Q4 Crypto Market Outlook: Bitcoin and Ethereum Consolidation Continues
Bitcoin and Ethereum Takeaways
- Global interest rates are finally reaching their peak, presenting a more favorable backdrop for cryptoassets in Q4 and beyond.
- Market internals show the market is poised for a new bullish cycle if a catalyst emerges.
- Bitcoin remains relatively strong vs. Ethereum, but both are generally consolidating within their mid-year ranges.
Bitcoin and Ethereum Fundamental Analysis
“The opposite of love isn’t hate; it’s indifference.” – Elie Wiesel
Despite a dramatically fluctuatuating macroeconomic outlook, the highest interest rates seen in decades, and a complicated regulatory backdrop, Bitcoin and Ethereum have spent the last 6+ months consolidating within a few thousand points on either side of the $28K level. More to the point, all speculative interest in the entire cryptoasset space has been gobbled up by the latest investment theme du jour, Artificial Intelligence.
In other words, traders have gone from loving Bitcoin and Ethereum two years ago, to hating them at this time last year, to being completely indifferent to them today.
Under the surface though, there are signs that the cryptoasset space may be ever so gradually entering a new bullish cycle. From a monetary policy perspective, global central banks appear to be approaching their peak interest rates, barring a surprise resurgence of inflation, with fewer and fewer central banks raising interest rates each month:
Source: Alphacast
Even if the Fed or Bank of England is able to squeeze in another rate hike this quarter, it would likely be a “one and done” scenario before a longer period of either holding interest rates steady or outright cutting them if economic growth stumbles.
Keying in on crypto market internals, the proportion of Bitcoin’s supply that is held by long-term holders (>155 days) is approaching record highs above 75%. In contrast to short-term traders who try to capture quick moves, these investors tend to be “true believers” who rarely ever sell their coins, suggesting that the true supply of Bitcoin available to buy and sell may be lower than it has been in nearly a decade:
Source: Glassnode
Like a pile of dry kindling, this situation sets the stage for a potential “supply shock” if there is a catalyst that leads to an increase in Bitcoin demand. Meanwhile, Bitcoin’s “dominance,” or Bitcoin’s market capitalization relative to the total market cap of all cryptoassets, continues to trend higher above 50%. Traders will be watching for this ratio to roll over to signal increasing speculative appetite in the crypto market and the next bull market to start in earnest:
Source: TradingView, StoneX
Bitcoin Technical Analysis – BTC/USD Daily Chart
Source: TradingView, StoneX
Turning our attention to Bitcoin itself, prices remain within the broad $25K-32K range as we go to press. Looking ahead, the first zone of support to watch will be from $25,000-25,500, which has put a floor under prices multiple times already this year; a break below this zone exposes the Fibonacci retracements at $23,700 and $21,700 next. To the topside, there’s little in the way of resistance until the top of the 6-month range in the $31,000-32,000 area, and on the off chance that resistance zone is overcome this year, the next level to watch will be closer to $36,000, the 38.2% retracement of the 2021-2022 drop.
Ethereum Technical Analysis – ETH/USD Daily Chart
Source: TradingView, StoneX
Looking at Ethereum, the world’s second-largest cryptoasset has trailed Bitcoin of late. Ether is arguably in a bearish channel since peaking for the year in early April, with prices failing to exceed $2,000 since then (though bulls are putting up a fight to defend support in the $1,500-1,550 area as of writing at the end of September. Looking ahead, a break below $1,500 support would leave little in the way of nearby support until the Q4 2022 lows around $1,150. In terms of levels to watch on the topside, a recovery back to $2,000 would certainly satisfy many bulls after starting the year below $1,200, and a move much beyond that may be too much to ask in the current environment.
-- Written by Matt Weller, Global Head of Research
Follow Matt on Twitter: @MWellerFX
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.
FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.
FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.
GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2024