Nov 30, 2023

This Week's Market Overview

Bitcoin Macro

The crypto markets have been gradually rising over the past few weeks, although a major breakout has not yet occurred. Bitcoin, Ethereum, and other prominent altcoins have experienced reduced volatility. It seems likely that conditions are slowly becoming ripe for a significant move; most likely a breakout. Ethereum could rally towards $2,250-2,350, and Bitcoin may aim for $40,700-42,000, potentially reaching short-term peaks before deciding on their next direction. This breakout could be robust; therefore, it's advisable not to sell everything or go short, especially considering potential developments related to ETFs.

Bitcoin appears stronger than Ethereum, but Ethereum has a more stable and clearer long-term chart, partly because it hasn't left as much untapped liquidity at lower levels as Bitcoin has. Bitcoin has significant untapped liquidity at lower levels (many fair value gaps and double/triple bottoms) but has accessed liquidity around $38,500. In contrast, Ethereum has climbed steadily and has considerable liquidity above $2,150, having tested this threshold four times without surpassing the highs. This suggests a high likelihood of Ethereum eventually breaking this level, though its subsequent movement is uncertain. In the short term, both assets might experience a 1-3% drop before continuing their ascent, with Bitcoin potentially reaching around $37,300 and $36,600 and Ethereum around $2,000 and $1,970.

While another dip is possible, potentially driving prices to the $33,000-$34,000 range, it seems more likely that prices will rise first. Currently, Bitcoin is outperforming most other cryptocurrencies, though approximately 30% of coins on legitimate exchanges have significantly surpassed Bitcoin's performance. We have experienced a mini altseason, which seemed to conclude on November 15th. However, many cryptocurrencies are still performing relatively well. Major assets like ETH, XRP, and BNB have not been as successful, marking a somewhat weak alt season that could end abruptly.

Current crypto market indicators do not suggest excessive speculation, but a slowdown is apparent. The market appears to be in a relatively healthy state, and the final move has not yet occurred. There is no definitive signal for a market reversal, even though the market has reached the lowest resistance zone anticipated. While signs of a slowdown and potential correction are evident, betting against the current trend may not be advisable. Taking some profits off the table is reasonable, but with ETF approval possibly less than 45 days away, exiting completely might not be the best strategy.

In the broader financial markets, the recent week has been uneventful for stocks due to the Thanksgiving holiday, with markets closed and minimal activity, even on Black Friday. Notably, there has been an emergence of an SFP in the VIX at the lows and exhaustion gaps in stocks. Some major U.S. indices show potential bullish signs, except for the Nasdaq 100, which appears to be peaking along with major tech stocks. In contrast, bonds have shown strength, with yields trending downward. They have reclaimed key support but now seem to be facing resistance. This situation is unusual, as bonds rallying while stocks remain stagnant is not a common trend observed over the past year, hinting at a potential slowdown in the global economy. Energy markets have been mostly flat and exhibit underlying weakness, though they may bounce back in the short term. The USD has been on a downward trend, struggling to find support, but today it is showing signs of strength and potential for a reversal. It seems unlikely that both the USD and bonds will continue to rise simultaneously; one is likely to fold. Precious metals, especially gold and silver, have seen significant gains in recent weeks and continue to appear bullish, potentially indicating further declines in bond yields and the USD. However, both metals are nearing resistance and our potential targets, suggesting that, like crypto, they might face a short-term correction before a strong final impulse upwards, followed by a potential plateau.

From a macroeconomic perspective, falling rates suggest an increasing probability of rate cuts in 2024, with inflation expected to remain stable or increase slightly in November. Global central banks, governments, and markets have been injecting liquidity in various ways, including actions by the Federal Reserve and Treasury, though their methods may not be immediately apparent. The overarching goal has been to raise interest rates and curb inflation without significantly disrupting markets and economies. The Federal Reserve, in light of these conditions and considering the upcoming U.S. elections, seems prepared to accommodate government needs, potentially through rate cuts, to prevent the re-election of Donald Trump. The softening labor market, combined with manageable inflation not far above the target, provides room for these adjustments. Despite the increased likelihood of a recession in 2024, possibly as early as Q1 or Q2, the anticipation of monetary easing, stimulus, and technological advancements is likely to mitigate significant market downturns. We could see stocks, for example, correct by 10-15% from their current levels, only to reach new all-time highs soon after as central banks and governments begin to support the markets.

Bitcoin Macro

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