BTC movements evolving
Since the start of the year, BTC has done something which it had never done before. BTC has moved in very close proximity to the traditional markets. This is very well displayed when looking at the NASDAQ 100.
The NASDAQ 100 is a stock market index, compiled of the 100 largest non-financial companies listed on the NASDAQ stock market. NASDAQ is best known for its high amount of tech-stocks. The current top five of the NASDAQ 100 are:
- 1- Apple (APPL)
- 2- Amazon (AMZN)
- 3- Microsoft (MSFT)
- 4- Facebook (FB)
- 5- Alphabet (GOOGL)
In the chart below, we can see the huge growth of the NASDAQ 100 since January. Firstly there was the steady growth period up until February. From February, there was then a huge correction, witnessed by most major stocks/commodities/cryptocurrencies etc.
This move down saw the NASDAQ 100 fall sharply. However, since the huge market corrections in March, the NASDAQ has gone on to see ATHs reaching 12400 points.
When we look at the chart above (NDX) and the chart below (BTC), apart from the period between early June towards mid-July, NDX and BTC have both moved very similarly – the general direction being upwards.
Should we consider BTC as a tech stock?
With the NASDAQ composed heavily of tech stocks, is it time that we consider BTC to be kind of tech stock?
Below, there is the chart of BTC vs SNAP (Snapchat). As we can see, they have both behaved very similarly, excluding the inverse periods (as indicated with the arrows). SNAP and BTC have also seen very similar returns, with BTC (red line) being only slightly outperformed by SNAP since the start of the year.
Although is SNAP a one off? Let’s take a look at FB (Facebook) to find out.
With SNAP against BTC, the correlation is high. However, during some periods correlation was inverted. Also, SNAP did not go through the same consolidation period, which BTC experiences June and July.
With FB the similarities with BTC are very significant; the charts looking almost identical from March.
Why is this the case?
Has BTC suddenly fallen under the tech umbrella or does it have something to do with the global pandemic/ economic crisis?
The US federal reserve has printed an unprecedented amount of US dollars since the COVID crisis. This has been in order to combat the economic crisis which has seen millions lose their jobs across the world and well-established companies struggling.
With the economy being propped up in this manner, and worries over inflation, we’ve seen a lot cash flow into the investment space – tech stocks, and Bitcoin.
EUR/BTC vs USD/BTC
Alongside this, there has also been a weakening of the USD. This is evident when we look at the EUR/BTC chart below against the BTC/USD chart (red line). This is very much clear from the green dotted line around the purple box.
EUR/BTC – USD/BTC
This trend of a weakening dollar does look set to change, with major breakouts occurring across many currencies.
Below there are three examples, with the SEK (Swedish Koroner), EUR (Euro) and the GBP (Great British Pound).
In the first forex chart, SEK/USD, we can see that the USD has had a strong break above the downwards parallel channel. The USD has been within this channel since March and has multiple points of verification. This positive breakout will increase the value of the USD against the SEK, provided that the USD can remain above the 8.6 support level.
Again we see something similar with the EUR below: another positive breakout from a descending parallel channel with USD finding support from the previous downwards resistance line of the channel.
The final major currency we will look at is the USD against the GBP. Here we can see that there has been a positive breakout again, although this time from a descending wedge, which is very bullish for the USD against the GBP.
A great way to view the strength of the USD, looking away from the individual forex charts, is through the DXY.
The DXY (USD Index) measures the value of the USD against six of the world’s currencies. These are:
- CAD (Canadian Dollar)
- GBP (Great British Pound)
- SEK (Swedish Koroner)
- CHF (Swiss Franc)
- EUR (Euro)
- JYP (Japanese Yen)
Alongside looking at the charts of the previous three currency pairs, we can also see from the DXY chart below that the USD is gaining strength with this bullish broadening formation. The DXY came into force after the Bretton Woods Agreement collapsed and the USD moved away from gold.
DXY/BTC/NASDAQ 100 correlation
In the chart below, we look at the correlation of DXY against BTC and the NASDAQ 100.
In the long term (monthly candles), the performance of DXY has shown to have very little effect on the NASDAQ 100 (shown below). There has been no real correlation.
It’s good to point out that there has been a negative short term correlation since the start of the year. This then presents the question: will the DXYs bullish formation on the short term lead to a decrease in value for BTC and the NASDAQ 100?
It is a complicated matter. If the correlation stays in place, then of course this will occur, but the NDX 100 and BTCs long term lack of correlation begs the question as to whether this is simply a short term correlation. It appears so, with BTC in fact being much closer tied to USDT rather than the USD.
DXY/USD long term against NDX
BTC/USD – USDT/USDTMKTCAP
With the US government’s printing appearing to fuel the stock market, the same has been apparent with the crypto market and may very well be the reason why the gains since March have been so significant.
The chart below has two lines.
Blue line – the market capitalization of USDT – Tether
Red line – the price of BTC against the USD
Tether often creates new USDT and increases the USDT supply, in order to meet demand and keep one USDT valued at approximately one USD. However, as we can see below, when increased USDT is placed into circulation / created – BTC tends to increase in price.
This is seen by many within the cryptocurrency community as price manipulation, but it does not change the picture of what is happening. The recent actions of Tether could help see BTC smash through the price barriers of $10500 and $11000 USD.
The DXY has recently broken below its long term monthly trend support line. The short term bullish set up should see the DXY retest the long term support line (now resistance line). If this is broken back above then expect the USD to see a major increase in value. If it does not, then the DXY could easily head back towards the 84 mark.
This would match the position of the FED, that they have as much money as needed to keep their economy on track. In the long term, if this occurs, then the value of BTC against the USD should increase faster than against that of other major currencies.
DXY long term view
It appears as though the NDX has taken a September breather before pushing further to reach new ATHs by the EOY. NDX has found healthy support at the 0.236 Fibonacci level and should be able to bounce off this. The indicators are currently bearish. If NDX falls below 0.236 then the 0.382 Fibonacci will be next up. However if 0.382 is broken below then the whole situation changes. NDX will likely form another common parallel channel once the bounce occurs, seeing ATHs by the EOY.
NDX Long term chart
With the correlations mentioned, alongside the indicators finally starting to turn bullish, BTC could see some big gains in the coming weeks. It depends on BTCs ability to break above the 20 day SMA of the BBs. BTC is currently below it and still has to break above the $11000 USD resistance level.
BTC currently has the SAR on its side in order to do this, but when we look at the short term chart, it appears as though the recent rally could be an exit plot. It all depends on BTCs ability to break above $11000 USD. If it can do this well and hold those gains then we could see BTC push $15000 USD. However if $11000 USD is rejected (which is also the 0.5 Fibonacci level) then BTC could see a move to $9500 USD, where alt coins would majorly bleed.
SNX (Synthetix Network Token)
SNX has had a tremendous year as one of the best performing cryptocurrencies of 2020. The cryptocurrency has risen from its yearly low of $0.4 USD all the way to its ATH of $7.5 USD. As demonstrated below, from March until late July the only way to go for SNX was up!
Since late July, SNX has seen three directions of price movement. The first was a move up, with some very strong support leading SNX to ATHs. From there, SNX then saw a major retracement, falling from $7.5 USD all the way to $4 USD, losing almost 50% of its value. This then leads SNX to its current position – trading within a slight wedge/parallel channel.
If we zoom in on the short term, we can see that SNX has found support at the 0.382 Fibonacci support level. Before this, the move up / breakout was very convincing by SNX. However, the 0.618 Fibonacci level has clearly proved to be too much for a first attempt and has seen SNX fall straight through the 0.5 Fibonacci level.
SNX/USD Fibonacci level
This then leaves SNX with two clear possibilities. SNX can either begin a new downwards trend, with the dotted green line acting as the new resistance line, seeing a break below the current upwards support. This would then see SNX fall back to the 0 Fibonacci level, falling to just under $4 USD.
The other possibility would be that SNX can find support at the 0.386 and use this as a trampoline to propel itself above the 0.618 Fibonacci level and fly above 6 USD. If the blue line is followed it would see SNX remain within the current formation.
What direction is most likely for SNX?
When looking at the indicators and current alt market momentum, the yellow line looks most probable.
The indicators below on the 4hr chart are currently all bearish. The MACD is above the 0 mark in the positive area and has seen a negative cross over, with the histogram currently painted red. This is the most bearish which the MACD can get. Alongside this, the SAR is currently above the candles and the QQE MT4 has seen a negative crossover – both bearish.
In conclusion, the recent run from SNX appears to be at an end. On the long term charts the cryptocurrency has broken its long term trend, while on the shorter term many of the indicators are bearish, with a recent rejection of the 0.5 and 0.618 resistance levels.