The Weekly Close

After a rejection at our $109k Range High, Bitcoin closed its weekly candle just under $106k. As it stands, this is a False Breakout and likely means we will pullback and consolidate in the short-term. My bias still remains that the cycle isn’t over, but we do have to watch price action closely and acknowledge the risks at hand. Ideally, we’d see Bitcoin bottom around our Range Mid at $100k or above our Range Low at $91k, anything lower would be more concerning, but our line in the sand is still the 50-week moving average at around $83k and that continues to rise weekly.

Sentiment Check

Market sentiment is now back in the Neutral region. This is exactly what you would expect from a healthy pullback. Investors were getting overly excited and greedy after Bitcoin’s incredible 7-week rally. Many investors likely tried to leverage trade the breakout and are now sitting underwater in their positions. It wouldn’t surprise me if we briefly dipped into the Fear region alongside a bearish narrative that appears, but that of course isn’t a requirement.

The Global Liquidity Index

The Global Liquidity Index is still in an uptrend, but it has been chopping sideways for the past few weeks. We still haven’t gotten a clear signal on what its next major move will be so we will have to continue to monitor it. This Global Liquidity Index uptrend is another reason why I think it is unlikely the cycle is over even if Bitcoin does experience some pullbacks along the way. I will be much more concerned if we see The Global Liquidity Index enter a new downtrend.

Macro

We will be receiving updated data for the FED’s preferred measure of employment on Friday. The Unemployment Rate has been flat for months now and the market forecast is expecting it to remain flat at 4.2%. Now that inflation is moving in the right direction, I’m sure market participants will be watching this data closely. A miss to the upside could spark some recession fears and cause the market to price in more rate cuts. A miss to the downside would result in the market pricing in less rate cuts and a stronger economy. So it will be interesting to see where the data comes in at and how the market reacts to it.

The Bigger Picture

It is not surprising that investors are taking some profits in the “Expensive” region. Bitcoin is over 100% above its 200-week moving average that it tends to mean revert to in bear markets. I am still optimistic that we will reach the “Very Expensive” region before this cycle is over, but of course it isn’t a guarantee. We could briefly dip back into the “Fair Value” region over the next few weeks if this ends up being a deeper pullback. All we can do for now is wait and see what Bitcoin decides to do.

What I’m doing with my portfolio

No changes were made to my portfolio this week. We took some profits at the highs, so I am quite comfortable sitting on my hands and letting the market decide what it wants to do next. I may even buy the dip if my cash percentage gets high enough to justify it. It has been quite painful sitting through this altcoin underperformance, but I have conviction in the altcoins I am holding, so I have no problem sitting through pullbacks and chop.

P.S. If you made it to the end of this report, thank you for reading and I hope you got some value from it. If you’d like to learn more, early bird pricing for the Crypto Enjoyers program is available as I build out the Mental Models course. You can learn more here:

I know anxiety is starting to build as investors wonder if this really is the end of the cycle after all, but of course there is no way to know for certain. This is exactly why we always discuss and prepare for multiple outcomes. I still believe we have higher to go, but will happily adjust my views if the price action or data calls for it. For now, all we can do is sit on our hands and see what happens. As always, I hope you have an amazing week and the future looks bright. 🫡