It’s Monday morning and markets are enjoying a positive start to the week. After a tumultuous Friday session left US Equities riding high, and Bitcoin reeling from a -5% dump in the aftermath of Silvergate Bank news.
Silvergate Capital Corp is now trading at all-time lows following last week’s admission that it had been forced to sell further debt at a loss.
This comes after a run on Silvergate Bank reserves in November, as top crypto providers – including Coinbase and Crypto.com – raced to secure USDC stores.
Despite US equities ending last week with a strong performance – with both the NASDAQ and S&P enjoying solid bounces – the USD remained suppressed as it failed to push higher.
Much to the disappointment of traders seeking to capitalize on fundamental tailwinds, Bitcoin saw a slow bleed-out following the sudden tumble down to $22,250.
This comes as 10-year Treasury notes saw a four-month high ahead of expected rates hikes from the Federal Reserve.
Bitcoin (BTC) Price Movers For The Week Ahead
Looking to the week ahead, markets are awaiting clarity – on both the performance of the US labor market and the outlook of the Federal Reserve – following rumors that rate hikes will be ‘higher for longer’.
Friday will see February’s unemployment figures released, markets have priced in an expected +200,000 growth in jobs last month – as traders anticipate a slowdown from January’s impressive figures.
The unemployment rate itself is expected to remain steadfast at 3.4% – the lowest level since 1969.
What markets want to find out here is whether data from last month will corroborate with the bright picture painted in January – or whether things aren’t as good as first thought.
This comes as Powell is heading to Congress for two days of testimony following the release of the Fed’s Semiannual Monetary Report last week.
Traders will be watching his performance at the Senate Banking Committee (10am EST – Tuesday) and the House Financial Services Committee (10am EST – Wednesday).
It is expected that Powell will be addressing concerns revealed in last week’s Monetary report about stubborn and persistent core inflation.
Markets are looking to confirm whether this is evidence that there are ‘higher for longer’ interest rate increases on the horizon.
Bitcoin (BTC) Price Analysis
With markets on edge awaiting clarification from US economic data, Bitcoin (BTC) continues to consolidate following the -5% Silvergate dump at the end of last week.
Currently trading at a price of $22,395 (a 24-hour change of -0.17%) – BTC is looking to bounce off 3-days of solid consolidation at the local support level above $22,250.
This comes following a 6-day long 11.5% retracement from a local rejection at $25,000 last Tuesday.
Traders had expected a quick run-up to retest the critical $25,000 level – however, Silvergate’s -5% dump has worsened the depth of retracement.
$25,000 still remains the key level – according to popular algorithmic trader Daan De Rover (Crypto Rover).
“If you look above [the resistance level], $25,000 to $29,000 is an extremely low volume range,” said Rover at last week’s Blockchain Economy Summit in London.
“So if we break above the $25,000, it could go up to $28,000-$29,000 very quickly, but the question really remains can we break above 25k? And where is the market heading in terms of inflation? Because that’s really a big driver in the market.”
Worse still, the Silvergate tumble saw BTC drop below its 20 Day MA – this becomes a key target to reclaim – and could quickly form a ceiling to cap upside price action.
On the bright side, support seems strong in the mid-$22k range – with consolidation over the weekend characterized by low volatility as price action remained tightly controlled.
But an impending collision with the lower trend line in this rally support channel could indicate a need for a decisive move soon.
The RSI showcases strong bullish divergence at 43 – having cooled off significantly into March.
This highlights the strong buy pressure supporting consolidation at current levels, and signals that BTC is oversold.
The MACD contrasts this reading bearish divergence at -239 – reflective of the move below the 20 Day MA.
Bitcoin (BTC) On-Chain Analysis
A look On-Chain paints a deeper picture of current Bitcoin market uncertainty – as price action continues to reel and consolidate from Silvergate.
Exchange Net Position Change illuminates a steady flow of BTC into exchange wallets since February 15.
Since the Silvergate dump, 30,385 BTC (worth $680m) has moved onto exchanges – sat ready to sell.
This is a bad sign – holders are moving supply onto exchanges instead of accumulating supply at these prices.
Typically this signals an impending sell-off move, and likely highlights traders bracing for further downside action in face of market uncertainty this week.
HODL Waves indicate the majority of BTC moved onto exchanges has come from supply last active within 1 week – 1 month – suggesting fearful bulls could be seeking to rebuy lower.
Further explanation comes from Percentage of Supply in Profit – which rose back above 50% of BTC supply following January’s recovery rally.
With a majority of holders now in profit and BTC showing signs of fatigue and duress below $25k – many could be considering whether now is time to take a profit.
This is mirrored by Net Unrealised Profit Loss – which depicts rising optimistic sentiment stalling in a period of hope and fear following Silvergate.
However, there are some silver linings – with Bitcoin’s overall accumulation picture looking fundamentally positive as the number of ‘wholecoiner wallets’ (wallets with >1 BTC) soon to hit 1,000,000 addresses (currently at 984,000).
Bitcoin (BTC) Open Interest Snapshot
Open interest levels have been rising steadily into 2023, but Silvergate once again seems to have thrown a spanner into the works.
The sudden -5% dump saw $400m in open interest swept off the table last week.
And open interest levels have continued to gradually diminish since, as traders seem increasingly uncertain ahead of US economic data this week.
Uncertainty has been reflected in Long/Short ratio sentiment, which has zigzagged over the weekend – although markets now seem increasingly bearish as Short positions take hold.
Bitcoin (BTC) Risk: Reward Structure
Overall, BTC technical structure looks good despite retracement following the rejection at $25k and Silvergate.
With strong buy pressure supporting 3 days of solid consolidation at current levels and a decidedly bullish RSI – upside potential is targeting $24,000 (+7.25%).
A move to this level would prime BTC for another run at $25k, and more importantly would see it reclaim a price level astride the 20 Day MA.
However, with On-Chain data depicting a strong flow of supply onto exchanges and Open Interest levels characterised by pessimistic uncertainty – downside risk could see $20,500 (-8.40%).
A tumble to this level would break rally structure, and create a rounded top pattern – this could spell disaster on the STF.
Overall, Bitcoin’s Risk: Reward ratio is 0.89 – an unattractive entry characterised by significant downside risk.
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