This blog references an opinion and is for entertainment and informational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
In this 17th Market Outlook here at Ostium Research, we'll be taking a look at the week ahead in markets, focusing specifically on price-action, positioning and event risk for Bitcoin, Ethereum, the Dollar Index and altcoins, via OTHERS.
Firstly, let's take a look at the calendar:
TUESDAY: US SERVICES PMI (MOM) (DEC): (CONSENSUS 53.5 VS PREVIOUS 52.1)
WEDNESDAY: FOMC MINUTES
WEDNESDAY: ADP EMPLOYMENT CHANGE (DEC): (CONSENSUS 143K VS PREVIOUS 146K)
THURSDAY: US INITIAL JOBLESS CLAIMS: (CONSENSUS 210K VS PREVIOUS 211K)
FRIDAY: US NONFARM PAYROLLS (DEC): (CONSENSUS 150K VS PREVIOUS 227K)
Now, let's dig into asset-specific price-action for the week ahead, looking firstly at Bitcoin:
Bitcoin:
Price: $99,350
Monthly:
If we begin by looking at the monthly for BTC/USD, we can see that 2024 closed firmly in price discovery, and though we did wick above the November highs into $108k before closing back below $98k resistance, it is currently my view that the December close is largely noise, particularly when we look at momentum here, which is supportive of the trend higher. That said, it would not surprise me in the least to see the December low taken out into support around $90k at some point in January before continuation higher; this is not a prerequisite, but something to keep in mind. If we close January above that $100k level, I think February sees $125k tagged with the potential for extension as high at $150k into the next set of fib extensions later on in Q1 / early Q2.
Weekly:
Turning now to the weekly, we can see that price has been range-bound largely since that first push into $99k seven weeks ago, finding range support above $91k and resistance around that $99k level. Last week saw a bullish engulfing form off that range support with price closing right up near resistance. Momentum here has reset a little with plenty of room for continuation higher, a little bit like January 2024. Now, whilst I mentioned that it would not surprise me to see $90k swept before a real reversal and subsequent leg higher to new highs and beyond, that only becomes likely in my view if we reject below ~$102k this week and close the week back below $98k; in that scenario, I would expect to see a swift move lower into $90k and a sharp reversal out of it into month-end. However, if we close this week above $102k, I think anyone still waiting on a range low sweep before jumping in will be left on the sidelines, with expansion more probable above $102k into $109k and then into $122-125kish as the next resistance cluster. Looking ahead, obviously if we tag new all-time highs and reject hard, we will have to reassess probabilities at that point, but for now I think it is very likely we're trading closer to $125k in February.
Daily:
Dropping into the daily, we can see the momentum breakdown I had highlighted played out pretty much perfectly, leading to two weeks of chop but - importantly - with price failing to actually break down and trend lower (this too despite the year-long liquidity correlation that suggested further downside). This is really quite significant in my view, as we had all the factors at play to extend the correction into year-end but instead we got a momentum reset whilst price held above $90k. I now consider this to be uncorrelated price-action relative to the past ~12 months of an extremely tight correlation to 11-week lagged M2SL/DXY, which means it is likely to be much less reliable as the roadmap for the coming weeks and months. Looking at the price-action here, we are still showing bearish structure on this timeframe, so a daily close above ~$100k would shift this back in favour of bulls with that higher-high. If we wick above $100k early this week and break down, then we have to look for the potential deeper correction. Acceptance above $102.5k on the daily is your signal that the next leg higher has begun, in my view.
Now, considering that potential wick above $100k and subsequent rejection early this week, there's an intraweek short scenario you could play if that price-action unfolds, where we could short acceptance back below $99k after squeezing into $100k+, looking for the weekend lows and Friday lows to be swept into the December open. Acceptance below that December open at $96.4k would then be the trigger for another leg down, likely through the 2025 open into range lows at $91k:
Given higher timeframe structure and momentum, however, I do still think longs are preferable, with two potential scenarios that could play out this week. The first is a shallower correction, leaving $100k untapped early this week and correcting into that December open before reversing, reclaiming the weekly open at $98.3k and the continuing higher through $100k towards $104k as major resistance:
The second scenario - and one that many appear to hoping for - is a full retrace of the early January pump back below 2025 open at $93.3k, then sweeping $91k before reclaiming the yearly open as a long trigger for continuation higher:
And here's a snapshot of current positioning across Velo and CoinGlass (though Open Interest data for CG appears to be a little bit glitchy at the moment):
And here's 3-month annualized basis, which is still very mild and has reset nicely over the past few weeks:
And finally here are the anticipated 1-week and 1-month liquidation levels, which can act as a magnet if price is trading towards them:
Ethereum:
Price: $3648
ETH/USD
Monthly:
If we begin by looking at the monthly for ETH/USD, we can see that price continues to find resistance at $4100, wicking into that level in December but rejecting and closing back at $3330, above reclaimed support and firmly above long-term trendline support. We in effect have an ascending triangle here into all-time highs, and given the next 90-day period is historically the most bullish for Ethereum, I think this structure is likely to resolve to the upside as we get into February. From a price-action perspective, we are holding strong above support, so unless we get a monthly close now below $3050 and that trendline, there's not really any reason to be bearish. A close above $4100 on the monthly is the clearest signal we'll get for price discovery beyond $5000. Momentum here is also ticking higher again with plenty of upside.
Weekly:
Looking at the weekly, we can see that price closed above trendline resistance, before rejecting and breaking back below it, retesting $3050 as support and holding firm, forming a higher-low on this timeframe. We are now seeing ETH push higher again back above $3500 and I am looking for a strong weekly close back above the trendline, as I do not expect the second attempt to be a fakeout. If we accept above trendline resistance this week, I think we see $4100 retested before the inauguration January 20th, with a weekly close above that level likely to follow going into Feb. Where we should rightly become concerned would be a deviation of $4100 again followed by a close back below $3050, turning weekly structure bearish, but we're nowhere near that sort of structure yet. Onwards and upwards through Q1...
Daily:
Dropping into the daily, we can see that daily structure is bullish once again with the higher-high above $3570 but we are in this very choppy pivot zone between $3470-$3570: if we accept above this zone, we retest $3972 and then $4100 swiftly; if we close back below $3470 on the daily this week, we take out the 2025 open at $3330 before marking out a bottom. Momentum, as one might expect looking at this price-action, is also choppy. Nothing much else to add on this timeframe for now...
ETH/BTC
Monthly:
Turning our attention to the BTC pair, ETH/BTC on the monthly looks very much to finally be marking out a bottom, with the downtrend having flattened out and momentum having stalled, which looks not too dissimilar to Dec 2019. What bulls want to see here is a monthly close above 0.0418 to confirm that this is indeed the cycle low; in that scenario, I think Feb-April are very fruitful for ETH/BTC, with the 2022 lows as the first target around 0.049. No bearish takes unless we close this month below the monthly open at 0.0355, thereby likely leading to continuation lower through 0.032.
Weekly:
Looking at the weekly, we can see that price is consolidating above 0.032, having formed a higher-low above it but remaining capped by that all-important 0.0417 level. Until we see a weekly close above that level, weekly structure remains bearish, but this higher-low is the first step towards shifting market structure here. Momentum certainly appears to have bottomed out here but we need to see price confirm this. Given the seasonal period ahead and this current structure, I think it is likely we see weekly structure turn bullish going into February. If we do accept above 0.0417, the 2022 lows remain the first target, with the 'euphoria' move kicking in on acceptance above the multi-year trendline resistance, where 0.06 (the 200wMA) becomes the next target.
Daily:
Finally, looking at the daily, we can see that daily structure is bullish here but we want to see 0.0365 protected early this week and price push on into 0.0383 to attempt a reclaim of that level, particularly given the trendline resistance turned support retest in December. If we close back below 0.0365 and turn that level into resistance, it becomes more probable that 0.0347 gets retested again, which is not particularly promising for bulls. That would be the line in the sand between this being a bottoming formation from which we have a sustained reversal and price continuing the downtrend towards 0.03, in my view - it is a must-hold.
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Dollar Index:
Price: 108.25
Monthly:
Looking at the Dollar Index, we can see that December closed very strong indeed, pushing through range highs and the 2023 high to close out 2024 at 108.2, turning monthly structure bullish. This is now a clean breakout with momentum also looking relatively supportive, but we did have almost exactly the same setup in January 2017, which is something to consider as we approach Trump's inauguration. If this breakout sticks and 107.7 holds as support in January, no doubt this continues to push higher towards 112, which would be significant headwinds to overcome for risk assets given the tightening effect on financial conditions. If, however, this is a fakeout like 2017, we should see price close back below the 2023 high and lead to a new trend lower, having baited Dollar bulls with December close.
Weekly:
Looking at the weekly, we can see the election fractal from late 2016 through 2017 overlayed onto present price-action, where this next two-week period should mark out the top in Dollar strength if the fractal is to play out again. Confirmation of a Dollar top and this breakout as a fakeout would be acceptance back below the 2023 high. Let's see how January plays out before coming to any conclusions for the months ahead...
Daily:
Turning to the daily timeframe, we do have momentum struggling to break out here as the Dollar pushes higher, with the move into 109.3 early in the New Year rejected. Nonetheless, daily structure is bullish here and should 108 act as support we should see continuation through 109.3 over the next week or two, where we may then see further signs of exhaustion if a top is forming, or a clean momentum breakout if this move is indeed real, thereby signalling 112. If the Trump fractal plays out again, we should see 108 flip back into resistance and price to close below 107 in January, leading to a momentum breakdown and then continuation lower into 105.5 as a first target; though, if that Trump fractal does indeed play out again, we'd be looking for range lows to be retested at the 100 handle some time in 2025 before the next wave of Dollar strength, as has been the general pattern for the past 16 years or so.
Others:
Price: $378.2bn (3.81mn BTC)
OTHERS/USD
Monthly:
Beginning with the monthly view for OTHERS, we can see something not too dissimilar from the pattern on ETH/USD, with multiple stabs at resistance below all-time highs but alts generally just consolidating around $350bn, with higher lows over since the cycle bottom. Momentum here looks ready to explode higher, to be honest, and I would expect a momentum breakout on RSI above the March 2024 highs to be the signal for price discovery on alts, so keep an eye on that. Structurally, this is bullish despite the December rejection, which I do believe is noise relative to the quarterly and yearly views for alts. The previous two cycles saw similar durations both from the BTC ATH to the cycle top and the halving to the cycle top, around 334 days and 550 days, respectively. This cycle, due to BTC making new highs so early, we are fast approaching that duration, with mid-Feb to mid-March being a key period. The halving to top duration would instead put the cycle top in October/November, were it to play out like the previous two cycles. Interestingly, if we use the November 2024 all-time high break as the 'real' breakout, vs the March 2024 high where price stalled, we would be very much aligned with prior cycles for duration, with mid-Q4 once again lining up as the top. Obviously, these duration fractals are just for reference, and we should be focused squarely on price-action and macro factors for signs of exhaustion, but some sort of double bubble in alts would not be surprising here, with a mid-term top in late Q1 going into Q2 and a cycle top in mid-Q4. A monthly close above $500bn is all we are looking for to kick off what is usually a shortlived but euphoric price discovery phase for alts...
Weekly:
Looking at the weekly, we can see the parabolic curve remains intact and weekly structure is firmly bullish, as is momentum, and despite the rejection below all-time highs leading to that flash crash, we held above key horizontal and trendline support, marking out a higher-low. This low should now hold firm in Q1, leading to continuation higher through $420bn into $490bn for alts. Acceptance above that prior all-time high is where we get the 6-12 weeks period of price discovery. I am looking for $750bn as a first target for OTHERS sometime in Q1/Q2, with $900bn as the area above that where it is likely we find some resistance for alts. If we are to get a double bubble, we could potentially see $750bn mark out a mid-term top in March/April, then see a brutal shakeout from there followed by a period of summer chop before an attack on the $1trn figure going into Q4. For the short-term price-action, however, I think it is likely we see the March 2024 highs around $350-360bn act as support going into February, with a weekly close above $420bn leading to a swift move into all-time highs.
Daily:
Looking now at the daily, we can see that following the correction, price reclaimed support at $330bn and then broke out above trendline resistance from the highs, now turning daily structure bullish with a series of higher-lows and higher-highs. As mentioned above, we should now see $350-360bn act as support, with $330bn as the absolute line in the sand for short-term bullishness on alts. Close below that level and we likely trade lower into the 200dMA and 360dMA near $250bn. Whilst we are holding above this resistance turned support cluster, we should see alts extend towards $420bn over the next couple of weeks, followed by a breakout through that resistance in February.
OTHERS/BTC
Monthly:
Looking at OTHERS/BTC on the monthly, this pretty much gives us a snapshot of how the previous two cycles have played out, and though there have been discrepancies there's a general pattern which seems to stick, and we are now - if history repeats - on our way towards the easy mode top some time in late Q1 or early Q2. Whilst alts vs BTC are priced above ~3mn BTC, this is a bullish chart and we should expect outperformance for the next 2-3 months at least. 5.4mn BTC is the first major resistance, around the March 2024 highs. Momentum has also certainly bottomed out and is now turning higher, which is supportive of this view on altcoin outperformance from here.
Weekly:
Turning to the weekly, we can see that OTHERS/BTC turned weekly structure bullish for the first time since March 2024, with a higher-high and higher-low having formed. Weekly momentum has also made a higher-high and higher-low but remains capped below that 2024 high; we should now see OTHERS/BTC close above 4.4mn BTC going into February, alongside weekly RSI above 68, leading to the next leg higher on alts with significant momentum. 5.4mn BTC is the major resistance level to look for, with the 200wMA just below that, but I personally do not believe that is where the 'easy mode top' would occur, if we are to get one over the coming months; rather, I expect it to be somewhere between 5.4mn BTC and 8.3mn BTC. Remember, the real fun on alts did not begin in prior cycles until OTHERS/BTC flipped the 'test pump' high as support, which here would be that 200wMA.
Daily:
Finally, dropping into the daily, we can see how OTHERS/BTC found resistance exactly where it should have, around 4.4mn BTC, but instead of just the single pull-back and continuation higher we got two legs lower, retesting the 200dMA and reclaimed support at 3.3mn BTC, and giving those on the sidelines a great opportunity to allocate. We then reclaimed 3.6mn BTC as support and alts are now consolidating around the 360dMA vs BTC. Honestly, I don't think you're going to be gifted with another opportunity like that of mid-late December, and we should see continuation higher from here towards 4.4mn and beyond over the next couple of weeks. Close back below 3.6mn BTC and things look a little more dicey for alts vs BTC, but at present the structure is bullish. RSI back above 61 here would be something to watch for, as that capped alts almost all of 2024 and the first major leg higher for altcoin dominance occurred as momentum broke above that area.
I hope you've found some value in the read this week - it's good to be back at the desk.
Oh, and if you've not tried out trading Real-World Assets on Ostium yet, you can now do so here with the launch of their public mainnet.
