Monday Market Outlook #11
In last week's Market Outlook we articulated the sentiment over the summer months and how, as we approach the fall season, the markets are poised to heat up.
The last two weeks coming out of July have been very strong for the Bitcoin price action and confirms our prediction that such a reaction would happen after the Grayscale unlocking of July. Since then, we have posted 12 consecutive green daily candles and everyone is anxious to know what's next, so let's dive into it.
Top story in the news with the ability to affect market conditions is most obviously the Delta-variant Covid-19 strain that has been sweeping back over the globe.
While the United States shares a significant share of global cases, Dr. Anthony Fauci, the director of the NIAID, says lockdowns are likely not coming. This is an interesting thing to dissect, where lockdowns would stifle economic growth and consequently affect markets to the downside, but would encourage the Fed to pass more stimulus which has historically strengthened sentiment among crypto market participants.
This may just equalize itself in market performance terms as we continue to ride the current investing landscape, which has been very rewarding for those who are further out on the risk curve with strong trend-based investments (i.e. Bitcoin).
The Fed and Congress
The Fed are still between a rock and a hard place trying to keep investor sentiment strong while inflation rears its ugly head and economic growth is dampened due to lockdown affects on labor participation.
This is almost obvious to spot as they try to appear hawkish in anecdotal terms yet continue to remain dovish in policy terms, continuing to remain in an easing temperament. We wont see more hawkish sentiment from the Fed till the September FOMC meeting. While August is a historically slow month for equities, let's see how it plays out in these very eased markets.
In addition to the Feds stance, the upcoming Infrastructure Bill has just made public the rough draft of its position on the crypto industry. The language of which has been extremely loose, and could inadvertently crush the crypto market entirely if passed.
The bill will continually be revised, however, and has been updated since the initial release. To my knowledge the language has been updated to pinpoint more specific regulation. Here's a Twitter thread which draws out the sentiment perfectly. Once the bill passes, most regulation wont instantiate itself until 2023.
S2F model showing the beginning of a possible reversal that may be very similar to 2013, something we have discussed many times before.
Puell Multiple also showing a reversal after touching the historical support level indicated by green.
The 200-week moving average heat-map showing our broader cycle has yet to be over heated, or reach a "blow-off top", like broader cycles of the past. A possible indicator there is more upside potential in the coming months.
The Bitcoin All-Time Log Index shows constricting bands as we approach the mid range again at around $46-48k and also show we have yet to reach the top of the logarithmic range in the current broader cycle.
Bitcoin closed over the 21-week moving average after the previous 50+% drop from local highs and bounced off the 50-week moving average. In the previous broader cycles, the bottom is usually marked at the 200-week moving average.
The next level of resistance for us here is the previous support ranges Bitcoin made when the market was trading in the 50k ranges and is marked by the 200-day moving average (the red line). The 21/55 week moving average ribbons look to be constricting and possibly flipping green here soon. I think we are definitely in buy-the-dip season with two very strong bullish continuation possibilities:
- BTC continues uptrend bouncing off the 40k level and into the mid-to-high 40k range to test the resistance.
- BTC falls back to 35k to test our support and put in a HTF higher low and base ourselves with strong support in the mid 35k's to send us back up with a stronger base.
This is buy-the-dip season until proven otherwise. There is a strong case to be made for a historical reversal here. More institutions purchasing Bitcoin, more institutions entering the mining arena, and strong traction to the first BTC ETF.
Regulatory guidance in the political sphere is direly needed and looks to be taking place with the recent updates to the Infrastructure Bill, but time will tell.
These are obvious signs of maturing market network effects and adoption. We could be nearing the end of a very historic inflection point if we do indeed succeed in this reversal and trend back to new all time highs. Excited for what is ahead.