Recently, economic data on the U.S. economy has been negative. S&P (SPY) appears to be failing at the 76 percent retracement of the avalanche lower late last year (Figure 1). This could mean U.S. stocks have the potential to fall sharply. After the scary decline last year when SPY and Bitcoin (BTC) fell in tandem, the SPY chart bears watching.
We believe crypto will be alternative assets that equities portfolio managers will need own to hedge against another material downdraft in stocks. That is a theory that needs to be proven.
In the meantime, the tactical reality is that both Bitcoin (BTC) and Ethereum (ETH) are at resistance. Bitcoin (BTC) has run into resistance near a cluster of activity that preceded the final downdraft of the recent corrective phase. A six-hour chart of Bitcoin (BTC) on BitMEX shows the struggle to get through the zone near $4,000 (Figure 2).
The six-hour chart of Ethereum (ETH) shows a similar structure near a big level at $150 (Figure 3).
Bottom Line: The litmus test for the crypto rally is how well Bitcoin (BTC) and Ethereum (ETH) can hold during corrective phases in both crypto and equities. We expect a struggle near $4,000 in Bitcoin (BTC) and $150 in Ethereum (ETH).
The Crypto.IQ Trading Desk was instrumental in finding the Bitcoin (BTC) resistance levels.
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