Abstract

• We believe that Bitcoin may not immediately experience an independent bull market due to a downgrade in the US government’s rating.
• In the future, Bitcoin’s safe-haven properties are expected to become more pronounced.
• ETFs could also serve as a catalyst for an independent bull market for Ethereum alongside Bitcoin.
• Short-term investors indicate that Bitcoin will find strong support at around $28,000.

Technical Analysis

Last week, we discussed a failed breakout at $30,000, which presented an opportunity for a short trade. Similarly, a failed breakdown at $29,000 could indicate a potential long trade. The failed breakdown trade worked perfectly, with the price dipping to $28,500 before bouncing back to $29,000 and reaching our forecasted resistance level of $30,000. Unfortunately, the $30,000 failed breakout trade didn’t succeed, as the price got rejected right at the resistance level. Nevertheless, it turned out to be the best short-term trade of the week. We believe the same setup can work well this week, especially with the multiple failed breakdowns of $29,000 showing buyers are active at the level. It’s important to keep an eye out for any failed breakouts or breakdowns for intraweek opportunities.

For long-term traders, this was just another boring week in the books. This is to be expected as Bitcoin’s price “personality” is significant rallies due to news-driven narrative with prices pushed up by “crowd psychology” and institutional participation as valuation changes due to new information. However, after this new discovery phase for price, it settles into a period of consolidation as no new information is released to the markets. During these periods of consolidation, it becomes increasingly difficult to trade as a short-term technical trader as you can be chopped up in the consolidation easily.

During our recent in-person meetup, we shared a message recommending the following approach: Considering Bitcoin’s personality and previous consolidation periods, we foresee more consolidation ahead, with a higher 75% probability of a gradual sideways move down in the next month. The key level to watch is the range of $27,500 to $28,000. With this view in mind, there are two approaches to consider:

1. Use Buy-The-Dip product at $27,500 – $28,000. Earn interest while waiting for a good price to build a position.
2. If you believe $28,500 will hold for at least the next week, consider using a tight-ranged Futures Grid bot near that level. However, if you don’t have confidence in $28,500 holding, refrain from using the Futures Grid bot for this trade.

Other than that, there are no significant developments in the market at the moment.

Trading Recommendation

BTC

As we talked about above, we recommend using the Buy-The-Dip strategy with structured products. You have two options: conservative returns with the goal of building a long position or aggressive high returns for the short term with the goal of just earning interest.

• If you are more conservative and want to build a position, we recommend 4 – 11 day expiration, $28,000 strike with an annualized return of 13% – 18%.

• If you are more aggressive and want to earn higher yields, we recommend 1 – 3 day, $29,000 strike with an annualized return of ~50%. With the most recently failed breakdown, which marks 3 failed breakdowns of $29,000 since last week, we believe $29,000 will be a very resilient level for this week.

Macroeconomic Analysis

Impact of the Rating Downgrade

On August 1st, credit rating agency Fitch downgraded the US government’s credit rating from the previous AAA to AA+. This downgrade indicates a decrease in people’s confidence in the US government’s ability to fulfill its fiscal responsibilities. The rating downgrade also prompted investors to take a cautious stance, leading many to withdraw funds from assets such as stocks, silver, oil, and long-term US bonds. Instead, they favored cash and short-term instruments, which are considered safer choices during uncertain times. Initially, cryptocurrencies saw an upward trend, but they followed the downward trend as risk-sensitive assets were heavily sold off.

In the past two weeks, the US dollar index rose from 99 to 103, suggesting a potential shift in investor sentiment. Investors may be abandoning government bonds, stocks, and commodities in favor of seeking refuge in cash. This highlights the attractiveness of the US dollar during uncertain periods.

Market pursuit of liquidity is both a cause and a consequence – that is, it overlooks the benefits of decentralized assets during turbulent times. Therefore, this crisis did not become a catalyst for a major surge in cryptocurrencies like the banking crisis in March. Thus, we believe that Bitcoin may not immediately experience a bull market due to the US government’s rating downgrade. Going forward, it is essential to closely monitor the progress of ETFs, the funding situation, and developments in the ecosystem.

However, considering Bitcoin’s decentralized nature and scarcity, it can stand out as a valuable asset amid expanding government debt and diluted currency, as excessive government debt and currency inflation can lead to the devaluation of cash. Therefore, we still believe that investors may increasingly view Bitcoin as a powerful safe-haven asset in the future.

Ethereum ETF on the Agenda

According to Bloomberg analyst Eric Balchunas on Twitter, after Bitcoin ETFs, six companies are currently applying for Ethereum futures ETFs. Following Volatility Shares’ application on July 28, Bitwise, Roundhill, VanEck, Proshares, and Grayscale have also submitted applications for Ethereum futures ETFs. The regulatory agency’s decision on Volatility Shares’ application is due on October 11, while the next deadline for decisions on the other five institutions’ applications is October 16.

After the upgrade in Shanghai, Ethereum has been unable to break out into its independent trend and has still significantly lagged behind Bitcoin amid regulatory uncertainties. However, the recent gradual recovery in the ETH/BTC exchange rate indicates that investors still have considerable confidence in Ethereum. We hope that ETFs can also become a catalyst for Ethereum to start its independent trend and drive a bull market alongside Bitcoin.

Fundamental Analysis

Bitcoin Strong Support Expected

Here, we can observe the realized prices of all short-term investors who purchased BTC within 1 day to 6 months ago (shown by the green line), as well as the short-term investors who bought BTC within 1 to 3 months ago (shown by the purple line), both of which are currently in a profitable state.

Specifically:

• Realized prices of all short-term investors (1 day to 6 months): $28,100
• Realized prices of short-term investors (1 to 3 months): $27,900

Therefore, we can anticipate a very solid support level around $28,000 for the Bitcoin index.