Unpopular opinion --> We expect stable/rising prices. Setup for Bitcoin and crypto is "less bad" into the weekend = good.

STRATEGY: Crypto De-leveraging unlikely this weekend = stable/up prices
For the past two weekends, Crypto and bitcoin prices tanked with regulatory crackdowns by China being the primary downside catalyst. And because crypto is so visible and potentially linked to equities, these sell-offs put many investors on edge.  

However, in a break of the pattern, we think odds favor Bitcoin / crypto to be stable/higher over the coming Memorial Day weekend. 

Why? We think the setup into this weekend is incrementally “less bad” for Bitcoin.  And as Tom Luddy, Vice Chairman of JPMorgan Asset Management, has told me multiple times in my career –> “less bad is good”


These are mostly “soft observations”:

– Crypto investors massive deleveraged over the past two weeks = “less bad”
– Crypto investors anticipated weekend weakness, reduced risk over the past 36 hours = “less bad”
– The technical picture for Bitcoin simply doesn’t look as weak as it did two weeks ago = “less bad”
– Crypto equities actually rose this week, and many show bottoming patterns — think $SI $MOGO $MSTR $COIN = “less bad”


The last point is somewhat notable.  Recall, these crypto equities were the first to fall, peaking 3 weeks ahead of Bitcoin’s actual peak.  In fact, Bitcoin price began to roll over as ESG concerns + taxation + China become more forefront.  Again, it is notable that many crypto equities seem to have bottoming patterns forming.


Bottom line: We see fewer reasons for Bitcoin to sell-off over the Memorial Day weekend.  Unless people sell the bitcoin to buy BBQ supplies.  Our view still remains that Bitcoin saw its mid-cycle bottom 10 days ago (see our prior notes on this, including 2 INTRADAY WORDs).


…Is Bitcoin forming an inverse H&S?  Key level is $40,000, which is also the 200D moving average
The technical picture for Bitcoin has stabilized.  Or rather, a few weeks ago, Bitcoin seemed poised for downside risk, because of its breakdown below its 200D and then the subsequent negative headlines.  But this picture has stabilized:

– we still think Bitcoin bottomed 10 days ago (see our multiple prior commentaries on this)
– David Grider commented in several notes that the crypto options expiry today likely removed “pin” and other effects on pricing
– Bitcoin could be forming a potential inverse “head and shoulders” pattern (see below)

This inverse H&S requires Bitcoin to close back to $40,000
– $40,000 is also the 200D
– thus, the key level remains $40,000


FYI, as long as Bitcoin is below its 200D, our “rule #3” is in effect –> Bitcoin is in “no man’s land” and we are not aggressive buyers here.  

…Weakness in weekend Bitcoin has been mostly between 10am to 5pm ET
Our data science team, led by tireless Ken, posted rolling 4-hour price change for Bitcoin $BTC by hour, with weekends boxed in blue:

– for the past two weekends, we see the sharpest downturn in Bitcoin prices between 10am to 5pm ET
– last weekend, there was another massacre between midnight (ET) to 7am
– that was the Sunday morning “surprise”

As annotated below, there are two waves of deleveraging that take place.  The China triggered panic caused selling Saturday evening to Sunday am, in this past weekend.

– that was why many investors, both crypto and macro, expected equities to sell off this past week
– (but we got a big rally instead)

PS: How does Bitcoin spill over into equities?
These crypto sell-offs have potential impacts on equity and broader markets, for several reasons:

– many US crypto holders also own equities (ala Robinhood)
– Bitcoin futures are traded by macro funds, hence, drawdowns/limit down moves impact macro markets
– Bitcoin has become somewhat loosely connected to the equities, because both are “risk-on” assets — more apparent these days