Here’s the Next Twist I See Coming on This Crypto Coaster

By Juan Villaverde

It’s astonishing how headlines keep yanking the crypto markets around.

Just look at Bitcoin’s (BTC, “A-”) recent price action.

At the start of July, Bitcoin saw some serious weakness. In fact, it fell below its at-the-time most recent 80-day-cycle low.

A bull market is marked by a series of higher highs and higher lows. So to cross beneath and even suggest a lower low while in a bull market is a clear sign of weakness. When I saw that, I thought for sure we were in for at least several weeks of sideways consolidation.

But then, the headlines came in hot, and sentiment took over the driver’s seat. The climb up from the most recent 80-day low near $56,000 was driven almost entirely by headlines.

My colleague Dr. Bruce Ng has often said that narratives, not fundamentals, are what matter most in a bull market. Now, you can see for yourselves just how right he’s been.

And this narrative is particularly powerful.

The crypto community is reacting the chance of a potentially more receptive regulatory landscape for crypto in the U.S. And many see former president and presidential candidate Donald Trump to be a key player in making that future a reality.

To be clear, this isn't saying I believe a Trump presidency is in the books. Or that he's guaranteed to be good for crypto. 

But many who are voting with crypto as their primary focus believe he will push their agenda the best, and that is being reflected in price action.

Frankly, I’m not thrilled to see Bitcoin and crypto whipped around by the U.S. presidential race and the 24-hour news cycle.

But as always, we must trade the market we have, not the market we want. 

It’s clear that Bitcoin is being influenced by the election cycle. To ignore that would be to ignore one of the strongest forces acting on the market. And I’m not one to stick my head in the sand and call it a strategy.  

 Instead, I want to focus on what this dynamic means for us as investors.  

In short, volatility. As competing headlines send the market swaying, they are also fighting against the cycles, creating a vortex of near-term volatility.

Let me explain: Over the weekend, the markets began to sell off.

One current explanation as to why is that prices fell on the news that President Biden would not seek reelection. The reasoning? Some believe Trump’s chances of victory decrease against another opponent.

But that conflicts with another narrative: the overwhelming bullish sentiment stemming from Trump’s anticipated Bitcoin Conference appearance.

You can’t have it both ways, however. So, which is it? Are current events hindering the latest Bitcoin rally or propelling it?

This, my friends, is where my Crypto Timing Model comes in clutch. It helps me see past the headlines to determine if there is anything deeper at play. (If you want to learn how I use my Crypto Timing Model to find the best entry and exit prices on top-performing cryptos, click here.)

Sure enough, there is.

What’s really happening is that the recent surge is losing momentum. Right now, the next level of overhead resistance for Bitcoin is at $70,000. But BTC is unlikely to break above there in the very near term without a decent correction first.

This is partly because the current 80-day cycle started below the previous cycle’s low, made on May 1. Typically, an 80-day cycle that starts below the previous cycle’s low doesn’t rally past the previous cycle’s top.

In other words, a break above $70,000 is only likely after a pullback.

But that’s the fundamental outlook in a vacuum. Add in the broad sentiment, and anything can happen. And with Trump scheduled to speak at the Bitcoin Conference tomorrow, we could see the headlines once again spark another push higher.

That means we can expect the rollercoaster ride to get more intense in the coming days. Hold on tight.

Best,

Juan Villaverde