Chart from Sigma by Hydra X
One headline maker this week was the stunning rally in BTC. This is an insiders’ asset class. As in the case of most previous large price movements, lay traders have been left scratching their heads in the aftermath and wondering what could have caused it.
Speculation on reasons for the rally have run the gamut of an April Fool’s fake news article, the SEC giving stealth approval to a new ETF, Warren Buffett diversifying into crypto, and a professional short squeeze. Zhao Changpeng, CEO of Binance, tweeted “anyone know any news? I have been asked ‘a few’ times, but honestly clueless.”
We had noted in previous weeks that BTC was coiling tighter in an extended symmetrical triangle, mirroring price action that preceded its breakdown at the end of 2018, and could resolve with prices breaking in either direction. This week, we saw that breakout – upwards. Perhaps, with the benefit of hindsight, we were given a clue to the direction of the breakout given the way price action has repeatedly tested the upper boundary of that triangle in recent weeks.
The end-2018 BTC breakdown saw a sharp move down, a short consolidation in form of a bear flag, followed by a second leg collapse. This rally has seen a similar dislocation upward, and prices are consolidating now just below the 38.2% fib retracement from July 2018 highs. We are watching with interest to see if this consolidation similarly results in a continuation leg higher.