior during the ongoing Bitcoin correction shows a greater interest in selling the coin at local tops.

The daily chart below illustrates it by highlighting the volume readings during downtrends and uptrends since November 2021. For instance, the last two big price declines in May and June coincided with a sharp increase in selling volumes.

In comparison, the follow-up rebounds to those price declines accompanied modest to lower trading volumes. The ongoing volume behavior looks the same, peaking during the downtrend and dropping as the price recovers.

This suggests a weakening upside momentum, which may lead to another price correction.

BTC to equities correlation flips back to positive

Bitcoin is once again tailing stock market trends despite briefly decoupling from them in early July.

For instance, on July 28, the day-to-day correlation coefficient between Bitcoin and the tech-heavy Nasdaq Composite stood near 0.66. That includes declines in both markets after the U.S. GDP plunged for a second consecutive quarter.

*BTC/USD and NDAQ daily correlation coefficient. Source: TradingView*

That officially confirms that the U.S. has entered a "technical recession," which could weigh negatively on the stock market. Therefore, Bitcoin's downside prospects appear high if its positive correlation with the stock market continues.

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