Bitcoin has pulled back just a bit during the early hours on Thursday, only to turn right back around and slam into the 200 day EMA. That is the biggest issue here, we are trading between the 50 day and the 200 day EMA indicators, which typically causes quite a bit of noisy behavior. The CPI numbers in the United States were hotter than anticipated, so that did cause a little bit of weakness for a short amount of time, but then we turned around to see a lot of “risk on behavior” shortly thereafter.
St. Louis Federal Reserve Gov. James Bullard then stated that he wanted to see “100 basis points of tightening between now and July.” This caused panic in the risk assets around the world, but it must be stated that Bitcoin held up rather well. This is a bullish sign, so we may be getting ready to see a move higher, but if we can break above the 200 day EMA on a daily close. At that point, then I think Bitcoin has a real shot at going towards the $50,000 level.
On the other hand, if we break down below the lows of the last three sessions, it probably opens up Bitcoin to go towards the $40,000 level. I think the one thing you can count on in the short term is going to be a lot of volatility, because everything’s volatile right now. Bitcoin does typically correlate to the VIX, so pay close attention to that. (Over the recent history, there is a 90% correlation between the two assets.)
I think all things been equal, this is a market that will go higher over the longer term, but we still have a lot of work to do in order to go to the upside longer term. That does not mean that we cannot obviously, but what I think it does mean is that it may not be a massive shot higher. I think it is going to be more or less a pullback and then a buying opportunity. That being said though, you need to pay close attention to yields in the bond market and of course help tighten monetary policy gets. Bitcoin does not have the history to truly know what will happen with a highly inflationary situation, because it has not performed well so far as inflation has gone through the roof.
