Bullish or Bearish?

In various posts we have commented that the main problem of the cryptoactive market lies in the lack of bullish volume. The fall of the second quarter of this 2022 has occurred in a new context and different from what we have seen before

The new environment derived from the changes in monetary policy is having a very important influence on the evolution of the digital asset market

This keeps the price of Bitcoin (considered as a reference asset in the market due to its level of dominance), within fairly stable price limits after the minimum marked last June.

But this situation cannot last forever, and from a technical point of view, it will be necessary in the next few days for the market to adopt a certain position, and the decision cannot take long.

It’s time to get out of the range zone

The situation from a technical point of view reaches a turning point in which the market is going to have to adopt a position and a direction

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The chart is very descriptive in this respect. It shows us a clear zone of soil aligning the minimums produced since this past June. On the other hand, we have a bearish guideline whose origin is the historical maximum reached during the past month of November 2021

Visually, the compression of this zone of range or indecision, delimited by these two previously mentioned technical zones, is perfectly appreciated. It is what in terms of Technical Analysis is known as a wedge figure, where the narrowing of the range will force the price to position itself in a significant area of the chart:

  • Breaking the long-term bearish dynamics, initiated from the all-time high
  • Perforating the low support zone

So the market is going to face that crossroads soon. From a Technical Analysis point of view, these situations always end up forcing an outcome and a resolution of the current range situation

Ethereum has more bearish pressure

If something can work against us seeing a general reaction of the market, it is the situation of Ethereum, which is slightly different

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In this case, we see the price much further away from the downward trend, so the probability of a long-term change in trend is still distant. In addition, the price is still below the strategic area of 1,500 USD, which is behaving as a difficult resistance to break.

The Ethereum Merge has diluted its influence once it has been launched and since then we have seen the price move through the low zone

The macro situation does not accompany either

All this framed in a macro situation that does not invite optimism. Central banks continue to apply economic contraction measures to curb runaway inflation, which is affecting a market as important as the bond market

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The yield on US bonds has skyrocketed, reaching levels that could mean the end of a very prolonged downward trend in the yield of these products. In the graph we can see the increases in profitability offered at times of financial crisis, but with a clear bearish bottom at a historical level that seems to be changing

A very prominent case is the British bond, which has put the UK economy in serious trouble. This has forced an intervention by the Bank of England to protect especially pension funds

Volatility remains stable

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Despite what it may seem to us with some market movements, its volatility is not remarkable and it is in a quiet zone, as we can see in the CVI indicator (Crypto Volatility Index)

The market is still in a long wait

All these data confirm the theory that the market is still waiting for a change in trend in investor sentiment. Without a doubt, this is what can move prices out of the current phase.

Increasingly, crypto assets are integrated into the financial system and are conceived as one more investment asset

which adds conditioning factors to their operations derived more from portfolio management in conjunction with other types of investments, unlike the previous ones. investment decisions, based solely on the development of the digital asset ecosystem

It is not to be expected that this correlation will disappear, given that the profile of the investor in digital assets will undergo a professionalization when an inflow of institutional capital occurs when the investment climate is appropriate.

An investment climate directly conditioned by the economic situation (crypto assets are not currently conceived as a refuge, but as volatile assets) and by the regulation that is pending to understand and know how to manage this type of investment