Ever the contrarian this week I would like to possibility and evidence of a pending correction in cryptocurrencies, whether it be in late 2023 or indeed in the first quarter of 2024.
Before I get started, remember the market is starting to quickly price in the Bitcoin ETF in a big way, which reminds me of the old saying "buy the rumor and the sell fact".
My reasoning for taking the opposite side of the trade is due to some real danger signs and also some hypothetical ones.
But mainly, too many people are bullish and expecting massive gains in 2024, but no one is looking in the opposite direction.
Starting with the economy, Goldman Sachs economists write in the bank's new outlook that 2024 should cement the notion that the global economy has escaped the post-[Great Financial Crisis] environment of low inflation, zero policy rates, and negative real yield.
Source: Bloomberg.com
However, some economists are bracing for a rough patch, largely as a result of tighter monetary policy that could finally pinch economic activity.
The bottom line is that in 2023 the economy defied gloomy forecasts. It's possible the 2024 economy may do the same, however, plenty of risks lie ahead.
Moreover, many geo-political and political risks also lay ahead. Aside from the fear of wars, widespread domestic issues are looming.
Aside from 2024 the U.S. election run-up, the launching of central bank digital identity and wallet in 2024 is set for many EU countries. Rightly so, this could cause significant protest.
Some on-chain signs have also emerged for Bitcoin that are raising yellow flags for me. Data from Santiment shows that the move higher has largely been driven by massive retail buying since October.
Compare the two charts below, with the first one being retail and the second one being sharks and whale addresses. Remember retail money is supposed to be the epitome of dumb money.
Source: Santiment.net
Regular readers of Biyond Daily will also be aware that massive DAA divergence exists down towards the $32,000 area.
Then we come to Biyond's own indicators. Our Biyond Atlas model shows that we are at very extreme levels of bullishness.
Source: Biyond Atlas
According to the historical performance of the indicator, such levels of bullishness really last long and will be followed by significant corrections.
And then we come to the technical signs.
Technically, massive negative divergence extends across MACD, RSI, and Momentum indicators down to $33,000 to $32,000.
Controversially, the monthly candle from January 2023 is highly suspicious and hints at a revisit of $15,000 at some point.
Source: Tradingview.com
I won't spend too much time on this topic, but rarely do monthly candles look this way, and don't see retests.
How to play this scenario if you agree with me? My plan is to wait for a short between $42,000 to $44,000, with a soft target of $32,500 and a stop above $45,500.
Please note, that this scenario will be negated if we see a pullback to $32,500 and $38,000 holds up as interim resistance.
I believe that buying $32,500 and targeting $42,000 with a stop under $30,500 would be the smarter play.
