Abstract

• Strong macroeconomic fundamentals provide some support for a more aggressive path of interest rate hikes, which strengthens the short-term upward momentum of Bitcoin.
• The impact of the Federal Reserve on the cryptocurrency market is expected to gradually diminish, and the target range of $35,000 to $36,000 remains promising.
• Regarding the Ethereum/Bitcoin currency pair, the 0.061 level is nearing a bottom, making contract grid bots still highly attractive.

Macro Analysis

After Bitcoin reached a peak of over $31,500 earlier this year and then experienced a sudden drop, briefly dipping below $30,000, the upward trend managed to defend the important support level and push the price back above $30,000. However, notable holders, including Cathy Wood’s Ark Investment, released a report stating that the amount of Bitcoin in circulation that hasn’t been moved for at least a year has reached an all-time high. Meanwhile, the Federal Reserve’s hawkish stance has once again caught the public’s attention, as the ISM services index, ADP employment report, and JOLTS job openings all provide some evidence for a more aggressive interest rate trajectory. This, in turn, further strengthens the challenges Bitcoin faces in the short term.

Momentum of Interest Rate Hikes Continue

During their June meeting, the Federal Reserve decided to pause interest rate hikes. However, their efforts to address inflation through rate hikes have not come to a halt. According to CME’s Fed Watch tool, the market anticipates that the July meeting will proceed with interest rate hikes, with a probability as high as 90%.

Resilient US Economy

On Thursday, the US ADP Employment Report, often referred to as the “mini nonfarm” report, revealed a significant increase of 497,000 in employment, surpassing market expectations of 228,000. This indicates that the job market remains very strong. Initial jobless claims rose to 248,000, while continuing jobless claims dropped to 1.72 million, the lowest level since February. Employment data is closely monitored by the Federal Reserve, alongside inflation, and the robust job market suggests that the Fed cannot easily deviate from its monetary tightening measures. Additionally, apart from the unexpectedly strong employment data, the June ISM Services PMI climbed from 50.3 to 53.9, with the employment index reaching 54.4, both indicating the resilience of the US economy. On the other hand, job openings in May were slightly lower than anticipated, declining from 10.3 million to 9.8 million.

Our View: Slow Bull Trend Still Possible

As mainstream Wall Street institutions continue to enter the cryptocurrency market, the consensus on cryptocurrencies will become more solidified. However, concerns related to regulations regarding liquidity, manipulation, and the volatility of Bitcoin (BTC) for ordinary investors still persist. Our belief is that the future volatility of BTC will decrease, leading to a gradual bullish trend in the cryptocurrency market. This decrease in volatility increases the likelihood of approval for ETFs (Exchange-Traded Funds), which in turn attracts a larger number of retail investors, enhances liquidity, and diversifies market participants. As a result, pump-and-dump schemes become more difficult to execute. Therefore, we view the slow bullish trend as both a cause and an outcome of the presence of ETFs. The probability of major cryptocurrencies experiencing sudden and significant unilateral rallies is diminishing, making the slow bullish trend a prominent characteristic of the ETF market.

However, substantial improvements in liquidity are necessary to truly see a surge in funds and sentiment, with on-chain data returning to healthy levels seen in a bullish market. The involvement of traditional institutional players in the market reduces the reliance on loose policies from the Federal Reserve, gradually reducing its influence on the cryptocurrency market. Therefore, even without expectations of interest rate cuts, we believe that our initial target range of $35,000 to $36,000, set at the beginning of the year, is still attainable.

Fundamental Analysis

Weak Ethereum Still Suitable for Buying The Dip

In our previous reports, we noted that Ethereum gas fees reached a new low of 16 GWei this year. We highlighted that when gas fees were in the range of 10 GWei to 20 GWei, it presented a favorable opportunity to accumulate Ethereum at a lower price. Currently, as the price of Ethereum experiences a surge followed by a pullback, gas fees have also decreased from the peak of 50 GWei to approximately 28 GWei. We anticipate that Ethereum will continue to exhibit relative weakness, and as gas fees continue to trend towards the lower range of 10 GWei to 20 GWei, our position preference will gradually shift towards Ethereum and the Ethereum ecosystem.

Importance of ETFs for Crypto?

The primary factor contributing to the current possibility of approving spot Bitcoin ETFs lies in the establishment of a surveillance-sharing agreement. The Securities and Exchange Commission (SEC) had expressed concerns regarding the susceptibility of the Bitcoin market to manipulation, given the large number of transactions on the blockchain, which posed challenges for tracking purposes. However, by entering into an agreement with an exchange to provide comprehensive trading data, these concerns can be effectively addressed. In our perspective, ETFs represent a narrative-driven investment opportunity but not a significant change in the crypto ecosystem. We already have a futures ETF regulated by the CFTC, which has negligible differences from a spot ETF. The distinction is you get more leverage with futures, and we all know that Crypto traders and institutions like leverage.

Regarding the probability of approval, it is important to consider the involvement of BlackRock, the world’s largest asset manager. It is highly unlikely that BlackRock would submit an application without careful consideration, as they would not want to face public embarrassment in the event of rejection. When examining BlackRock’s track record with ETF approvals, it stands at an impressive ratio of 575 approvals to 1 rejection. In contrast, the SEC’s track record for ETF rejections is at a ratio of 33 rejections to 1 approval. Ultimately, it is a matter of personal preference as to which odds one finds more favorable.

As stated above, we believe this is more of a narrative play that will be a tailwind for BTC in the coming month. After its approval following potentially the above timeline, I believe we would be around the $36,000 mark, and it will be a sell-the-news event. The above timeline lines up well with our prediction of a $36,000 final target by End-Of-Year. With the above narrative, an example trading plan could be to use the DCA bot or Buy-The-Dip to build a position while reducing costs and hold for the narrative play and sell on the news release pump.

Technical Analysis

Bitcoin

There are not many technical developments in the market. Most of the focus is still on the fundamental factors, such as ETF filling approval and the dates surrounding that, as we covered above. In terms of price action, Bitcoin finds itself trading within a range, with an upper boundary around $31,500 and a lower support level at $29,500. Essentially, we are witnessing trading activity confined within a $2,000 range. This pattern is not unprecedented for Bitcoin. Over the past two years, Bitcoin and most cryptocurrencies have exhibited a trend of consolidation within narrow ranges until significant fundamental news triggers price movements in either direction. At present, we can observe sellers emerging above the $31,500 mark, indicating an overvaluation, and buyers appearing below the $29,500 mark, suggesting undervaluation.

Similar to the previous week, we maintain our perspective that Bitcoin is currently overextended, supported by the elevated score on the fear & greed index and the disparity between price and the Relative Strength Index (RSI). Our recommendation to employ the Covered Gain strategy, aimed at reducing the average cost of Bitcoin, has proven successful and has not required execution in the past two weeks.

After approximately 2.5 weeks of sideways movement in the market, we anticipate that the consolidation phase might be coming to an end. We have the upcoming release of CPI inflation data this Wednesday, followed by the FOMC meeting in two weeks. Reflecting on the patterns observed earlier this year, each consolidation period following a price surge or pullback typically lasted between 1 to 3 weeks. If Bitcoin adheres to its historical behavior, it is likely to make a significant upward or downward move in the near future. Given this possibility, we recommend considering additional strike levels for the Buy-The-Dip strategy, particularly if you are comfortable with establishing a position at those levels. Specifically, we continue to monitor the $28,500 range as a potential entry point.

Ethereum

ETH has experienced a recent pullback but remains predominantly within its trading range, with an upper range of $1,930 and a lower range of $1,830. Unfortunately, despite breaking above its critical pivot point of $1,930, ETH failed to sustain its position above. The decline in Bitcoin exerted downward pressure on ETH, bringing it back into our support area of $1,800. The preferred scenario is for ETH to establish a higher low at this point and reclaim the $1,930 level, which could facilitate further upward movement. However, if ETH ventures below the crucial support zone around $1,810, it would have negative implications from a technical standpoint.

Looking at the options data below, the skew is to the downside, with more traders interested in downside exposure, as seen on the implied volatility charts below. In the near future, traders are pricing in a 50/50 chance of moves to either side, but when we get to a later month, such as the week of the FOMC meeting, we see a rapid steepening to the downside representing increased demand for downside protection.

ETH/BTC

The ETH/BTC pair did not perform as hoped after ETH failed to hold over the $1,930 pivot level we mentioned. Not much to be said right now as there is nothing constructive on the chart in any timeframe you look at. We had a range breakdown failure which we had hoped would hold, but as we can see on the chart, we broke down once again. So we are still in a downtrend on the longer time frame, with the chart making lower highs and lower lows.

However, we did start our Futures Grid Bot when we mentioned it around 2 weeks ago, as we believed the 0.061 level was nearing the bottom with BTC outperformance waning. Check out the performance below.

Trading Recommendations

Bitcoin

Continuing our previous recommendation, utilize the Take Profit feature in the Pionex dual-currency wealth management product. For Bitcoin, consider taking profits on 10% to 20% of your position. Choose a product with a 2-day expiration and a target price of $31,500, which can provide an annualized return of 17%.

If you prefer to hold onto your coins for potential gains at higher levels and also seize opportunities to buy at lower prices, we recommend selecting a product with a 4-14 day expiration and a target price of $32,500. This corresponds to an annualized return of over 19% and offers a stable and rewarding return in Bitcoin terms.