Short-term crypto price action remains bullish into challenges

by Arthur · March 31, 2023

Macro vs technical
The macro environment remains complicated, with little clarity on the impact of the banking crisis on inflation-fighting central banks. While inflation has been falling, it has mostly been due to base effects – the core remains strong, as Dominique has pointed out. While the Fed is expected to hike again and then pause, the market is swinging (at times wildly) between this outcome and the Fed having to cut significantly by the end of the year. We have a challenging two weeks ahead, with the US employment report due out on Good Friday, and then the latest CPI update the following Tuesday in what is likely to be a far less liquid environment. So far, the price action in crypto remains bullish.

Ethereum vs Bitcoin
The ratio has been in a range for the past week, consolidating the recent downside break of the triangle, after reaching first Fibonacci support around 0.063. This “flag” type consolidation is expected to give way to another leg lower towards monthly trend support in the 0.0609 region, with the risk of a breakdown of the Fibonacci support in the 0.057 region. However, the broader studies suggest monitoring the lower range for signs of a base and reaction back higher. A direct move now back through 0.067 would eliminate the downside risk and take us back to the previous range environment.

Bitcoin

Prices attempted to break higher this week but have so far failed. That leaves us in an ongoing consolidation phase. My underlying studies remain bullish and I have fallen into my chart trend envelope which has upper support at 27500 and lower support at 25450. The lower level is also the pivot and breakout support region. Pullbacks are expected to remain choppy and corrective, and the underlying view is bullish while above 24,500-23,900 is supportive within the medium-term outlook.

From a medium to long-term perspective, the bear cycle completed from last year’s 2021 highs of 15,574. We now seem to be in a new bull phase, so around the short-term outlook above, we should go up to the next target around 33,000 and then to the Fibonacci target above that around 36,000.

Ethereum
As with Bitcoin, prices have been in a choppy correction phase after the recent aggressive rally to ~1850. Short-term studies have gotten somewhat complicated, which risks an early upside break. But for now we are holding below 1858/1860 resistance. The price action is seen as correction with support now between 1710 and 1670. Even if this region holds, we should see a break higher as part of the bigger picture C wave rally targeting ~2400/2450.

An impulsive (5-wave) decline through 1670 would be the first warning that this bullish outlook is wrong and risk a deeper pullback towards the March 1370 reaction level. A subsequent break there would invalidate the overall bullish outlook and return us to the broad medium-term area since June last year.

From a longer-term perspective, the decline from the 2021 high of 4866 completed a bear cycle at 880 in June 2022. Ideally, we should see prices build on the recent rally phases highlighted above.