Broad risk sentiment has been nothing but a pain for crypto bulls over the last few months, but the fall in prices have stabilized so far in February.
If you recall, high inflation and rate hike fears (likely leading to a global economic slowdown) have been the main drivers for the bearish flow in the markets.
On top of that, pandemic fears and geopolitical fears were also likely bearish drivers, giving traders more reasons to move away from riskier assets towards safe haven assets.
But with rate hikes likely priced in and recent survey data showing a possible slowdown ahead in both inflation and economic growth, we may see a re-pricing of conviction that a strong monetary policy tightening regime is coming.
And if this current issue between Russia and NATO can be resolved diplomatically, then sentiment may further shift back towards favoring risk assets, as we’ve seen today as markets rally on news of Russia pulling back troops.
So, we’re in the camp that at these depressed levels, the crypto space is more of a buy than a sell, especially with recent crypto specific headlines being net bullish over recent weeks. That included news of BlackRock (the world’s largest asset manager) preparing to offer crypto asset trading services, Russia not likely to ban crypto as it looks to regulate, and KPMG Canada adding crypto to its balance sheet (a move that could spark other corporates to add crypto to their balance sheets).
Also at these depressed levels, low risk long positions can be put on with high potential returns, so here’s a quick technical setup to watch and use as a guide when forming your own trade ideas.
BTC/USD: Daily
BTC/USD Daily Crypto Chart
We’re keeping it simple when trying to play a turn in the crypto market by focusing on the king of crypto: bitcoin!
On the daily chart above, we can see that the market just broke the steep down trending pattern that goes all the way back to November 2021, which from peak to trough was around a 50% dip.
This break above that pattern may draw in technical traders to buy, especially if the market can sustain a hold above the $46,000 handle. Combined with the potential bullish fundamental scenario discussed above, a break could lead to a longer-term momentum move with traders setting their targets at the November high of $69,000.
And if using a tight stop below the current consolidation area (roughly between $41,000 – $46,000), then that creates a potential return-on-risk of roughly 2x – 4x, depending on how wide you set your stop.
What do you all think? Is it time for crypto markets to get back into bull mode? Or is the environment still favoring bearish moves in the space? If you are bullish on crypto, which other assets are you checking out? Let me know in the comments section below!
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