Volatility Will Increase Dramatically | Market Update
Review Date: May 24, 2022
Market Update: Volatility Will Increase Dramatically
BTC Weekly Chart
As you may have heard by now, bitcoin (BTCUSDT) has closed lower eight weeks in a row. What you may not know is we suspect eight straight down weeks is a prelude to a much bigger down move.
ETH 4-hour Chart
On the ETH 4-hour chart, DeMark’s Elliott Wave tool suggests that ETH has recently completed a three-wave down. The retracement to $2,100 registers as the fourth wave. If this count holds, there could be a drop below $1,800 to complete the ﬁve-wave structure. So, there is a risk of a massive down move after the U.S. Memorial Day holiday. We anticipate the drop may accelerate near the start of the Consensus conference on June
7. We remember bitcoin dropped substantially in 2021, right as the bitcoin Miami conference started.
BTC 4-hour Chart
Looking at the 4-hour chart of bitcoin, a Wave 3 down has started. We suspect a move to either $20,000 or $14,000 is next.
BTC 2022 vs. BTC 2014 Fractal
We suspect the current price action in BTC mirrors the last time bitcoin declined for six weeks straight. That was back in 2014. If the past scenario repeats itself, BTC could fall to $14,000 by July 4th and massively reverse and retest $28,000 in just one week. We believe we are entering a regime of staggering volatility for bitcoin on the upside and the downside.
Using a structure created by Jesse Livermore, a famous trader from Reminisces of a Stock Operator, ETH may dramatically outperform BTC as the market declines. We see the accumulation cone formation in ETHBTC, leading to a very sharp rise in ETH relative to BTC. The ETH merge, combined with the levered liquidation that can likely unfold in BTC (ex: Microstrategy), makes ETH a more compelling crypto to hold with BTC short against it as a hedge.
Note how well the accumulation cone formation worked in the Commodity Research Bureau Index (CRB).
Bottom Line: Risk assets could start crashing on June 1. That crash could start with prominent crypto players that were hurt by LUNA. These big players (think hedge funds) may have to liquidate other inventory of large-cap cryptos. Bitcoin may feel the brunt of that selling. Small altcoins may see dramatic price drops. It seems prudent to shift portfolios to a defensive posture. The time has come to talk about “the Flippening.” The time has also come to protect capital so you can do genuine value investing when this is all over.