Bitcoin and Ethereum gave back their gains, but has anything actually changed?

Crypto markets took a nice turn this week by rallying in resistance on a “positive” consumer price index (CPI) report, before resuming most of those gains right after Federal Reserve Chairman Jerome Powell took a surprisingly hawkish tone during his post- interest rate hike pressures.

The Fed raised interest rates by 0.50%, which was well within the expectations of most market players, but the eyebrow raiser was the consensus from the Federal Open Market Committee that rates would need to reach 5%-5.5%+ to hopefully reach the Fed’s inflation target of 2 %.

This basically threw cold water on traders’ fond dreams of a central bank Fed policy in the first half of 2023, and the dampener on sentiment was felt throughout the crypto and equity markets.

As the charts below show, Bitcoin (BTC) and Ether (ETH) reversed course right when Powell started pushing on December 14th.

How do you like those apples?

It is also not surprising that BTC and ETH price action and market structure on the lower timeframes also look identical.

So, yes, the markets resumed their recent gains on bad news, but has anything actually “changed?” Bitcoin is still trading with a clear range; Ether is doing the same, and neither asset has hit new annual lows recently.

As the saying goes, when in doubt, zoom out. So, let’s cut it short and take a closer look at the land area.

Zoom out when in doubt!

On the weekly time frame, Bitcoin is still bouncing around in a falling wedge, a classic technical analysis pattern that tends to turn bullish. The price does mostly what you expect the price to do within the framework of technical analysis.

Resistance is expected at the 20-MA, which is in line with the descending trend line. The volume profile calculation shows a lot of activity in the $18,000-$22,500 range, and the lower arm of the falling wedge has so far acted as support.

Similar price action was seen in May 2021–July 2021, but of course the situation was completely different, so it’s a bit of an apples to oranges comparison. There is a divergence on MACD and RSI. In short, the price is trending down and the MACD and RSI are trending up on the weekly timeframe, possibly worth keeping an eye on.

What I like about the weekly time frame is that candles form slowly and trends, either bullish or bearish, are fairly easy to call and confirm. It’s easier to build a solid investment case on the weekly time frame than to spend endless hours poring over four-hour, one-hour and daily charts.

Related: Ethereum and Litecoin are making a move, while the Bitcoin price is searching for firmer footing

Either way, breakouts from the falling wedge are likely to be limited to the descending trendline, while a breakdown of the pattern or drop below the lower support could see the price drop as low as $11,400. That’s all within market consensus for most analysts.

As for Ether, which I covered in more detail in last week’s Substack and newsletter, it is still doing the bull flag: bouncing around between support and resistance and seeing breakouts limited to key moving averages and the descending trend line of the bull flag.

$2,000 remains the ultimate target on the radar of most analysts, and the downside to $1,100 is far from shocking.

A dip below $1,000 is likely to raise eyebrows and draw the attention of those looking for more resolute shorts.

Ether price action basically does the same predictable thing as Bitcoin: nothing to see here, stick to the plan (whatever that might be for you). Like BTC, there is also a difference between Ether’s MACD and RSI – something worth keeping an eye on.

Litecoin update

Last week I also set my eyes on Litecoin (LTC) due to the upcoming network reward halving. While the price has retreated from its local peak of $85, the uptrend remains intact and on the daily time frame, the GMMA indicator remains bright green.

The vertical black lines track LTC’s bullish momentum leading up to halvings and the corrections that occur immediately after the halving takes place. So far, everything seems to be going according to plan.

Of course, none of this is financial advice. Make sure you do your own research, calculate your risk, think about the worst case scenarios, weigh your ROIs and take profits, and cut your stop loss zones a few days before you actually make a trade. Remember that 1:3 and 1:5 are the optimal risk-to-reward outcomes to aim for.

Ignore the short-term R&D and price action. Zoom out and build a strong thesis from that vantage point.

This newsletter was written by Big Smokey, the author of The humble pontificator Substack and resident newsletter writer at Cointelegraph. Every Friday, Big Smokey writes market insights, trends, analysis and early research on potential new trends within the crypto market.

The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.