Bitcoin rejected at $40K, what now?

Tuesday and Wednesday everything looked great.  Bitcoin was about to and then did break out from the descending wedge.  See this chart below:

 

Then it was rejected at $40K and fell back to $37K!  What gives?  The DXY chart is surging again, that is what gives!  Yesterday, the markets were strong on the rumor of the so so rate hike of 50 bps.  Today, Bitcoin markets are weak on the news of this rate hike of 50 bps:

 

We know the DXY and Bitcoin are inversely related.  How will this strong dollar period we are in right now affect Bitcoin?  See the next two charts.  This first one is the DXY chart for today.  After that is the Bitcoin chart.  Obviously inversely related:
 

 

Tuesday, crypto zombie had a chart that looked bullish and it was at the time.  Bolinger bands tightening, meant increased volatility ahead for Bitcoin.  Yesterday, we thought it was for sure going to be a bullish break out.  Here is the bolinger band chart showing future volatility:
 

 

It appears, the global macro outlook is waging the dog so to speak.  The rest of this blog we will focus only on global macro.  

US corporate bonds have dropped down to the same levels as March 2020, the covid crash.  See this chart below:

 

The bond market is terrible right now.  The Fed will have to buy back treasury bonds because no one else will.  QE is what led to all past asset inflation bull markets since 2008.  Now that the Fed is hawkish and the latest rate hike is in the books at 50 bps.  This bond index will keep droping.  If that is the case, over time demand will collapse.  The ISM manufacturing index is steaming down towards recession territory.  It dropped from 57.1 to 55.4 this week.  Once the ISM gets below 50, that is officially a recession.  Here is the chart below:
 

Yet ISM Manufacturing index compared to the 2 yr bond yields year over year, is flat out scary.  See this chart below:

 

 

2 yr bonds have never crashed this hard per Raoul Pal.  This sets up a massive crash, possibly this fall 2022.   This next chart from Raoul Pal is the Fed numerical broad dollar year over year, in blue compared to the ISM manufacturing index.  So the broad dollar is below the ISM index as well: 

 

 

This next chart from Raoul Pal is the 10 yr bond yields year over year compared to ISM.  Since bond yields are inverted 10 year bonds look better:
 

 

Even the S&P 500 is worse off than the ISM index.  The markets are going into a recession and it looks to be a really bad one.  Likely as bad or worse than 2008!  Time will tell how this plays out.  Here is the chart below:
 

 

An argument could be made the US is already in a recession even though the ISM manufacturing index is not below 50 yet.  Every metric is in recession compared to the slumping ISM index except 10 year bond yields.  Below, Quoth the raven writes about the currency markets.  The sanctions against Russia have completely backfired on the Biden administration and the Ruble is stronger now than before the sanctions began.  Europe is buying Russian Oil in Rubles.  Further sanctions may be imposed, but the Oil buying will continue none the less.  There are no other options in Europe.  China is backing the Yuan, as Russia is backing the Ruble, with Gold.  Bitcoin is at play in both countries as well, especially in Russia.  They are going against the globalist countries in Europe and the US, Canada.  Click here to read this article.

 

In the future as more and more countries walk away from using the dollar to buy goods, raw materials, the DXY will eventually turn south and stay that way.  This will be the goliath Bitcoin bull run.  It appears this years bull run has been interrupted.  However, looking at Bitcoin rolling 4 year growth it is still by far, the best returns over ALL other assets in the world.  See this chart below:

 

 

Next we can show the same chart going back to the March 2020 Covid crash.  Same outcome.  Bitcoin continues to outshine all asset classes by a wide margin:

 

 

Thus, don’t bet against Bitcoin.  The fake out to $40K is a temporary phenomenon, Bitcoin may dump to the target price below the descending channel it was in until a week ago.  That target price is $19,000.  When you consider that after the 2017 bull run, Bitcoin dumped to $3,000.  $19,000 is not that bad.  Prepare now to buy that dip, in that price range.  It may not ever get there.  The charts are back to telling us it could!  If Bitcoin dumps to that level, know it is a great buying opportunity.  We are NOT saying to sell now.  Some people will do that anyway.  Just be ready to buy if it does get to the $419K to $20K range.  The Covid crash taught us Bitcoin will behave as a tech stock would in a crash.  After the V bottom, those are the fastest hardest bull runs in financial history.  Bitcoin went up 1,800% in 13 months after the Covid crash.  This is setting up to be a similar situation.  It’s not what we want to hear.  We thought on Monday, the Wednesday breakout we saw would happen.  By Thursday, we find out it was a fake out and we’re right back where we started.  $40K is the resistance line.  If Bitcoin does not breakthrough that and hit $47K by May 10 or 11, this bear market may be confirmed by then.  This is not financial advise and we are not financial advisors.  We need a long time horizon to find the gains we expect.  This is a volatile asset with an adoption curve outpacing the adoption of the internet!  Hold on for dear life! 

 

Neutral ATM is here to get everyone off of zero Bitcoin.  

 

Give Neutral ATM a try.  We have low rates, convenient locations and we are expanding. Contact Neutral ATM, we will answer all your questions about Bitcoin and using our ATM machines. Find a Neutral ATM Bitcoin machine location near you.