Bitcoin Weekly Review September 15th – 21st
TLDR:
The prevailing concept in CT is that once the Fed begins a QE cycle, prices of financial assets immediately shoot up.
The data from two previous cycles tell a different story. The market doesn’t immediately react to rate cuts, if at all. It is after the rate cuts ended that the uptrend begins.
2007/2008 Rate Cut Cycle:
Based on historical data from 2007 and 2008, Nasdaq 100. The first month of QE resulted in a bullish response. However, it was followed by a downtrend until the rates were zero.
2019/2020 Rate Cut Cycle:
Based on the BLX chart. Excluding the initial bullish reaction, this QE cycle did not affect Bitcoin’s price. After rates were at zero, Bitcoin’s uptrend began.
Takeaways From Previous QE Cycles
1. Fed cuts don’t change the trend. At least until the cutting cycle is over.
2. Even if we assume a bullish reaction, it is short-lived.
3. The Fed is late in responding to market conditions.
4. The chances of a 50% rate cut in September are low.
5. The Fed overreacts to recession conditions.
6. When the markets begin to tumble, it is a dumpster fire. The fed cannot put out the fire with rate cuts.
Bitcoin Cycle Analysis:
My macro-outlook for Bitcoin remains that Bitcoin is in the process of completing a wave four correction, after which I expect a continuation of the bullish trend to at least 80K.
Within the wave four correction, the two primary scenarios are:
Complex Correction:
This scenario presumes that Bitcoin is in a wave four correction. According to this scenario, the final leg down in wave C of Y is missing.
If this is the “correct” scenario, Bitcoin should begin wave C to the downside after hitting the reversal zone between 0.618 and 0.786 retracements.
ABCDE Triangle Breakout:
According to this scenario, Bitcoin’s wave four bottom was on August 5th. Bitcoin consolidates in an ABCDE triangle before breaking out to the upside in the final 5th wave.
If this is the “correct” scenario, Bitcoin is close to the 0.618 retracement. I expect it to be rejected between 61.1K and 62.5K (wick) to complete the final E wave. This will become the primary scenario if it can find support at around 54K and break out of the triangle.
Direct Breakout Scenario:
This scenario assumes that Bitcoin finished the correction process on September 6th and is now on the verge of a breakout. Even if this is the “correct” scenario, I expect a pullback to 57K - 58K before continuing.
High Probability Support and Resistance Levels:
1. 65K. Resistance.
2. 62.5K. Resistance.
3. 61K. Resistance.
4. 58K. Support.
5. 56K. Support.
6. 54K. Support.
The prevailing concept in CT is that once the Fed begins a QE cycle, prices of financial assets immediately shoot up.
The data from two previous cycles tell a different story. The market doesn’t immediately react to rate cuts, if at all. It is after the rate cuts ended that the uptrend begins.
2007/2008 Rate Cut Cycle:
Based on historical data from 2007 and 2008, Nasdaq 100. The first month of QE resulted in a bullish response. However, it was followed by a downtrend until the rates were zero.
2019/2020 Rate Cut Cycle:
Based on the BLX chart. Excluding the initial bullish reaction, this QE cycle did not affect Bitcoin’s price. After rates were at zero, Bitcoin’s uptrend began.
Takeaways From Previous QE Cycles
1. Fed cuts don’t change the trend. At least until the cutting cycle is over.
2. Even if we assume a bullish reaction, it is short-lived.
3. The Fed is late in responding to market conditions.
4. The chances of a 50% rate cut in September are low.
5. The Fed overreacts to recession conditions.
6. When the markets begin to tumble, it is a dumpster fire. The fed cannot put out the fire with rate cuts.
Bitcoin Cycle Analysis:
My macro-outlook for Bitcoin remains that Bitcoin is in the process of completing a wave four correction, after which I expect a continuation of the bullish trend to at least 80K.
Within the wave four correction, the two primary scenarios are:
Complex Correction:
This scenario presumes that Bitcoin is in a wave four correction. According to this scenario, the final leg down in wave C of Y is missing.
If this is the “correct” scenario, Bitcoin should begin wave C to the downside after hitting the reversal zone between 0.618 and 0.786 retracements.
ABCDE Triangle Breakout:
According to this scenario, Bitcoin’s wave four bottom was on August 5th. Bitcoin consolidates in an ABCDE triangle before breaking out to the upside in the final 5th wave.
If this is the “correct” scenario, Bitcoin is close to the 0.618 retracement. I expect it to be rejected between 61.1K and 62.5K (wick) to complete the final E wave. This will become the primary scenario if it can find support at around 54K and break out of the triangle.
Direct Breakout Scenario:
This scenario assumes that Bitcoin finished the correction process on September 6th and is now on the verge of a breakout. Even if this is the “correct” scenario, I expect a pullback to 57K - 58K before continuing.
High Probability Support and Resistance Levels:
1. 65K. Resistance.
2. 62.5K. Resistance.
3. 61K. Resistance.
4. 58K. Support.
5. 56K. Support.
6. 54K. Support.
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