Stormrake - Insights #Technical Trading

The FEDs Fight Against Inflation a Doveish Prophecy or a Wolf in Sheep's Clothing?

Tue, 21 May 2024 20:09:00 +1000

Between a deluge of mostly bullish stock market Q1 earnings in the last month, positive Inflation CPI data last week and a continued overall fixation on how the Federal Reserve in the United States will respond to such macro-economic data, it’s needless to say we’re at a pivotal turning point in the current market cycle. Where we were a mere two years ago in uncertain waters with the FED raising rates, rampant increasing YoY Inflation data and uncertainty in the Bond market, the FED’s objective of a “Soft landing” in an attempt to cool inflation and restore growth to the markets has remained in the minds of traders. It’s important for the FED to achieve this objective because as we saw for the greater part of 2022, increased inflation and rising prices in the market created further uncertainty in the Bond market, causing a sharp selloff; consequently, leading to a sharp spike in yields and an inverted Yield Curve. This proceeded the following hawkish rate hiking cycle and sentiment from not just the FED, but also most western Central banks globally such as Australia.

Several factors contribute to the inflation rate, including supply chain disruptions, labor market conditions, and commodity prices. The persistence of high inflation can be attributed to lingering supply chain issues, elevated demand for goods and services post-pandemic, and geopolitical tensions affecting oil and food prices. Whilst all the above factors are true, it’s also not the whole story. Aggressively doveish monetary policy from the FED and most developed Central Banks around the world during the pandemic saw us cutting rates to all-time lows. In the FED’s case, this was even as low as a flat 0% for the Federal Funds rate, combined with a $700 Billion Quantitative Easing Program that sought to inject significant currency into the Treasury market, in an attempt to re-inflate the market and stave off a more severe crash due to the economic conditions wrought by the pandemic at the time. Since then, we’ve witnessed the 2021 Bull run in Cryptocurrency that created investing euphoria to unprecedented levels, birthing meme stock investing such as $GME (GameStop stock) and DOGE coin, and of course plotting BTC at a near $70,000 USD high at the time. It’s needed to say that this was unsustainable in the short to medium term as we welcomed a rise in interest rates to curb the inflation in the broader economy that came with such mania, a stark contrast to the Zero Interest Rate Policy (ZIRP) the FED aggressively pushed just a few years prior. Ultimately, all of this has culminated and landed us here where we are today, let’s take a deeper look.

The FED managed to raise their Federal Funds Rate to a current target of 5.25%-5.50%. During the period of hiking, we saw a correction in the broader financial markets globally during 2022, however coming out of this we’ve seen steady gains and reversing of price to the upside for nearly all market sectors; including Cryptocurrency. US Inflation naturally has come down since the continuous FED hiking cycle, of which the last rate hike of 25 basis points was in July of 2023 creating the Federal Funds rate target of 5.25%-5.50% we see today. The corresponding downtrend in CPI data that came along with the hikes alleviated bearish market fears of further rate hikes which naturally saw us climb to the higher market prices we see now.

Last week, we just received confirmation of the April 2024 CPI data, of which the markets were pricing in at 3.4%, which unlike the last few months forecasts for inflation, we in-fact achieved this month around, further solidifying in the minds of market participants that the FED’s fight against inflation may be nearing a conclusion. This overall risk- on sentiment has historically trickled down from US Stocks and Indices, into Cryptocurrency as the market seeks greater yields in doveish market conditions. Let’s take a deep dive into how this is impacting Bitcoin currently.

Bitcoin has seen a welcomed cooling off pre and post halving after the monstrous rally we saw in the wake of BTC ETFs, as institutional investors that were waiting on the sidelines for years to invest via the regulatory framework of traditional methods now had the means to do so. The pullback took us to a point where we quickly sold off and broke daily support at ~ $61,000, however this selling momentum wasn’t sustained with conviction on higher timeframes, ergo; allowing us to maintain price action above the 2021 Monthly highs.

This quick sell off most likely ran the stop loss orders that we hanging around below the $61,000 Daily support zone from where price had been holding for two months prior to the capitulation, creating a slingshot back up in price. The quick regaining of this same level had then consequently set us up well for a bullish pattern, commonly seen in bull market continuations known as an “Inverse Head & Shoulders”.

As you can see, not only did it break the neckline for this pattern, of which is the requirement to confirm the pattern itself; it also retested the breakout at $64,615, further favouring the Bulls. This combined with yet another, albeit simplistic bullish continuation pattern known as a “Bull flag” demonstrates a vast amount of technical confluence and confidence from market participants that they’re looking towards new all time highs in the near future.

As we can see, the market has responded positively to these technical setups, although a keen eye would see we are also currently at short-term resistance at the weekly highs. An ideal and healthy way the market could continue higher from here would be to retest where we reversed the local daily trend at $67,274 and continue there-after well into All-Time-High territory.

Whilst it’s needless to say it’s a good time to be a Bull right now, we also need to be aware that these are similar market conditions that preceded the sticky inflation we’ve become accustomed too in our daily lives over the last few years. It’s no coincidence that now as markets look towards new highs, we’re seeing a return of “meme investing” with an infamous figure head, under the alias “Roaring Kitty” returning to posting memes on X.com (formerly Twitter), leading a metaphorical charge and rallying his followers’ sentiments towards “Ape’ing in” to $GME (GameStop stock), such was the trend that begat the roaring 2021 Meme Stocks Bull run. As the FED was forced to fight that lagging inflation battle approximately 18-24 months after the rally by raising rates somewhat aggressively, it’s a wonder what the economic landscape might look like after this battle of steadfast bulls and ever-capitulating bears who slowly succumb to the euphoria is over possibly 18-24 months from now? Will the FED be forced to reluctantly quash market euphoria again, or in a desperate move to avoid a broader correction will they moderately maintain and even reduce rates despite rising inflation fears, proclaiming that inflation is yet again merely transitory under the guise of low unemployment and shadow statistics. Is this so called “Soft Landing” the FED are hoping to proclaim victory over in fact a doveish self-fulfilling prophecy for organic growth or a wolf in sheep’s clothing? Time will tell and here at Stormrake we’re watching with keen interest how this all plays out in the coming months ahead.

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The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.

Stormrake is not a financial adviser and does not provide financial product advice. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances. Stormrake is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by this newsletter.

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All statements made in this newsletter are made in good faith and we believe they are accurate and reliable. Stormrake does not give any warranty as to the accuracy, reliability or completeness of information that is contained here, except insofar as any liability under statute cannot be excluded. Stormrake, its directors, employees and their representatives do not accept any liability for any error or omission in this newsletter or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided in this newsletter is owned by Stormrake. You may not alter or modify this information in any way, including the removal of this copyright notice.

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Liquidity Injection Revives Markets

Mon, 20 Feb 2023 14:30:51 +1100

There is a new narrative emerging amongst global investors as many are wondering who will be the first to bring in the new liquidity fortunes. This has set in motion an East vs West divide and those who are trying to be early are positioning their bets accordingly.

The information contained here is for general information only. It should not be taken as constituting financial advice. Stormrake is not a financial adviser. You should consider seeking independent financial advice prior to making any personal investments.

PBoC Provides Relief

The Chinese Central Bank has provided its single largest liquidity injection on Friday to help its embattled economy. This is unlikely to trigger a global loosening of monetary policy but has caused investors, particularly in the digital asset space to edge towards Chinese assets. This is a precarious trade to say the least as it's built on the narrative that Chinese investors will start bidding on certain assets. What has happened now is a reflexive loop where both Eastern and Western investors are bidding on the same assets in anticipation of the other.

Bitcoin: Supply In Profit

The recent surge in Bitcoin price has lifted the circulating supply of Bitcoins in profit to nearly 75% and if current trends continue, can provide a signal for more bullish price action. It's important to note that this particular indicator lags behind price but it can assist in identifying if holders are more or less in profit. As it climbs though it invites sellers to come in as their positions are no longer underwater, when used with that lens traders can extrapolate the data and use it as a form of leading data.

BTC/USD Key Levels

Interactive chart: click on image for higher resolution

Bitcoin has hit a major sell wall at $25,000 USD as traders and investors alike rush to realise profits in a low liquidity environment. The current key level to watch is $24,425 for should it break to the upside, a retest of $25,000 will be up next. Should there be enough momentum for a break and close above $25,000 watch for a sharp move to $27,200 before the markets take a breather. To the downside, if we lose $24,000 then watch for a retest of $23,000. If the pullback is sustained, major support will come in at $22,400 before end of week.

ETH/USD Key Levels

Interactive chart: click on image for higher resolution

Ethereum continues to chop around its key level of $1,661 USD. For a breakout to the upside to occur we need to see a close above $1,748, once that is secured on a daily timeframe watch for a sharp move towards $1,888. To the downside, if we close below $1,661 then a retest of $1,510 cannot be ruled out. For those who are looking at extreme discounts major support can be found at $1,339 if the sell off continues.

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Ethereum Layer Two Solutions Rapid Growth

Thu, 08 Dec 2022 12:26:22 +1100

Despite a savage bear market with valuations being decimated and severe levels of fraud and deception being exposed, Layer 2 solutions such as Arbitrum and Optimism keep on growing.

Layer 2 Gas Expenditure

Source: Messari

Ethereum gas expenditure on batch posting transactions from layer two solutions to be secured on ETH mainnet are hitting all time high levels. This is not only being driven by insatiable user demand but a wide array of dApps now being supported on both Arbitrum and Optimism. These L2s provide a viable way to actively engage with DeFi and NFTs without the burdensome costs and long wait times on Ethereum mainnet.

The growth in users, transactions and spend on L2 solutions despite the bear market is worth noting and is a narrative that will well and truly take off in a bull market. Optimism already has a token that investors can pick up to partake in the narrative but be mindful of the large daily unlocks and wider macro picture.

Layer 2 Activity Boom

Optimistic rollups such as Arbitrum and Optimism continue their astonishing growth. This demand is being driven by better usability of layer 2 solutions and well designed onboarding mechanisms that make the the bridging experience much easier. The massive climb in daily transactions can be best exemplified by visiting l2fees.info as the cost of swapping tokens is currently 26 times cheaper on L2s than on ETH mainnet. With such incredible savings, it's no wonder that ETH users are flocking to these solutions.

BTC/USD key levels

Interactive chart: click on image for higher resolution

Bitcoin remains rangebound and holds well above our key level of $16,500 USD. BTC now has to overcome $17,189 before it can make another move higher. If it closes above $17,189 then the major resistance level comes in at $18,217.To the downside, if we lose $16,500 then the next major level of support comes in at $15,588. This can be triggered by further weakness in the US stock market and another 75bps rate hike out of the next FOMC meeting.

ETH/USD key levels

Interactive chart: click on image for higher resolution

Ethereum has failed to reclaim $1,300 USD and this breakdown in market structure can weigh heavily on the coming trading sessions. If we close below $1,190 then we can expect a move towards $1,071 before major support kicks in. To the upside if we close above $1,300 on the daily chart, then we expect a move towards $1,472.

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Bond Market Signals Potential Global Recession

Tue, 06 Dec 2022 11:23:25 +1100

As we continue to trade our way through a brutal 2022, the US bond market shows no remorse and provides the strongest signal that a deep global recession is imminent. Today we dissect how real this signal can be and what risks are associated with its confirmation.

Yield Curve Inversion

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US bond yields give us a clear picture of what large hedge funds, sovereign wealth funds and global money managers think of risk across different time horizons. A normal yield curve for any bond market would be the longest dated bonds, so think 10 year, 20 year and 30 year bonds would pay the highest yield, as you assume the longest duration risk and are locking up your funds for a significant period of time. To cover that risk premium and duration, they pay higher yields whilst shorter dated bonds, think 1 year and 2 year pay a lower yield as your duration risk is much shorter.

What we are seeing now is called yield curve inversion, where shorter dated bonds are paying a much higher yield than the long dated bonds, this is because bond investors see a much higher risk in the next two years than in the future. So the risk premium for having your capital locked up during a global recession cranks short dated bond yields way up.

Now with all of this in mind, we are now witnessing the deepest US bond yield curve inversion in over 30 years. This shows how desperate bond investors are to exit their bonds, as they pay huge coupons to jump out of short dated bonds in fear of getting caught in a recession. We don't wish to be alarmist but it's important to note that these risks are real and we need to keep them in mind when heading into a new calendar year.

Bitcoin Exchange Supply Dries Up

Due to the collapse of FTX, the jarring reality of counter-party risk has hit the entire crypto industry like a sack of bricks. This has led to a significant run on exchanges, as crypto traders and investors rush to withdraw their Bitcoin balances from exchanges into the safety of their self-custody. With this frenetic rush to withdraw, Bitcoin balance on exchanges have hit multi-year lows, combine this fact with an increasingly illiquid market as many market makers have bit the dust in 2022, it sets up a supply squeeze.

As there is less available Bitcoin on exchanges and the shocking reality of Paper Bitcoin now exposed, we can finally see some real price discovery on exchanges, as market structures are now setup in an eerily similar fashion to the 2017/2018 period.

BTC/USD key levels

Interactive chart: click on image for higher resolution

Bitcoin has now well and truly reclaimed our key level of $16,500 USD. BTC now has to do battle with $17,189, which was the resistance level we highlighted in our previous Morning Note. It managed to peak above this pocket but was brought back down with a weak US stock market session. If we reclaim and close above $17,189 the next major level of resistance comes in at $18,217, which is a tidy lift of 7% from current levels. To the downside, if we lose $16,500 then the next major level of support comes in at $15,588.

ETH/USD key levels

Interactive chart: click on image for higher resolution

Ethereum has a slightly more bullish market structure and technical chart as compared to Bitcoin. Should ETH manage to finally close above $1,300 USD on the daily timeframe, the local resistance level comes in at $1,386. Should it clear $1,386 the major resistance level comes in at $1,472 where we expect the market to take a pause. If ETH fails to reclaim $1,300 on the daily, then it becomes clear resistance and we look for a move towards the previous key level of $1,190. Should $1,190 fail to hold, expect a sharp move towards $1,130 before support manages to kick in.

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Weakest Four Quarter Performance In Bitcoin History

Tue, 29 Nov 2022 13:38:13 +1100

This year has seen a lot of first for Bitcoin, not all of which have been a blessing. As we head into the final month of 2022, Bitcoin is set to deliver its weakest four quarter performance in its trading history. Those who have survived 2022 so far are set to become the most battle hardened Bitcoin investors.

Straight Red For 2022

As a crypto investor you probably don't need a reminder that this year has been one of the most brutal on record. The good news though, is that if you're still here, you have witnessed one of the most savage bear markets in digital asset history and are well prepared to survive whatever else may come.

To recap what we have seen so far, Crypto companies currently in bankruptcy proceedings:

Voyager

Celsius

BlockFi

Billions of dollars of industry capital has completely evaporated, taking with it VC money all the way down to everyday retail investors. The systematic failures of centralised entities, who levered up again and again with backdoor deals and negligent (arguably criminal) accounting practices has left crypto asset prices in a severe correction. We're witnessing a huge deleveraging event but as Bitcoin, Ethereum and DeFi keep trucking along, as designed and intended, we'll continue to see new innovation and exciting opportunities crop up.

In light of these centralised entities complete failures, we suggest you look into self-custody, you can get started by reading our article on the topic HERE.

Altcoin Watch: Chainlink

Interactive chart: click on image for higher resolution

Chainlink has come across our radar as their public staking is set to go live in mid December. The entire crypto market is completely starved of narratives right now and is quite beaten up from the FTX saga, so Chainlink coming along and staying true to their roadmap of releasing public staking will provide the crypto community a focus point. The narrative of on-chain supply decreasing as staking goes live plus being considered a "DeFi Blue Chip" should provide a very Merry Christmas for the LINK community.

The key level to reclaim to the upside will be $7.5 USD, should we close above this level on the daily chart then the next key level comes in at $7.89. Clearing the zone between $7.89 and $8.33 could have a retest of $8.99. To the downside, if we lose $6.84 then the next major level of support comes in at $6.29. The line in the sand is the double bottom low of 2022 coming in at $5.54, if this level is lost then the market could print significant new lows for the year.

BTC/USD key levels

Interactive chart: click on image for higher resolution

Bitcoin dipped below the key level of $16,500 USD following a small liquidation cascade. We currently just trade below $16,500 which means a retest of $15,588 is on the cards, further material downside risks can take us to new lows for 2022 and support comes in at $14,444. For a move to the upside, we will need to see the market reclaim $16,500. Should we complete this reclaim the next major level of resistance comes in at $17,189, clearing this level will have us retesting $18,217. Worth noting, if we get back above $20,000, we can end the quarter in the green, it rests on the perma-bulls to make it happen.

ETH/USD key levels

Interactive chart: click on image for higher resolution

Ethereum is once again testing $1,190 USD, this time by coming up from the downside. Should we reclaim $1,190, we are likely to see a move to $1,333. Closing above $1,333 could have us retesting $1,472 as a major level of resistance. To the downside, if we lose $1,071 which is also a local double bottom level, could have us quickly head to $1,000 even. Losing the round number level of $1,000 which is also quite a significant psychological level, will have us retest the major support level of $885, the 2022 low for Ethereum.

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Dollar Index Weakness Tempts Crypto Bulls

Mon, 28 Nov 2022 11:59:05 +1100

After a brutal year for crypto investors, there may be some hope left in 2022 as the Dollar Index parabolic run looks to have come to a close. We remain hopeful that a Christmas rally is set to be delivered to risk assets and it begins with continued weakness in the US dollar.

DXY Breaks Parabolic Run

Interactive chart: click on image for higher resolution

An incredible amount of strength and demand had been ushered into the US dollar as the FED raised rates and began its tightening cycle. This created a structural bid on the USD and caught many large institutions and sovereign states short on liquid USD. When taking into account large USD denominated debt that has become a lot harder to service due to rising rates, the increased demand for liquid USD also rises to meet this debt obligations.
All of this created a parabolic run for the most of 2022 but had become broken towards the end of October, this caused Bitcoin and other crypto assets to track higher throughout Q4. We unfortunately had met the FTX collapse and deleveraging which has understandably sent prices across the crypto industry a lot lower. With that risk and potential contagion now known, we're well set up for a Christmas rally should continued USD weakness remain.

wBTC Latest Contagion Victim

Image Credit: @Messari_Jack on Dune Analytics

Alameda research was one of the largest merchants taking on wbTC/BTC conversions. The tokens are “minted” when a user makes a request to a merchant, who then makes a transaction with a custodian who sends them wBTC in exchange for the $BTC which will be held in custody. When the user wants to redeem their BTC, the merchant will initiate a “burn” transaction with the custodian, returning the original asset and burning the wrapped token. The problem here lies with the fact that Alameda research, the defunct trading arm that allegedly embezzled client funds as FTX had sent them user deposits, so there are now concerns that the wBTC transactions are either fraudulent or have no Bitcoin backing. This has led to a stress test and slight depegging of the wBTC/BTC price. Impacts are yet unbeknown but we will be watching this development and update through our morning note accordingly. For brave arbitrageurs there is an opportunity here but should be aware of the significant risk of further depegging before wading into arbitrage waters.

BTC/USD key levels

Interactive chart: click on image for higher resolution

Bitcoin is now well and truly entrenched at the key level of $16,500 USD having traded within a tight 2% range of that price for close to a week. For any meaningful move to the upside to occur, we need to see $17,189 get a strong test, if we close above this level then a sharp move to $18,217 cannot be ruled out. To the downside, we will be watching for a break and close below $15,588. Should we close below this level (2022 low) then the next level of support comes in at the critical level of $14,444.

ETH/USD key levels

Interactive chart: click on image for higher resolution

Ethereum is currently testing its key pivotal level of $1,190 USD. Should it manage to hold above $1,190 and close the daily chart above this level, then we will watch for a strong move to $1,333. If the upside momentum is particularly strong, a retest of $1,472 cannot be ruled out. To the downside, if we lose $1,190 then we will look for a move to $1,071. The next major level support comes in at $1,000 even and could occur if we close below $1,071 on the daily chart. Currently ETH is deflationary since post-merge but the slowdown in network activity has led to a net increase in supply emissions over the last 7 days.

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Relief Rally Lifts Risk Appetite

Thu, 24 Nov 2022 11:37:42 +1100

Crypto markets have taken a pause from relentless selling as participants assume most market contagion has been identified. The relief rally has brought along with it an increased risk appetite as traders and investors find ways to claw back losses from a brutal 2022.

Altcoins Catching Bids

Interactive chart: click on image for higher resolution

A wild variety of altcoins have recently caught some attention and have been getting a nice lift in market prices. It includes Proof-of-Work asset, Litecoin as it has recently undergone it's own halvening cycle and had it's supply emissions reduced. DeFi token, Curve has recently undergone a short squeeze, as Aave (lending protocol) has been exploited. The attacker borrowed a significant amount of CRV tokens by posting USDC as collateral and let the debt turn toxic, as the smart contract would have had to liquidate the attacker's USDC and buy back CRV. This causes a short squeeze as the position was on-chain and traders started to pile into CRV long positions. Even embattled tokens such as Apecoin and Solana have managed to catch a bid in this risk-on environment but it would be wise to proceed with caution, markets are trading on a knife's edge and won't take much to turn sentiment around.

Layer 2 Wars Rage On

With all the chaos in the wider crypto markets, the layer two wars have taken a backseat but they continue to rage on. Over the last 6 months, Layer two solutions have overtaken Ethereum maninnet transaction settlement, with Arbitrum counting for nearly half of all layer 2 transactions. Layer 2 solutions have also onboarded 1 million new users over the last 30 days, showing the need for cheaper and faster on-chain transactions, have only accelerated despite the savage bear market. We will keep on watching this space, as the next 6 months will bring plenty of opportunities for traders to take advantage of and etch out some alpha.

BTC/USD key levels

Interactive chart: click on image for higher resolution

Bitcoin has found support at $15,588 USD and now just trades above our pivotal key level of $16,500. It's decision time for Bitcoin for if it holds above $16,500 it can make a run higher and retest $17,189. If it manages to close above $17,189 on the daily chart, watch out for a sharp move to the $18,217 handle. To the downside, if it loses $16,500 it will head right back to its 2022 low of $15,588. Should a risk-off environment pop up over the next few days, a move towards $14,444 cannot be ruled out.

ETH/USD key levels

Interactive chart: click on image for higher resolution

Ethereum had a stellar session overnight and now flirts with our key level of $1,190 USD. If we can close above $1,190 then we will watch for an explosive move to $1,333. Reclaiming $1,333 on the daily chart and a retest of $1,472 by week's end cannot be ruled out. To the downside, if we fail to close above $1,190 on the daily chart, we will look for a retest of the double bottom level of $1,071. If we slice through, $1,071 it can melt a further 6% to the $1,000 handle before finding meaningful support.

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FOMC Announcement Awaits Crypto Bulls

Wed, 02 Nov 2022 11:19:42 +1100

There are only two meetings left in the 2022 FOMC calendar. Today will provide a signal whether there will be any relief in 2022 for risk assets. Should we get a light rate hike, a Christmas rally would definitely be on the cards.

Carrot or Stick - JPow will decide

The RBA fired out a soft 25 bps rate hike whilst Australia gathered to watch a horse race. The rhetoric from RBA Governor, Philip Lowe was a lot stronger and created a rift between actions and words. This divergence between trying to talk markets down and having a soft rate hike caused the AUD to weaken and the ASX to catch a strong bid. Although the RBA never leads the FED in policy, it can give us an indication of what we can expect tonight. If FED chair, Jerome Powell comes out tonight with sub 75 bps and a strongly worded speech about continued rate hikes, we might just see the early signs of softening policy. We're not calling for a "FED Pivot" just yet as that may be premature but we're quite close to apex rates.

Altcoin Watch: GMX

Interactive chart: click on image for higher resolution

Lately we have been covering the Ethereum L2 landscape, where we have provided education on, "what is a layer 2?" and a potential Arbitrum token airdrop. All this research has given us an insight on which protocols and dApps have the best chance of capturing some value and attention. This brings us to GMX, the decentralised exchange that has the most on-chain activity on Arbitrum and accounts for more than 40% of its total value locked (TVL). Without having to expose oneself to the risks of bridging ETH assets over to Arbitrum, one could gain exposure to the ecosystem, through GMX exposure.

Diving into the technicals, the first key level comes in at $42.39, if we can close above this level we can anticipate a retest of $45.67. To the downside, if it closes below $40.85 then the next major level of support comes in at $38.05.

BTC/USD key levels

Interactive chart: click on image for higher resolution

Bitcoin currently sits a few ticks below our pivotal key level of $20,554 USD and will likely get retested several times heading into the FOMC meeting. If we hold above this level, we can quickly shoot towards $21,761 as the first level of resistance, which if we manage to clear can have us track up to $22,794.

To the downside, if we close below $20,554 on the daily chart, we'll be anticipating a retest of our previous magnet area of $19,560. Losing $19,560 can have us spiking lower towards the local low of $18,161 before we find support.

ETH/USD key levels

Interactive chart: click on image for higher resolution

Ethereum has hit a snag and now trades sideways, for it to continue its strong lift in prices, it will need to close above $1,664 USD. If it reclaims $1,664 then expect a strong push to $1,761 which provided a huge level of support until it broke down in mid June 2022. When support becomes resistance, from a technical perspective it's generally a pretty sticky area but if we clear $1,761 then its clear skies ahead.
To the downside, if we close below $1,555 then a retest of $1,472 cannot be ruled out. Losing the 2018 high of $1,472 can have us retest $1,333 if the downside momentum is strong enough. A severe sell-off is likely to come on the back of an aggressive rate hike out of the FOMC meeting.

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The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.

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Happy Bitcoin Whitepaper Day

Mon, 31 Oct 2022 10:25:48 +1100

The world irrevocably changed 14 years ago today with the publication of the Bitcoin Whitepaper. A revolution that spans finance, economics, politics has created the purest form of money the world has ever seen.

The Birth of Bitcoin

What a glorious day for us to reflect on the invention of Bitcoin. Over the last 14 years a lot has happened in the world of Bitcoin and the greater universe of digital assets, yet the impact and revolution of true money has only just begun.

Erik Voorhees, founder and CEO of ShapeShift on a debate with exchange kingpin, Sam Bankman-Fried eloquently stated that the Bitcoin provides separation of money and state. This revolution in thinking and freedom is akin to the separation of church and state. No longer will the people be subject to currency manipulation, artificial inflation and egregious government debt loads as Bitcoin provides emancipation from a legacy system that has truly outrun its course and utility.

The next 14 years will provide volatility, countless ideas, continuous development and an opportunity for monetary freedom but for now, let's enjoy Bitcoin Whitepaper Day and prepare for a huge week ahead in macro land.

Macro outlook

We have a huge week in macro land to navigate as we have not one, not two but three key interest decisions to digest. First cab off the rank will be the RBA announcement, followed by the king of all interest rate decisions the FOMC meeting and closed out with the BoE decision.

Expectations are between 50 - 75 bps to come out of each meeting, usually this would crush risk assets especially crypto and equities. However, we have had an interesting development occur over the last few weeks, as we have seen giant tech firms such as Amazon and Meta get absolutely destroyed by poor earnings yet Bitcoin stands strong. This strength in Bitcoin and the wider crypto space despite tech stocks getting a proper beatdown may indicate some of the Wall Street tourists have already left.

To confirm this divergence, we will be watching the price action react to the interest rate announcements, if equities and tech stocks get sold off and Bitcoin holds up, it may be one of the clearest buy signals crypto has had in quite some time.

BTC/USD key levels

Interactive chart: click on image for higher resolution

Bitcoin currently sits on our pivotal key level of $20,554 USD and will prove to be a make or break area this week. If we hold above this level, we can easily retest $21,761 prior to taking a pause, if we close above $21,761 on the daily chart, watch for a sharp move to $22,794.

ETH/USD key levels

Interactive chart: click on image for higher resolution

Ethereum continues to outperform and its market structure looks incredibly healthy. Due to its recent strong outperformance, it could possibly trade in a range between $1,472 USD and $1,664 USD. To move higher it will need to close above $1,664 on the daily chart, if it manages to clear this level then it's clear skies until $1,761 as the next meaningful level of resistance.
To the downside, if we break and close below $1,472 on the daily chart, we will anticipate a sharp move down to our previous magnet zone of $1,333. A strong enough sell-off can have us retest the local lows of $1,190.

No Advice Warning

The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.

Disclaimer

Bitcoin Bears Bruising Beatdown

Wed, 26 Oct 2022 11:55:25 +1100

Just over $328M USD worth of short liquidations got triggered by Bitcoin moving over $20,000. Across other crypto assets over $700M worth of short liquidations has been doled out to the bears. Let's dive in and see where this short squeeze can take us.

Pain & Punishment

As a Bitcoin perma-bull, 2022 has seen its fair share of bull butchering events and has certainly tested the resolve of Bitcoiners and crypto investors alike so please forgive my gloating. Today was the single largest liquidation event on FTX in its history and the runner up isn't even close. Approx. $600M USD got wiped, mainly from shorts as 87.67% of the total liquidation event came from the bears. Across the wider crypto space, well over $800M got liquidated, with almost 86% of that coming from shorts. Prices have started to normalise following this wrecking ball of liquidations, with further upside anticipated if certain key levels can hold and the liquidity faucet gets opened up by the US FED.

Revenue - Back On The Menu

The beleaguered crypto ecosystem is starting to show some signs of on-chain life, as fees and revenue over the last 24 hours have started to pick up. This is critically important and a high quality signal, as users are willing to transact on-chain and pay fees. That gives us an indication that the ecosystem is still operating despite a reduction in valuations. The DeFi, trading and derivatives sectors of on-chain markets have been particularly busy as speculators begin to build their positions and regain confidence. What has been particularly impressive is how quickly Total Value Locked (TVL) has picked up. The ETH chain for example has risen back over $30B TVL. Keep an eye on the Layer Twos, as they are steadily gaining market share from ETH, as we have recently seen Arbitrum crack past $1B in TVL.

BTC/USD key levels

Bitcoin has finally breached the $20,000 USD level. The sharp rise we had seen in prices had us almost retest our key level of $20,554, this will prove to be the first bullish retest for Bitcoin. If we can push past $20,554 then the next level up will be $21,761 which would provide us with a tidy 8% lift from current prices. To the downside we have to watch for a fade back below $19,560, should this occur we can anticipate a breakdown to $18,549. What is most likely to occur now though, will be settlement of prices around the $20,000 level and the same sideways price action we have seen in the past few months.

ETH/USD key levels

Ethereum has had a much stronger lift in prices relative to BTC, up over 8.5% for the day so far. This strength has ripped through most of our key levels with ease and almost retested our key level of $1,555 USD. We currently trade around the 2018 All Time High key level of $1,472. If it manages to hold the 2018 ATH, a run up to $1,721 cannot be ruled out. To the downside, if we fall back below $1,400 then it's back to the magnet of $1,333. A reversal can also have us retest $1,241 before finding meaningful support.

No Advice Warning

The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.