Crypto News

Bitcoin Skyrockets to Unprecedented Heights Before Dramatic Plunge!

Bitcoin surged to unprecedented heights on Tuesday, marking a historic milestone for the world's leading digital currency. Bitstamp Exchange, renowned as the oldest cryptocurrency exchange since its inception in August 2011, reported a staggering price peak of $69,210 for Bitcoin, during the UK afternoon. This remarkable surge follows a 16-month period for Bitcoin, witnessing a 347% increase since plummeting to its November 2022 lows. However, this euphoria was short-lived, as Bitcoin's price swiftly plummeted by over 14% in a matter of hours after reaching its record high.

Multiple factors contributed to Bitcoin's meteoric rise in recent months, including a slowdown in inflation and the long-awaited approval and introduction of 11 Bitcoin Spot ETFs on January 10, 2024. These ETFs provided investors with a regulated avenue to acquire Bitcoin, bypassing the need for specialised cryptocurrency exchanges. The anticipation, implementation, and subsequent success of these ETFs undoubtedly fuelled Bitcoin's surge to unprecedented levels, leading many industry experts to predict an eventual milestone of $100,000.

However, Bitcoin's journey to its current heights has been fraught with challenges. The cryptocurrency endured a year-long bear market starting in November 2021, during which it shed 77% of its previous all-time high. This downturn was fuelled by cryptocurrency companies and exchanges over-leveraging positions, coupled with instances of corporate misconduct and the legal troubles of prominent figures like TerraformLabs' Do Kwon and former convicted fraudster, FTX owner Sam Bankman-Fried.

As Bitcoin braces for an upcoming halving event, where the block reward for miners will be halved from 6.25 to 3.125, the path to further ascent appears relatively unobstructed. This impending supply reduction could serve as a catalyst for Bitcoin to ascend even higher in the foreseeable future.

Ethereum ETF: SEC Keeps Institutions on Edge with Delay Decision

The Securities and Exchange Commission (SEC) has opted to delay approval of any Ethereum Spot Exchange Traded Fund, signalling a need for further assessment. BlackRock, the largest investment company globally, alongside other major investment houses, had sought to establish such a fund since January. Despite Ethereum's application, the SEC is soliciting public feedback to determine whether the arguments previously made for a Bitcoin Spot ETF apply to an Ethereum Spot ETF.

On January 11, 2024, the SEC approved eleven Bitcoin Spot ETFs, which have since proven highly lucrative. These ETFs, led by BlackRock and Fidelity, have collectively attracted over $14 billion in investments. Investment companies recognise the potential profitability of an Ethereum Spot ETF. Nevertheless, the SEC remains concerned about protecting the public from potential manipulation and ensuring that Ethereum Spot ETFs differ from existing Bitcoin Spot ETFs.

The approval process for Ethereum ETFs is anticipated to follow a similar trajectory as that of Bitcoin, involving ongoing discussions between the SEC and exchanges. While the SEC has until August 7, 2024, to reach a final decision, there are indications that a resolution may be reached as early as May 7, 2024. Key indicators of the SEC's stance on granting an ETF include updates to relevant documentation addressing feedback provided by the regulatory body. This comes in the same week that Blackrock announced that BlackRock is planning to buy spot Bitcoin exchange-traded funds (ETFs) for its Global Allocation Fund (MALOX).

Meme-Mania Surges: Traders Ride Bull Market Wave with Meteoric Rise of Meme-Coins

Meme coins have surged significantly over the past two weeks as traders take advantage of the rising bull market and the respective chains of these internet-driven phenomena. Dogecoin, for instance, displayed a remarkable 157% increase, Shiba Inu soared by 382%, and at one point, Pepe coin experienced an astounding 639% surge. These meme coins have always been popular among cryptocurrency traders, leveraging their massive mainstream appeal to outpace the general market with dramatic price swings, especially when other cryptocurrencies like Ethereum approach $4,000 and gain traction alongside Solana and other Layer-1 blockchains.

Such surges often mark the onset of what enthusiasts term 'Meme Season'. While the trend may persist for a while, there's a prevailing belief that profits will eventually be cashed out, leading to a sudden drop in prices as investors seek stronger fundamentals in alternative cryptocurrencies. Memecoins have defied resistance levels, achieving gains rarely witnessed in more traditional and safer digital assets, with Pepe, Shib, and Doge experiencing spikes of up to 26% in a single day.

With the ongoing bullish trend in the market, it's undeniable that Meme coins will continue to attract substantial attention and perhaps even greater popularity as a vehicle for swift profit-taking strategies. As the bull market continues, there is no doubt that Meme coins will retain their huge popularity and even gain further popularity as a means to make quick profits.

Crypto Analysis

Bitcoin (BTC)

After a journey spanning 120 weeks and 6 days, Bitcoin, the leading digital currency, has finally reached a historic milestone: surpassing its previous all-time high set in November 2021 at $69,000 and peaking at an unprecedented $69,210 last Tuesday. However, the celebration was short-lived as Bitcoin swiftly plummeted, experiencing a drastic 14% drop within hours of reaching its pinnacle. Just three days later, on Friday, Bitcoin once again soared to a new all-time high, only to face another setback, this time with a modest 4% dip before stabilising in the mid-range between the highs and the interim Friday low and at the current time of writing, Bitcoin has broken the key $70,000 level and holding for now.

The sudden lack of buyers above the previous high, coupled with persistent selling pressure, raised concerns, particularly in the short term, as the absence of buyers became increasingly apparent. One plausible explanation for the sell-off following such a significant milestone could be attributed to a potential flush out of over-leveraged long positions by large players, commonly referred to as Whales, who capitalise on liquidity in specific regions, consequently exerting downward pressure on the entire asset. This phenomenon occurring rapidly and repeatedly at crucial highs underscores the feasibility of this scenario, now presenting a formidable barrier at $70,000 that bullish investors must surpass and close above to sustain the upward trajectory.

Examining the volume dynamics, the substantial volume observed on a single bar suggests that the recent downturn may have been an isolated anomaly or a concerted effort to drive down prices, warranting cautious interpretation, especially considering the consistently above-average volume observed on recent bars in favour of upward movements. While a slight divergence is noticeable on the daily Relative Strength Index (RSI) indicator between the two most recent higher highs, a clearer picture emerged when analysing the 1-hour chart, revealing a rising wedge pattern that breached to the downside, larger players taking the asset down, before stepping in to take the price back up again, shown by the green arrow on the fake-out bar on the chart to the right. However, the observation that Bitcoin was trading around this pattern's periphery and the sudden up surge suggests that any potential downside breakout was short-lived.

It's crucial to maintain a balanced perspective amidst the excitement surrounding such significant price milestones. While it's tempting to get swept up in the euphoria of new all-time highs, it's essential to recognise that we're still entrenched in a zone of formidable resistance. Until this resistance is decisively breached, preferably on a daily or weekly basis, it must be treated as such, as delineated by the green horizontal shaded zone below.

Should we indeed manage to break above this resistance, and this could realistically happen within days with sustained price action and volume, it becomes imperative to identify potential areas of interest on the chart. While utilising this analysis tool in conjunction with multiple Fibonacci tools could provide more comprehensive insights, I've opted to utilise the Trend-Based Fibonacci Extension tool, connecting three key points on the chart to pinpoint future potential areas. These points include the significant low of March 2020, the previous all-time high at $69,000, and the November 2022 lows.

These selected points hold significant importance in both price and time, serving as anchors for future extensions. The first Fibonacci extension (1) projects to $80,629, while the second extension (1.236) projects to $96,004. This analysis provides a foundation for understanding potential future price movements.

As we conclude this week's analysis, it's essential to remain vigilant for any signs of a potential topping formation and to monitor Bitcoin closely for any indications of retracement levels in the coming days. Weekly monitoring of Bitcoin will continue to inform our ongoing analysis and decision-making processes.

Near Protocol (NEAR)

Near Protocol chart is showing significant developments since our last review. Price dynamics have been particularly noteworthy, with a notable breakthrough of the black horizontal line and major resistance around $2.65, as indicated by the blue arrow. This breakthrough, accompanied by a close above that level and solid price action, confirms that the bottom has been firmly established. Subsequently, we witnessed a classic retest of the resistance line, which successfully transitioned into new support. Since then, the price trajectory has been consistently positive.

For clarity and focus, I've chosen to present a weekly chart only in this analysis. The daily chart, in comparison, lacks notable divergences or topping formations. However, it's crucial to highlight that we are currently encountering significant monthly resistance at the $6.00 to $7.50 level signalled by the red arrows on the chart. Beyond this milestone, there's a key weekly resistance point at the 0.382 level, derived from the all-time swing high of January 2022 to the October 2023 swing low. This level is marked by the green arrow, positioned at $8.39. Following this, there's minimal resistance before reaching the 50% level, approximately at $10.71. While there's a slight uptick in volume at that particular point according to the VRVP indicator, depicted on the chart, there's no noteworthy obstacle until we approach the 0.618 Fibonacci level at $13.02 and although not certain, it wouldn’t surprise me at all if we hit that area at some point in the future.

Considering all factors, Near is currently experiencing an exceptionally bullish phase. Weekly candles exhibit strong green momentum, signalling sustained upward movement. Although there's a possibility of the RSI indicating overbought conditions, the overall chart suggests continued bullish sentiment. However, it's prudent to monitor the chart on a weekly basis for any signs of topping formations. Such formations, while not necessarily indicative of a reversal to new lows, could signal a temporary peak in the near term.

Hedera (HBAR)

This week's final chart is on Hedera (HBAR), chosen for its pivotal position as it attempts to breach significant resistance levels on the weekly timeframe, potentially signalling a substantial upward trajectory. Let's begin our analysis with the daily chart before delving into the weekly perspective.

Currently, the daily chart indicates a crucial test of support, marked by the green shaded horizontal box around the $0.12 area. A favourable outcome here, characterised by positive price action and a notable upside bounce supported by solid volume over the coming days, could signal a bullish momentum shift. Notably, a breach below this shaded area doesn't necessarily imply a substantial retracement, given the pattern of higher highs and higher lows observed in recent movements.

Moreover, the successful test of the 50-day EMA and major support at $10 is a significant bullish indicator for the market.This, coupled with price finding support from the 10-day EMA and all major moving averages showing upward slopes, strengthens the case for potential higher prices ahead.

However, it's essential to consider potential counter-arguments. Firstly, there's a slight daily bearish RSI divergence to contend with. Additionally, the current upside test of the 0.382 weekly Fibonacci level, derived from the March 2022 swing high to the January 2023 significant swing low, positioned at $0.1256, presents a challenge. Despite this, given the limited resistance between the current level and the 0.618 level at $0.1806, the upside potential remains compelling, especially on any daily or weekly close above the current area.

In summary, the successful breach of the weekly black horizontal resistance at approximately $0.10 cents, coupled with a confirmed double bottom pattern, could serve as a significant positive catalyst for this asset's future trajectory.

In Summary

In the current market climate, we're witnessing an impressive surge, with record-breaking highs supported by robust trading volumes and a consistent upward trajectory, bolstered by breakout patterns and sustained price momentum above upward sloping moving averages. These strong indicators strongly suggest that the primary uptrend is firmly in place. While a pullback may be on the horizon, the recent breakout to new highs could delay its onset. It's wise to remain alert for any signs of potential topping patterns or bearish divergences. Remember, this analysis is not intended as financial advice, where market conditions can change anytime. Have a good week!

Macro News

Bitcoin ETF Update

Two months in and we can safely say, spot bitcoin ETFs have been a huge success, blowing volume and flow predictions out of the water and breaking numerous ETF launch records. These new ETFs have been live for 40 trading days – weeks 2 and 7 were four-day weeks and week 1 only traded two days as the ETFs were approved mid-week. Total net flow over this period, including Grayscale’s outflow, has been $9.6 billion. That averages to ~4,000 net BTC inflows per day!

Now we have an overview of ETF activity, let’s look at some of the drivers of this incredible performance.

Grayscale Outflows

Grayscale have had a spot bitcoin trust (GBTC) since 2013, giving traditional finance exposure to bitcoin. However, the nature of this type of fund meant the underlying spot bitcoin price didn’t track as accurately as an ETF’s price tracking mechanism. Historically this has caused GBTC to trade at both a premium and a discount, depending on underlying bitcoin market activity.

2022’s FTX fallout led GBTC to trade at a substantial discount to the spot bitcoin price. Traders took advantage of this in an arbitrage trade, where discounted GBTC shares were purchased ahead of its conversion to a spot ETF. On approval, the ETF conversion enabled GBTC’s discount to be brought inline with the spot bitcoin price, at which point shares purchased by arbitrage traders were in huge profit.

This arbitrage profit taking, along with sales of FTX’s GBTC holdings, are what caused significant outflows and a net negative week in the second half of January. GBTC outflows slowed into early February, then picked up again with Genesis sales into early March. Whilst GBTC outflows are still significant, they have been trending lower.

New 9 Inflows

Without doubt, inflows to the 9 new ETFs (excluding GBTC) have been nothing short of incredible. According to Bloomberg ETF analyst Eric Balchunas, who has been working with ETFs for 20 years, ETF trade sizes have been a healthy spread from large, institutional buys all the way through to small retail purchases.

This is a positive sign. Flows to date, whilst not likely to keep the current pace for a prolonged period, are probably “sticky”. Whilst ETFs are used for trading and hedging, relentless net inflows and steady accumulation suggest strong buying from the typical long term, set and forget ETF buyer. These are traditional 60/40 portfolio investors, where 60% is allocated to equities and 40% allocated to bonds allocating. Adding a 1-5% bitcoin allocation to such a portfolio wouldn’t have much impact on overall volatility as the stocks and bonds would greatly dampen bitcoin’s wild price swings, whilst providing exposure to bitcoin’s highly asymmetric upside potential. All that said, ETF holders are likely better HODLers than your typical crypto bros which of course is not only great for bitcoin’s price, but likely will dampen long term volatility.

What does this mean for bitcoin’s price?

This morning, BTC broke a new all time high, hitting an intraday price of $71,837 at the time of writing. Dips are being bought. Large sell-offs being absorbed. Grayscale outflows haven’t caused a mass ETF outflows. The one large price movement we’ve seen was last Tuesday’s -14% intraday decline, where 1,000 BTC mined 10 years ago and worth around $69 million, was was sent to Coinbase and likely sold for around $69 million. Despite this sale, half the decline was bought up the same day, and a new high was reached on Friday.

So we know there is incredible demand from these ETFs: as discussed above, average net daily inflows are around 4,000 bitcoins. What about supply? We’ve seen significant GBTC outflows, old bitcoins held for years starting to move to exchanges for sale which is to be expected at new all time highs. But Grayscale sales are slowing and long term bitcoin holders will only sell so much until they demand a higher price. Then we have the halving.

Some notes on current supply:

• Grayscale outflow supply is slowing quicker than demand is rising

• Exchange bitcoin float is drying up

• Long term holders are demanding higher prices to part with their bitcoins

• Pre-halving mined supply is ~900 bitcoins per day

• Post-halving mined supply will be ~450 bitcoins per day

Some notes on current demand:

• ETF demand ~4,000 bitcoins per day

• Spot market and futures activity are increasing as price rises

• Retail mania has yet to begin

In Summary

That’s an awful lot of demand and not a lot of supply. Some days have seen around 10x daily mined supply flowing into the new ETFs alone. With the halving just weeks away and demand likely to increase as more TradFi and retail get involved, it looks very much like bitcoin’s price has a lot further to run!

Sovereign Funds Eyeing BTC?

Just when things seemed too good to be true, interest in bitcoin is being seen from other traditional finance sectors.

El Salvador

Unless you’ve been living under a rock for the last couple of years, you’ll know that El Salvador adopted bitcoin as legal tender in September 2021. Bitcoin adoption has played its part in president Nayib Bukele’s transformation of El Salvador, from a country with one of the world’s highest murder rates to a country with the world’s highest incarceration rate, as large swathes of violent gang members were jailed.

United Arab Emirates

Perhaps other nation states are taking note. A cryptic post appeared on Bukele’s X account last week, showing him shaking hands and talking with a man dressed in traditional Middle Eastern attire.

This has sparked mass speculation around a Middle Eastern nation state potentially eyeing bitcoin as a sovereign asset. One X user, @greenbean1034, suggested this could be the UAE Ambassador to Mexico who is also a non-resident ambassador to El Salvador.

Marathon Digital in UAE

Marathon Digital (MARA) hold a 20% stake in a joint bitcoin mining venture with Abu Dhabi which started mining bitcoin in July 2023, so we know that the UAE are interested in bitcoin. Whilst nothing has been confirmed, Bukele certainly caused a stir in the bitcoin X community.

MicroStrategy Are Buying BTC Again

Last week MicroStrategy (MSTR) announced a private offering for $600 million in convertible senior notes to raise capital for their next bitcoin purchase. According to Investopedia, “convertible notes are bonds issued by corporations that are convertible to company stock, depending on the circumstances”.

MSTR soared 23.5% higher to close Monday at $1,333.11 from Friday’s closing price of $1,079.40 but gave back most of those gains during post market trading, following the debt issuance announcement. By the end of cash trading Tuesday, MSTR had dropped to $1,051.01, lower than Friday’s closing price but has since made new cycle highs and currently sits at $1,565 in pre-market trading.

Things I’m Watching

• Oil prices rise as Red Sea tensions mount – does inflation follow?

• Bank of Japan could rate hikes for first time in 17 years – volatility likely

• UK To Freeze Crypto Assets Used in Crime Without Convictions

• Another BIG downward US jobs openings revision last week

This Week’s Events

Tuesday

• Japan PPI

• CPI for Argentina, Brazil, Germany, India, US

• US inflation

• UK jobless claims, unemployment

• India industrial production

• Turkey industrial production, current account

• EU finance ministers meet in Brussels

• ECB Governing Council Member Robert Holzmann speaks

Wednesday

• Eurozone, UK industrial production

• UK GDP, goods trade balance, manufacturing production

• India trade

• South Korea jobless rate

• ECB Governing Council member Yannis Stournaras speaks

• Swedish Riksbank First Deputy Governor and Deputy Governor speak

• US 30 year Treasury bond auction

Thursday

• Saudi Arabia, Spain CPI

• US PPI, retail sales, initial jobless claims, business inventories

• Australia Treasurer Jim Chalmers delivers pre-budget address

Friday

• Japan tertiary index

• China house price index

• Indonesia trade

• New Zealand PMI

• Philippines overseas remittances

• Sri Lanka GDP

• France, Italy, Poland CPI

• Canada housing starts

• US industrial production, University of Michigan consumer sentiment, Empire Manufacturing

• Japan union federation results of annual wage negotiations

Earnings Calendar