As predicted, crypto is selling off. What's next?
- While prices have now corrected from 30,350 when he sent out our note to now 28,870 (-5%) and Ethereum from 2,127 to 1,946 (-9%), we would remain cautious and patient...
- On Monday, we warned that traders should NOW take some profits as "the crypto market is showing exuberant signs".
- Our own Greed & Fear indices had climbed to 95% and 98% for Bitcoin and Ethereum, respectively (range 0-100%). While still high, they have now dropped to 75% and 86%.
- Based on the historical track record of our indicator, a reading above 90% has signaled caution with the risk of a correction elevated while a reading below 10% has offered buying opportunities.
- The funding rate was excessively high for even large-cap names such as Bitcoin and Ethereum and signaled to us that a lot of short-term traders went very long and prices were at risk of correcting lower.
- Binance had also announced that Ethereum withdrawals would only start from April 19 onward (Wednesday) and this date put the market at risk of a larger sell-off.
- Shortly ahead of the planned time for Binance ETH 2.0 withdrawals (bETH), prices fell through the support level at 2,070.
- This sets up the market to retest the key breakout levels of 1,900 (for Ethereum) and 28,000 (for Bitcoin).
- But on Monday, we also warned that interest rates have started to climb back up and this would be a negative sign.
- Indeed, we have seen UK inflation surprising on the upside and the move in bond yields needs to be watched. If 10yr US yields are below 3.50% AND if Bitcoin is near to 28,000 and Ethereum around 1,900, then we would buy again.
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