Bitcoin extends recovery

Bitcoin has managed to climb further higher today, along with most other risk assets. From its lowest point in June around $17.5K, BTC/USD has climbed some 35% higher. While that looks impressive, let’s remind ourselves that at around $23.8K, it still remains miles below the all-time high of $69K. It has definitely got a long way to go to get anywhere near that level again, but at least for now it looks like the selling may be done after spending several weeks in a relatively tight consolidation range as the bulls and bears battled it out around the $20K handle. The fact that we are now starting to climb back towards the mid-$20Ks suggests that better times are ahead.

Bitcoin’s recovery has coincided with the firmer stock markets and a weaker US dollar. While not a lot has changed fundamentally, there is some hope that soon we might see the end of aggressive central bank tightening because peak inflation is nigh.

Indeed, we have seen a number of key commodity prices come down sharply over the past few months, raising hopes that inflation will also head lower:

Wheat down about 40% from peak in March
Corn down 25% from April peak
Cotton down about 40% from peak in May
Aluminium down 35% from peak in March
Copper down more than 35% from peak in March
Crude oil down 20% from peak

If inflation does come down, as we expect that it might, then this will renew hopes that central banks will stop their aggressive tightening in the not-too-distant future, and possibly even go in reverse in order to prevent a severe recession.

This is why it is important to keep an eye on bond yields, as that is where the so-called “smart money” is at. The US 10-year Treasury yield has struggled to hold above 3% in recent times, which is definitely a welcome sign for crypto investors.

Reflecting the slight macro optimism, we have seen some positive price action on Bitcoin recently:

As you can see from the daily chart, BTC/USD broke out of its ascending triangle consolidation pattern to the upside earlier this week. In doing so, it also took out resistance around $21,600 and climbed above the 21-day exponential average.

This begs the question: Has Bitcoin bottomed out around $20K or is this another bear market rally?

Well, if you look at the weekly, I wouldn’t be surprised if it did bottom out here:

Previous major sell-offs have been between 70 to 85 per cent, similar to this one, before Bitcoin went on to rally to new highs.

I am not saying we will necessarily see a new all time high for BTC this time, but at least a nice bounce should be expected given the extent of the drop and the fact that we are testing the highs from 2017, an old major resistance area.

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

Open a Forex.com account, or log-in if you’re already a customer.
Search for the pair you want to trade in our award-winning platform.
Choose your position and size, and your stop and limit levels.
Place the trade.

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.