Welcome to the Three Ts with CoinJar. Each fortnight we explore a big Theme, an interesting Trade and some good, old-fashioned Technical Analysis (courtesy of Tom from trading gurus FX Evolution).
 

Make mine a macro

It’s fair to say that the current macroeconomic environment feels… unsettled. Inflation is going haywire, supply chains are breaking down, the stock market continues to defy gravity and the world can’t work out whether COVID is actually going to cause the downfall of civilization or not.

So where does crypto fit into all of this? Well, it’s complicated. On the one hand, Bitcoin has spent most of the COVID-era fulfilling its core purpose as a hedge against inflation. But it’s also benefited enormously from an unprecedented risk-on environment driven by rock bottom interest rates that never recovered from the GFC.

So, with inflation in the US reaching its highest level in more than 30 years, it should be Bitcoin’s time to shine, right?

Well, perhaps not.

If interest rates go up in response to persistent inflation and people are already perilously indebted (which they are), it’s likely that the broader appetite for risk will begin to ebb. And in a frothy, hype-driven market like crypto, it doesn’t take much of a shift in sentiment to produce outsize effects.

This isn’t a call to panic stations. Nobody knows how such a chaotic macroeconomic environment is going to play out and the outcome for crypto, as the world’s newest and most idiosyncratic asset class, is even more unclear.

But it’s a reminder that Bitcoin and crypto are all part of a broader system of financial effects – and as this bull run finds its eventual conclusion it could pay handsomely to keep that in mind.


 

BTC ready for blast-off?

And now some hopium to balance things out. A few astute analysts on Twitter have spotted a pattern on the Bitcoin chart affectionately known as a Livermore cylinder.

First identified by the legendary trader Jesse Livermore (the guy basically invented technical analysis), the ‘Accumulation Cylinder with Widening Mouth’ is a rare, slow-forming but potentially explosive pattern where the price brackets back and forth between two non-parallel lines until it detonates to the upside.

This wouldn’t be the first time crypto has wheeled out a Livermore cylinder for the fans: Ethereum could already be in the process of resolving its own Livermore cylinder; and hell, BTC may have done one itself back in 2017.

While things may appear to match up pretty well, always remember that charts aren’t destiny. They’re just ways of shifting the odds ever so slightly in your favour, so always keep your risk levels in check.
 

ETH’s time to shine

Which brings us to this week’s charts and hasn’t Bitcoin been doing… nothing? Sure, everything felt scary during the Omicron mini-crash, but in reality Bitcoin appears to be doing a classic re-test of the daily support area built during April and May’s post-peak consolidation.

With price chopping around, this remains a difficult area to trade. According to Tom from FX Evolution, what we want to see for a potential end-year bull run is a break back above US$60k. On the other hand, a convincing break below US$52k could indicate that the party is over for the time being.

Ethereum, on the other hand, is making waves. While not back at its all-time high yet, the ETHBTC ratio has broken upwards, indicating that the next phase of market movements could be led by ETH rather than BTC.

Right now, ETHBTC is flirting with the 0.08162 daily resistance set back during the April/May alt-season. If it can break through that, Ethereum could set the scene for a convincing move above US$5000 – and beyond. And if history is anything to go by, that could be exceptionally good news for alts.

CoinJar is Australia’s longest-running crypto exchange. Since 2013, CoinJar has helped more than half-a-million Australians buy and sell billions of dollars in cryptocurrency.

FX Evolution is Australia’s premier forex, stock and crypto trading community.

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