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 21st 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, Copper, the Dollar Index and altcoins via OTHERS.
Firstly, let's take a look at the calendar, with a very busy week ahead:
WEDNESDAY: ADP EMPLOYMENT CHANGE (JAN): (CONSENSUS 150K VS PREVIOUS 122K)
WEDNESDAY: ISM SERVICES PMI (JAN): (CONSENSUS 54.2 VS PREVIOUS 54.1)
THURSDAY: BANK OF ENGLAND INTEREST RATE DECISION: (CONSENSUS 4.5% VS PREVIOUS 4.75%)
FRIDAY: US NON-FARM PAYROLLS (JAN): (CONSENSUS 170K VS PREVIOUS 256K)
Now, let's dig into asset-specific price-action for the week ahead, looking firstly at Bitcoin:
Bitcoin:
Price: $98,856
Weekly:
If we begin by looking at the weekly, we can see that last week found resistance at $102k after pushing up towards all-time highs, rejecting to close the week out back below $99k. This led to Monday's volatility, which took price into support at $92k, pushing marginally below that before bouncing into the $99k area where it is currently sat. This - for Bitcoin specifically - is appearing more and more like January 2024, including the way momentum is shaping up. The bullish line in the sand following this early weekly volatility is of course that $92k support, a weekly close below which would open up a much deeper correction and break this structure. As long as that support holds, a weekly close this week back above $99k would be very bullish indeed and I would consider this liquidation event the fuel for the range breakout to the upside. If we close below $99k but above $92k, more chop ahead until it picks a side.
Daily:
Looking at the daily, we can see that price found resistance at $106k before breaking below $99k into the bottom half of the range, with yesterday's price-action retesting the bottom of the range and finding significant demand, closing the day out as a bullish engulfing on high volume back above $99k resistance but marginally below $102.5k resistance. What bulls want to see here following this move is for yesterday's open (the weekly open) to act as support today and tomorrow and price to then close above $102.5k subsequently. In that scenario, I think we take out all the resting stops above $106k into range highs, where the reaction will dictate whether we remain range-bound or the next leg higher has begun. A daily close above $106.3k would be the highest daily close of all time, which would provide confirmation that the range breakout is likely underway. On the short-term bearish side, failure to hold above the weekly open after such a show of strength yesterday would suggest at least a partial backfill of the wick back towards range support, where the yearly open at $93.3k should find support if this range is not going to break lower. If we close back below the yearly open, I think it looks likely we lose the range and likely move towards $80k.
Looking now for potential setups through the week, there's a couple of possible longs and a short that could work out.
The first long would be for price to chop around the weekly open over the next day or two, break below $97.6k and then swiftly reclaim it as support, where entry on a move back towards $97.6k from above makes sense, with a clear invalidation. We have the February high still untapped, so that would be target 1, followed by the highs above $106k:
Long setup two would that partial backfill idea where we push lower leaving lots of intraday highs untapped towards the 61.8% retracement at $95.5k (or even as low as the yearly open), and then find demand and push swiftly back above the weekly open from there, with the same targets but potentially a less rewarding R/R depending on how that sets up:
The short setup would be for price to grind higher over the next couple of days, taking out the February high towards that trendline resistance overhead and then rejecting and breaking back below, with a partial entry on a retest of $102.5k from below followed by a partial entry back below $99k, looking for range support:
And here's a snapshot of positioning via Velo and CoinGlass:
And here's the 3-month annualized basis, which is back to pre-election levels:
And finally a look at 1-month and 1-week anticipated liquidation levels:
Ethereum:
Price: $2728
ETH/USD
Weekly:
Beginning with the weekly for ETH/USD, we can see that the pair was massacred by the Monday liquidation event, following a weekly close back near support at $2870. Yesterday's move saw the pair wick below multi-year trendline support to retest the 2024 open at $2280, wicking as low at $2150, before bouncing back above that trendline where it currently sits. This was an historical daily candle for ETH - that cannot be overstated. And if ever we were to mark a bottom from which this can actually break $4100, it would be that candle. Wicking below every level of support since 2024 began only to push back into $2800 immediately suggests this was true capitulation - akin to May/June 2022 - except this time there is an intact multi-year uptrend. It goes without saying that closing the weekly below trendline support and the 200wMA around $2500 would point towards a breakdown of the trend, so that is something I am paying keen attention to. Meanwhile, a weekly close this week back above $2850 would confirm this as a particularly brutal bear trap. Anything in between $2500 and $2850 and we're just chopping, with the next week or two more likely to determine direction. I am heavily leaning towards this wick into $2150 being the pico-bottom for ETH/USD before another attempt at $4100 later this year, to be clear.
Daily:
Looking at the daily, we can see that yesterday saw as much volume on Coinbase as the Yen carry unwind day on August 5th, confirming its likelihood of being a higher timeframe bottom. Unlike August 5th, somehow ETH closed green on the day despite wicking close to 30%, with some of that wick beginning to be filled today. Momentum is capped on the daily, so that's something to look towards as a sign of a sustained reversal; breaking out and making a higher-high on RSI as price breaks back above the confluence of resistance at $3050 would be a very clear signal of where we're headed next, in my opinion. Conversely, momentum continuing to be capped and price breaking and closing back below $2700 would suggest a deeper fill of the wick, potentially as far as $2400, though given the higher timeframe implications of trading back down there you'd want to see a very swift push back into the current range. If this is particularly bullish following that wick yesterday, $2700 should act as support today and price should push higher from there into a weekly close back above $2850.
ETH/BTC
Weekly:
Looking at ETH/BTC, the first thing to mention here is that yesterday's wick filled in all of that lack of support below 0.03 back into the level that marled the bottom in December 2017 and December 2020 - 0.023. In both of those occasions, the subsequent week saw price reverse hard and close green, so next week pushing back above 0.03 would confirm this as a cycle low in my view. If 0.03 acts as resistance next week, we likely backfill the wick and retest close to 0.023 next week, which is what occurred in December 2020. Closing below 0.023 would be wild times indeed, as you only have on level left on the chart for the past 7 years, which is 0.016 as the 2019 low. Let's see how this next 7-10 days plays out, but if ever there was a moment for ETH to reverse it would be this one.
Daily:
Looking at the daily, there really isn't a great deal to add here except that you want to see a higher-low form within yesterday's wick over the next day or two and then - if there are any ETH bulls left alive - a reclaim of 0.03. Ideally, a reclaim of 0.0319, as that was the swing-high that preceded the sell-off, so reclaiming that support would be telling. Beyond that, there's really nothing to discuss on this timeframe - all eyes on the weekly close.
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Copper:
Price: $4.35
Weekly:
Beginning with the weekly, we can finally see the momentum kicking in here, after last week closed in the red but held above trendline support, compressing beneath trendline resistance from the 2024 high. We have since seen price wick below last week's low and then show strength, pushing higher, now sat right around that resistance cluster. This is make or break for the move, in my opinion, and we should now see a weekly close above $4.36 that confirms both the trendline breakout and reclaims a key pivot. Above that level, I expect we see continuation into $4.70 before the next major resistance is found. If we wick above $4.36 this week and close back below the trendline, that will look like a second failed breakout to me following the attempt a couple of weeks ago. In that scenario, I'd be closing my long from the 200wMA and awaiting clearer price-action.
Daily:
Turning to the daily, we can see how daily structure is very much supportive of higher prices, as is momentum, and yesterday's bullish engulfing should be followed through with a close above the 200dMA at $4.36 today. If we see that, I expect the rest of the week to push through to fresh yearly highs above $4.45, with $4.70 the main resistance beyond that. Rejection here mid-week and then closing back below $4.32 on the daily would begin to point towards weakness, and if we lose yesterday's low at $4.22 I would cut my position early in profit, given the expectation that we then trade back towards the yearly open.
Dollar Index:
Price: 108.2
Weekly:
Looking at the weekly, following the weekend tariff talk and the Monday volatility, the Dollar pushed higher off the weekly open, rallying into 109.5 before rejecting and now trading lower into 108.2. Assuming the market continues to grow desensitized with each new tariff headline - which in turn assumes no significant escalation - we should now hold below that weekly high. A weekly close above the 2025 high at 109.9 would be a risk-off environment, in my view, and would have negative implications for my short-term expectations on crypto. As long as we continue to trade below that level, my view remains that this is a bull trap for DXY beyond the multi-year range, into which we are likely to return. Trading back inside the yearly open and closing the week below it would provide confluence for this and I would expect something akin to the 2017 fractal to continue to play out. Closing back inside 105.5 opens up that much deeper correction back to the bottom of the range, but as long as the Dollar isn't raging higher towards the 2022 high I think risk assets continue to operate in an accommodating environment.
Daily:
I have marked out the bullish and bearish path for the Dollar on the daily chart above, where 108.2 acting as support and price closing the daily above 109.3 subsequently would lead to continuation of the trend higher through 110 and beyond; conversely, if this is a headline-induced fake-out, we see 108.2 flipped into resistance this week and price return to 107, where any daily close below that level affirms bearish structure and we continue lower to retest 105.5. A daily momentum breakdown back below 50 would make this scenario more probable.
OTHERS:
OTHERS/USD
Price: $275bn
Weekly:
Beginning with the weekly for OTHERS, we can see that following last week's rejection at the yearly open at $335bn, alts sold off to close out the week at $280bn. Then, yesterday we saw the largest nominal liquidation event in crypto history, with OTHERS wicking all the way into the 200wMA at $210bn before bouncing back into that $280bn area around the weekly open. We still have a long-term uptrend here and we have now wiped out all derivatives positioning post-election - that's ~90 days of positioning wiped out in one day with prices now back at the weekly open. This feels very much like a brutal but necessary move before continuation higher, in my view, but you don't really want to be messing around in the middle: by that I mean either await a reclaim of the 2025 open at $335bn for high probability ALT/USD longs into fresh highs or await a partial backfill of the wick next week. If we v-reverse all of last week's sell-off too within the next 7-10 days that would be a tough pill to swallow for any levered positions that got wiped out and no doubt you'd see participants chasing prices much higher, which in turn would fuel that next leg. If instead we have more of a post-August 5th move, we will see some chop here for the next week or two before retesting that yearly open and likely reclaiming it. This only becomes giga-bearish if we close the weekly below the 200wMA (this week's low), at which point alts have broadly lost their multi-year trend and you'd expect to see OTHERS capitulate back towards the 360wMA which marked the bear market lows, currently at $130bn. Given where I believe we are in the broader cycle, I give this a very low probability, with a 30% probability of v-reversal back above $335bn by end of next week and 65% probability of a week or two of chop followed by reclaiming the parabolic trend and pushing back above the yearly open by March.
Daily:
Looking at the daily, we can see OTHERS closed in the green yesterday above the 360dMAand 200dMA, which is notable strength given the extent of the liquidation event. The most bullish scenario would now see $260bn act as support for the rest of this week and alts to then continue higher into $335bn for the retest next week. Less bullish but still bullish would be a deeper backfill of yesterday's wick but demand stepping in and OTHERS chopping around for a couple of weeks between $250-300bn before attempting that yearly open retest and reclaim into end of month. The bearish scenario here is obviously that the range marked out is flipped back into resistance after the 200dMA and 360dMA get turned into resistance, then leading to the end of this multi-year uptrend and OTHERS pushing towards the 2024 lows (and likely lower) from there. I gave my probabilities above - now let's see what happens.
OTHERS/BTC
Weekly:
Now, I've provided two charts here for OTHERS/BTC but beginning with chart 1, we can see that OTHERS/BTC is forming significant bullish divergence into cyclical lows here, with this wick below support getting gobbled up so far. Importantly, if this 2.8mn-3mn BTC range gets successfully flipped as support turned resistance over the next week or two, it's not looking good, with no support for alts vs. BTC all the way back down into the December 2020 lows above 1.4mn BTC - that would inevitably also lead to OTHERS itself breaking down and losing its multi-year uptrend. If this bullish divergence plays out, however, this is the point of maximum opportunity to rotate some BTC into alts, which is what I plan on doing over the next week or so, with a view to cut aggressively if I don't believe this is playing out how I expect it to.
Looking at the second chart, as keen readers of my work will know, I don't believe we are late cycle as it relates to the domestic business cycle in the US or the global liquidity cycle. This chart overlays US ISM, Global M2 / Global GDP and the aggregate balance sheet of all central banks *excluding* the Fed, BoJ, PBoC and ECB (i.e. it depicts all of the less 'important; central banks). Historically, altcoins have outperformed BTC when all of these measures are in expansion; since 2022 they have all been in contraction. This month printed the first higher-high in expansion territory for US ISM in three years, whilst last week the first domino fell in the 'less important' central banks as relates to balance sheet expansion. If my view is that the forward outlook is now aggregate balance sheet expansion (even when excluding the four major CBs), a weaker dollar that facilitates Global M2 / Global GDP to cycle higher (as has been its trend since pre-2008) and the US business cycle to continue to recovery and expand, I should now be expecting a bottom to be in on alts vs BTC. Yesterday's liquidation event may well have been that bottom. Let's see what happens over the next week or two but if that low is protected I would be much more comfortable in rotating more BTC into alts.
Daily:
Finally, looking at the daily, I've marked out these two trajectories, where the bearish scenario would see 2.8mn BTC act as resistance and OTHERS/BTC to make fresh lows from there below yesterday's low, which in turn would lead to significant further downside. The bullish scenario needs to see yesterday's low protected, a higher-low to form above it and alts vs BTC to reclaim 3mn BTC, breaking out above the trendline resistance from that December 2024 high. That would be confirmation that this was indeed the final bear trap bottom from which alts can start to outperform, but in order for that outperformance to be sustained we need to see those core factors addressed above continue to unfold in a supportive manner, which I do expect to be the case from here. If you want to rotate some BTC into alts, awaiting that trendline breakout and ~3mn BTC reclaim would be the higher probability setup for that, from a purely price-action POV.
I hope you've found some value in the read this week!
Oh, and if you've not tried out trading Real-World Assets on Ostium yet, you can now do soherewith the launch of their public mainnet.
