BTC, ETH volatile to start week but becoming oversold near-term

Global macro

Risky assets have gapped down to start the week with the market digesting the historically high US tariff levels announced by the Trump administration late last week.  The tariffs are a complex discussion beyond the scope of today’s piece, but a herculean effort to rebalance global trade with the US suffering increasingly unsustainable massive trade deficits with many major trading partners over the last few decades.  There have been many benefactors among US MNCs to the offshoring trend, but also many losers principally among US manufacturers (remaining onshore).  Time will tell whether this strategy of re-onshoring of some manufacturing into the US will work over time, but in the past few months, the market has spoken with its fears over what the brakes on the status quo means insofar as impact to global trade flows and profits in the short to mid term.  As with other times of severe risk off sentiment, correlations across asset classes rise and these past few months have been no different. 

Bitcoin (BTC/USD)

For the next few days, to the relief of bulls or those playing a short-term bounce, BTCUSD should be seeing some tentative support in the next few days as BTCUSD is now testing the 38.2% Fib retrace of the massive December 2022 to January 2025 bull market (as can be seen in the weekly chart below) along with the highs of March and June 2024.  BTCUSD is likely to slide further to the 50% Fib of the same bull market (coinciding roughly with the peaks of April and November 2021) by year end but odds are rising for a minimum multi-week Dead Cat Bounce to begin as early as Wednesday with the release of the US FOMC meeting minutes, Thursday with the US CPI and unemployment claims, and Friday with the US PPI and preliminary UoM consumer sentiment and inflation expectations.

Weekly

 

Daily

As can be seen in the daily chart above, BTCUSD is now nearing the 61.8% Fib retrace of last August to February’s Bull Market extension, and is oversold on the daily Stochastics, and more or less testing last May, June and November’s highs, suggesting rising odds for BTCUSD to begin firming by Wednesday after perhaps first edging lower to this 61.8% Fib.

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