Bitcoin rises despite "bad news" --> further evidence Bitcoin bottom is in

May 31, 2021 • 2 Min Read

STRATEGY: Markets typically bottom on “bad news”
As the US Memorial Day weekend comes to a close, we wanted to close the loop on Bitcoin, particularly before US financial markets open on Tuesday morning. This past Friday (5/28), we issued an INTRADAY WORD to our clients at 6:50pm, with our view that the probabilities favored Bitcoin to be flat/rising over the long weekend.  The rationale:

– Bitcoin fell sharply over the prior two weekends, mainly due to regulatory risks rising, particularly US and China
– sell-offs over the past two weeks triggered significant de-leveraging
– in our 20-ish conversations Thu/Friday leading into weekend, many of our clients were cautiously positioned (flat/neutral)
– the set-up into the weekend was “less bad,” which Tom Luddy always says, “less bad is good”


…FT headlines on Sunday was another “negative shock” but Bitcoin and crypto market barely reacted
Tom DeMark, of DeMark Analytics, likes to say that markets “bottom on bad news” — specifically, markets bottom when they no longer react to bad news:

– check out the headline from the FT from Sunday, which came out at 3:50pm ET on 5/30
– this story says US regulators are going to take a more “active role”
– given the cadence of US headlines around Binance sanctions, tax scrutiny/increases and now regulatory, these are “bad headlines”


Bitcoin rises despite bad news --> further evidence Bitcoin bottom is in


Source: https://www.ft.com/content/a2c13ce0-6e66-4751-aa65-6c668d303101

But unlike past weekends, Bitcoin barely responded to these headlines (see below).  In fact, Bitcoin is indeed flat/rising over the long weekend:

– at 4pm ET Friday (5/28), Bitcoin was ~$34,900
– at 3:50pm ET Sunday (5/30) when FT story “broke” Bitcoin was ~$36,000
– as of this writing at 4:30pm ET (5/31), Bitcoin is $36,900, +$900 vs FT headline

In other words, despite another set of “negative headlines” Bitcoin actually rose $2,000 over the weekend.  Granted, China regulators did not take additional steps.  Still, I can’t help but view this as reinforcing the likelihood Bitcoin has bottomed, given bad news is not creating new lows.  In fact, it even seems like China regulators already accomplished what they needed by their prior edicts.

Bitcoin rises despite bad news --> further evidence Bitcoin bottom is in




…Tether printing another $1 billion is also arguably a positive signAnother positive data point is that on Sunday at 11:10am ET, Tether, the stablecoin USDT, issued $1 billion.  This suggests that potentially new demand is emerging for Bitcoin and crypto.  After all, the only time USDT is issued is if fiat to USDT has been deposited.  In this case, there is a sign of new inflows into crypto.

– this is a good sign

Bitcoin rises despite bad news --> further evidence Bitcoin bottom is in

https://twitter.com/whale_alert/status/1399382769025773571


…Squint and one can see an Inverse H&S
In our Friday (5/28) INTRADAY WORD, we also suggested a potential inverse “Head and Shoulders” (H&A) technical pattern was forming.  This is often a sign of a reversal of trend:

– on the 30 minute chart, you can see the formation of the right “shoulder”
– this pattern would be confirmed with a move to ~$40,000
– a measured move from there would imply $50,000
– Technical patterns are finicky, so we don’t place significant credence on this

But this is a positive sign, if this indeed takes place.  And would reinforce our view that Bitcoin bottomed a few weeks ago at $30,000.

Bitcoin rises despite bad news --> further evidence Bitcoin bottom is in

BOTTOM LINE: If S&P 500 surges to ATH, expect Crypto to rise to ATH
Bitcoin bottoming doesn’t mean we expect it to soar.  We also sent out an INTRADAY WORD on 3/5 when we thought US Technology stocks were making their 1H2021 and potentially 2021 lows.  But we are still not “bullish” on Technology today.

– in other words, a Bitcoin bottom doesn’t mean a straight rise to $62,000
– a consolidation between $35,000 to $60,000 makes sense
– we see S&P 500 rising to all-time highs before 1H2021
– this rise should also lift crypto markets as well

Thus, we still see Bitcoin exceeding $125,000 before YE 2021.  But for now, we are carefully watching Bitcoin in the shorter term.  A rise above $40,000 would strengthen the case that $30,000 was the low and the low for 2021.

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