Is Bitcoin Coiling for Its Next Big Bounce?

Another epochal hurricane blew up the Gulf Coast Sunday with a storm surge so substantial, the Mississippi River in southeastern Louisiana reversed course and flowed north.

America’s misadventure in Afghanistan is ending as it ever was — that is, poorly, as is the case when wars are lost by invading powers.

And there’s still a pandemic.

The good news is markets keep on keepin’ on.

Indeed, the S&P 500 Index and the Nasdaq Composite (Nasdaq: IXIC) each made four new all-time closing highs last week, ending the regular trading session on Friday at their respective peaks.

And after pushing out to near $50,000, Bitcoin (BTC) has settled up against key resistance in the $48,000 neighborhood.

Let’s check with analyst Sam Blumenfeld for an update on the cryptocurrency market, specifically with an emphasis on Bitcoin and Ethereum (ETH), from the Aug. 27 edition of Weiss Crypto Alert:

Bitcoin is bouncing higher after yesterday’s brief pullback to trade around $48,000 today.

It’s a welcomed sign, but it doesn’t rule out a potential correction. The crypto market is volatile, and we already saw the King of Crypto rally over 60% from its July lows.

Bitcoin is still digesting its recent gains after soaring past the upper end of its previous sideways trading range. It may decide to continue its “two steps forward, one step back” approach that we’ve seen so far since July.

Bitcoin briefly dipped below its 21-day moving average, but it quickly bounced higher after finding temporary support. With its significant price appreciation since late-July, Bitcoin easily overtook its 200-day exponential moving average (EMA) and 21-week EMA, which are currently at about $40,000 and $42,000 respectively.

Here’s Bitcoin’s price in U.S. dollars via Coinbase (Nasdaq: COIN):

Ethereum is also rebounding today with a solid push. The second largest cryptocurrency by market capitalization dipped further below its 21-day moving average than Bitcoin, but it’s making a slightly bigger move today.

Just like with Bitcoin, though, another short-term pullback can’t be ruled out. For now, it’s trading above that 21-day moving average, but it hasn’t found solid short-term support when it dipped below.

A lot of the bullish momentum for ETH can be traced back to the EIP-1559 upgrade. To date, over 100,000 ETH have been burned since the upgrade rolled out on Aug. 5. This translates to over $320 million burned, which could lead to higher prices due to smaller supply.

Here’s Ethereum’s price in U.S. dollars via Coinbase:

Sam also pulled back to provide some context for recent price action:

It makes sense that the crypto market is digesting its recent gains considering how significant the price movements have been over past five weeks.

Nothing goes up in a straight line, and it is possible we see a deeper correction soon to consolidate after the big recent moves.

In macro news, crypto notched another win in its quest to achieve mainstream adoption yesterday. Cuba — following El Salvador’s lead — will be recognizing the use of Bitcoin for payments. The government and central bank will be establishing regulations for the crypto landscape.

At the Federal Reserve’s Jackson Hole Symposium, all eyes will be on how the committee members approach the decision to taper its current bond purchase plan of $120 billion per month.

The Fed’s balance sheet doubled since the beginning of the pandemic to over $8 trillion, and its current policies are unsustainable.

Extreme government spending has accentuated our future financial predicament, but cryptocurrencies provide a hedge against the traditional system. Institutional adoption is soaring already. It’ll only continue to increase given the Fed and U.S. government’s decisions to kick the can down the road.

Volatility aside, promising pathways lie ahead.

Best, 

David Dittman 

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