“Hot” CPI Numbers Cool the Bitcoin Rally – But Is It Really Over?
Well, what goes up must come down! A red day across the board here in Crypto Land, with a few outliers: LUNC, HBAR, TWT, LTC, and XEC up modest gains today despite the market wide sell off.
The primary culprit for today's sell off was the lackluster CPI report from the U.S. Bureau of Labor Statistics, the inflation report. Bullish traders were hoping for a print below 8.1%, and unfortunately, we crept up with our inflation metrics, clocking in a CPI of 8.3% this month. The bullish catalyst hope was that inflation was beginning to taper off, which would bode well for risk-on assets moving forward. Unfortunately, although the increase was small, as far as our objective metrics go: inflation is not yet contained.
As hotter than expected CPI numbers were announced, all markets puked simultaneously. Bitcoin is currently down almost 6% on the day, and we must ask the question: is this the end of the latest bear market rally? Were we so wrong about everything? Is the movement to $17K imminent?! Enough of the fear mongering, let's look at objective data to formulate our trade thesis.
To begin, the daily chart of Bitcoin.
As we can see, we are forming a Bearish Engulfing Candle, generally considered to be a bearish reversal candlestick formation. Nominal volume on today's movement is quite high, showing that the bears indeed do have some strength.
On a positive note, we are still trading above our current Point of Control. This is coming in at 19.800, and indicates that the most volume was transacted at that price level. This forms a strong level of support that if we can remain above, perhaps things will not become so bad. Losing that level however, puts us back into momentum shorting territory and eyeing our first level of on-chain support, Bitcoin's Balanced Price, coming in at $17.000.
Gazing at price through the lens of Pathways to Profit, we can see that after briefly trading above the Daily Base Line, today's sell off looks like yet another rejection from a breakout of the bearish trend. Mynx is curling over and threatening to cross back below the signal line, while Waddah and Parallox remain moderately bullish. The strategy would recommend closing any breakout long positions taken yesterday at a loss, and awaiting an indicator reset before pursuing another position.
Zooming into the lower time frame charts, we can see that longs are getting pummeled. CVD has been consistently dropping throughout the morning session, and Open Interest is in a downtrend. We've had two waves of liquidations, one generated on the initial dump, and than one just now. We can see that overall, the open interest was in shorts putting on new positions, the rise in OI that is. Whereas the drops in OI are longs becoming forced sellers.
Altcoins of Interest:
Large Open Interest Increases:
#1 REEF USDT 1947.31%
#2 1000LUNC USDT 34.93%
#3 HBAR USDT 30.2%
#4 FTT USDT 20.61%
#5 APE USDT 19.15%
Let's analyze the most opportune altcoin opportunities today.
Beginning with REEF, yesterday I took a long intraday position on REEF. I successfully hit my first TP, however was stopped out at break even after price reversed with this morning's price action. After reviewing the chart, I noticed that CVD and Open Interest were continuing to climb on REEF, so I snuck another long position in this morning and price exploded upwards.
REEF is continuing to climb, and CVD indicates buyers are still in control. Be wary of buyer exhaustion moments, but this asset is still performing well.
1000LUNC is interesting, it was just recently added to ByBit's perpetual markets. Analyzing the chart, we can see that even during the rise in price CVD was still in a decline, showing that bulls weren't really in control of the market and that short sellers took opportunity to increase their positions during the pump at more advantageous prices. Open Interest is skyrocketing still on this asset.
One thing that took me for a second glance is the sharp spike in negative funding. Generally, when we see extremes, it's a sign of a potential reversal. I did take a cheeky long on LUNC1000, but I don't recommend it. Honestly, everything about this chart is screaming short. I just noticed the extreme spike in negative funding along with the rise in OI, potential short-term low.
I will wait for price to rise before positioning where I think the dominant trend is: to the short-side.
HBAR is quite interesting. Note that CVD continued to rise even during the price decline. HBAR obviously having a bit of a fundamental catalyst with it's Coinbase listing. Open Interest isn't doing much of anything, but the CVD increase the positive funding have me eyeing this for a potential long.
While markets were heating up and looking to be quite bullish yesterday, today's CPI catalyst has poured cold water on the flames of bullish investors, for the time being at least. Time will be needed to see if current price action can rebound from today's emotional and news-driven sell off event. Check back in tomorrow to see what the pulse of the market is!
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