CoinJar’s Three Ts: Ethereum upgrades, the DXY factor and a weekly close for the ages
Link copied to
With Bitcoin hitting its highest level in a month, things are mostly champagne and roses in crypto-land right now. But it might be worth paying more attention to crypto’s second-in-command, Ethereum.
The much-hyped EIP-1559 upgrade is due to go live in early August, bringing a new token burn dynamic to the network that should apply deflationary pressure to the market.
Add to that the increasing roll-out of the Optimism scaling solution (goodbye $50 gas fees!) and the imminent arrival of Serenity – AKA ETH 2.0, Ethereum’s proof-of-stake solution – and you have what some commentators are referring to as a Triple Halving event on the horizon.
This is a 90% drop in sell pressure from miners thanks to changes to $ETH including POS, deflation, as well as liquidity
— croissant (@CroissantEth) July 18, 2021
For the past half a decade, the most consistent Bitcoin price correlation has been with the US dollar index ($DXY).
The relationship is simple. Strong dollar, weak Bitcoin; weak dollar, strong Bitcoin. It makes sense as Bitcoin has always presented itself as a weapon against inflation. If fiat currency is losing strength, Bitcoin becomes a more appealing place to park those dollars.
So when the US government started printing trillions of US dollars to mute the economic effects of the COVID-19 pandemic, it was little surprise that the DXY began to plunge – and the Bitcoin price went parabolic.
However, now we’re beginning to see signs of a turnaround in the DXY – a double bottom followed by a break of resistance – and if those trends continue it could spell continued stagnation or even downside for BTC.
I think we continue to see the dollar rally here towards 94.
— Payne (@Tradermayne) July 19, 2021
But before you rush into any 100x shorts: DXY moves can take months if not years to play out, so there’s plenty of scope for Bitcoin upside in the interim. And hey – from another perspective that’s just a rising wedge ready to collapse…
And there we have it: some actual, high volume movement in the Bitcoin market.
While the more immediate cause of the impulse was likely a short squeeze – overleveraged short positions being liquidated in a self-perpetuating cascade upwards – for Tom from FX Evolution, what we’re seeing matches up well with a classic Wyckoff accumulation pattern.
If the model holds, we should see a return to a newly established support around US$36k over the next few days before making another push for US$40k and above.
If you’re unfamiliar with Wyckoff schematics, they’re basically a way of mapping out trading movements and price manipulation at market tops and bottoms. You can find a good summary of the phases and terminology here.
The giant green candle we saw around the weekly close yesterday also signalled a reversion to the 20-week EMA (Exponential Moving Average), an important trendline for the Bitcoin price.
As we can see, price is now sandwiched firmly between the 20-week and 50-week EMAs.
While yesterday’s gains are certainly the most positive bit of price movement we’ve seen in months, we’ll need to see a break and close above the 20-week before we can more confidently declare a return to bullish conditions.
CoinJar is Australia’s leading cryptocurrency exchange. Established in 2013, CoinJar makes buying, selling, trading and spending cryptocurrency fast and simple, whether you’re a first-timer or a pro trader.