Buy the dip?

Last week brought Silicon Valley Bank's (SVB) collapse, accompanied by a spike in VIX and a selloff in stocks and cryptocurrencies. As if it was not enough, unemployment in the United States rose by 0.2%, flashing a strong recession signal. Subsequently, Bitcoin dropped below $20 000 before rebounding back above $22 000 over the weekend (amid the FED’s handling of the SVB). These developments prompted many people to buy the dip and tell you to do the same, hoping everything was alright and Bitcoin would continue to new highs above $25 000.

However, we are not nearly as optimistic as other market participants. In fact, we think the rebound in Bitcoin will be temporary and tied closely to the relief in stocks. Considering the recent data on the U.S. economy, we think serious trouble mounts for the U.S. economy, which will inadvertently affect Bitcoin in a negative way. Therefore, we raise a word of caution against “overly bullish” calls that ignore ominous developments in the market (more rate hikes, rising unemployment, housing crisis, etc.). With that said, we stick to our previous calls and remain bearish on Bitcoin. Our price targets stay at $15 000 and $13 000.

Illustration 1.01

Illustration 1.01 displays the daily chart of BTCUSD. It can be observed that Bitcoin rebounded above $21 376 and then also above the sloping support/resistance. We will pay close attention to both of these levels and seek a breakdown that will lead the price back below them; breakouts to the downside can be utilized as a trigger for a short position.

Technical analysis
Daily time frame = Neutral
Weekly time frame = Neutral

Illustration 1.02

The picture above portrays the daily chart of BTCUSD and two simple moving averages. Interestingly, the rebound coincides with the price’s retracement toward these SMAs. Such behavior often represents corrections, and therefore, we will pay close attention to whether the price will manage to hold above these indicators. If it doesn’t hold, it will be bearish.

Illustration 1.03

Illustration 1.03 shows the 1-minute chart of BTCUSD. It can be seen that rebound occurred very fast, and the price jumped up steeply in very quick time intervals. We outlined similar behavior in the past few months, when Bitcoin moved to new highs on weekends or when the futures market was closed (and when the volume was low, making Bitcoin more prone to price manipulation). In our opinion, this is not a healthy sign.

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.

Trade active:

Erratic moves continue.

Trade active:

Our warning stays in place. Dip buyers and those chasing the price up will very likely end up holding the bag.