Bitcoin (BTC), Ethereum (ETH) Weekly Forecast: Potential Short-Term Bounce Forward

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Most read: Bitcoin Technical Outlook: Down, but not out

FALLOUT FROM FTX CONTINUES TO AFFECT THE CRYPTOCUM MARKETS

The crypto market as a whole continues to face significant headwinds as the fallout from FTX continues to spread. Crypto exchanges have struggled to convince customers that their assets are safe with a recent data release from CryptoQuant revealing reserves of Bitcoin, Ethereum and Stablecoins have fallen sharply since the FTX scandal. Exchange platforms from Binance to Crypto.com have made efforts by providing full or partial disclosure of their assets while users continue to withdraw funds.

The biggest impact of the spread so far has been experienced by Gemini Trust Co. which announced a suspension of redemptions at its lending unit while Blockfi Inc. is on the verge of filing for bankruptcy. Genesis has warned investors of a potential bankruptcy filing if it is unable to raise $1 billion in new capital to support its lending unit.

This development has kept the Crypto markets on the back foot and struggling to make significant gains. In a week where risk sentiment improved for stocks and the US dollar retreated after dovish FOMC minutes, both Bitcoin and Ethereum failed to capitalize as trading volumes also continue to decline. However, both BTC/USD and ETH/USD remain on course for marginal gains this week heading into the weekend.

ETH/USD TECHNICAL OUTLOOK

ETH/USD Weekly chart

Source: TradingView, compiled by Zain Vawda

From a technical perspective, Ethereum (ETH/USD) is trading on the weekly time frame within a bearish pennant pattern suggesting a downside breakout. There is still the possibility of a push to the upside to retest the descending trendline before a downside breakout occurs. However, the 200-day MA is just above the current price around the $1,338 area, which could halt any attempt to the upside. A breakout of the pennant pattern to the downside could see a retest of the YTD low from June 13 resting around the $864 area.

BTC/USD TECHNICAL OUTLOOK

BTC/USD Weekly chart

Source: TradingView, compiled by Zain Vawda

From a technical perspective, BTC/USD has retested the long trend line from November 2021 and is trading just above it. The pair has already seen one false breakout of this trendline in the last week of October before falling back below the trendline. This week the pair posted a new YTD low around the $15479 area bouncing off the bottom of a falling wedge pattern. The falling wedge pattern combined with a break of the long-term (2021) descending trend line suggests a potential bullish move heading into the new week. A move higher faces significant obstacles with the $18,000 level (September and October lows) set to provide resistance, while a break higher will need to clear the 20-day MA before a break of the falling wedge pattern enters. The break of the falling wedge pattern if it were to occur could take a few weeks to play out and perhaps something to keep an eye on.

Alternatively, a break below the falling wedge pattern would first have to clear the psychological $15,000 level, which could open up a test of the October 2020 resistance turned support area around $12,300.

BTC/USD Daily chart

Source: TradingView, compiled by Zain Vawda

After a bullish engulfing candle on Tuesday, BTC/USD followed it up with another bullish day before closing as a doji candlestick on Thursday. Close of the doji candlestick once again highlights the downside pressure on the crypto markets at the moment as this was a day after the dovish FOMC minutes which saw the US dollar index fall.

A daily candle above the $16800 level would be the first sign of a bullish shift in price action as it would be a higher high for the pair and could see BTC/USD run towards the $18000 resistance area. The 20-day MA provides short-term resistance resting around the $17,000 area currently, which could see the rally stall and give the pair an opportunity for another lower high to form before the next leg higher.

— Written by Zain Vawda for DailyFX.com

Contact and follow Zain on Twitter: @zvawda