Kisses and Fake Breakouts Can Be Deadly
Lita Ford will tell you about the kisses (1988), but fake breakouts can be deadly, too, and Bitcoin’s recent version is a concern. Here’s why…
In late October Bitcoin moved to a new all-time high, above its April 2021 high. This move was confirmed by our momentum work. However, Bitcoin’s push to a minor new high two weeks ago was not confirmed by our momentum work – in fact, momentum was slowing dramatically – and since then the cryptocurrency has broken below support / the “top of its range” and makes us believe that a move to the “bottom of its range” at the 30,000 level is doable.
Perhaps more importantly is that our weekly momentum work for Bitcoin did not come close to confirming the Oct and November highs and that Bitcoin relative to the S&P 500 (2nd chart, bottom panel) gives the appearance of a double-top.
We should not forget that sentiment around Bitcoin is wholly and indisputably bullish / complacent. Here are some of the most egregious examples: (1) NYC’s incoming Mayor, Eric Adams, said he will take his first three paychecks in Bitcoin, (2) Miami Mayor Francis Suarez is taking his entire paycheck in bitcoin, (3) Odell Beckham, Jr. will take his new salary, form the Rams, in Bitcoin and give $1 million of digital currency to fans (we admire his altruism), (4) The Staples Center in Los Angeles is to become the Crypto.com Arena, and (5) Nayib Bukele, the President of El Salvador, has been an ardent buyer, fan, and Tweeter of Bitcoin and, as of June 8, 2021, it is now legal tender within the country. We’ve noted – many times and were burned by it – that the actions of the President of a country to Tweet his intentions to buy Bitcoin – on the dip no less! – was the all-time greatest example of market speculation since the Babylonians were trading grain, lambskins, and livestock.
