FOMO, market euphoria, and the market set for the repricing
Bitcoin is up approximately 46% since its 2022 low, and market euphoria is taking over. There is a tremendous increase in ideas claiming a primary trend reversal (from bearish to bullish) and people dismissing any chances of a recession in 2023. However, we want to take a step back and ignore the noise. Over the past year (since the 2021 market top), there were four rallies (excluding the current one); on average, they lasted 40.7 days and returned 35.3%. During that same time, there were five significant selloffs; on average, they endured 42.6 days and erased 41.5% of the value. The current rally (from the 2022 low) has continued for 63 days and returned approximately 46%, which does not represent anything out of the ordinary compared to previous rallies in the past year (see Illustration 1.01 and Illustration 1.02).
In addition to that, the stock market has been gaining over the past few weeks, providing a lift to highly correlated cryptocurrencies. However, with tech earnings in progress and many big names set to report their full-year 2022 results in the coming days, the sentiment may change quickly. As if it was not enough, the daily volume has shown a significant decline after Bitcoin broke above $21 000, raising questions about the rally's sustainability. Therefore, just like on previous occasions with deceitful rallies in the past year, we raise a word of caution to market participants.
Overall, there are still many problems in the system, which should be reminded to investors by the latest bankruptcy of Genesis, with more than $5 billion in liabilities (and implications for Gemini, DCG, and other institutions). Thus, we remain very skeptical about the current rally, which is reminiscent of “FOMO” rather than a healthy recovery. As a result, we maintain our price targets for Bitcoin at $15 000 and $13 000.
Illustration 1.01
Illustration 1.01 shows the daily chart of BTCUSD. The length and magnitude of particular price moves between peaks and troughs in the bear market can be seen.
Illustration 1.02
Illustration 1.02 shows additional price moves between peaks and troughs in the past year. Interestingly, 63 days have passed since the last trough displayed on the chart.
Technical analysis
Daily time frame = Bullish
Weekly time frame = Slightly bullish
Illustration 1.03
Illustration 1.03 displays the daily chart of BTCUSD. For the first half of January 2023, the volume can be seen rising, which is bullish. However, with Bitcoin breaking above $21 000, a worrisome drop in volume can be observed. In our previous article, we outlined that such development would support a bearish case beyond the short term. Therefore, we are very cautious and looking for more signs of exhaustion.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
In addition to that, the stock market has been gaining over the past few weeks, providing a lift to highly correlated cryptocurrencies. However, with tech earnings in progress and many big names set to report their full-year 2022 results in the coming days, the sentiment may change quickly. As if it was not enough, the daily volume has shown a significant decline after Bitcoin broke above $21 000, raising questions about the rally's sustainability. Therefore, just like on previous occasions with deceitful rallies in the past year, we raise a word of caution to market participants.
Overall, there are still many problems in the system, which should be reminded to investors by the latest bankruptcy of Genesis, with more than $5 billion in liabilities (and implications for Gemini, DCG, and other institutions). Thus, we remain very skeptical about the current rally, which is reminiscent of “FOMO” rather than a healthy recovery. As a result, we maintain our price targets for Bitcoin at $15 000 and $13 000.
Illustration 1.01
Illustration 1.02
Technical analysis
Daily time frame = Bullish
Weekly time frame = Slightly bullish
Illustration 1.03
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Trade active:
Bitcoin jumped to a new high, which is bullish in the short term. However, the volume continues to flash warning signs. Despite that, a low liquidity may still allow for a push higher.
