The recent rally in the market surprised the most, mainly because macro conditions have certainly not improved, especially with the latest CPI data coming in at 9.1% year-over-year – much higher than expected. .
Nevertheless, according to some surveys, market inflation expectations are calming down. This is a major contributing factor to the recent price rally we are currently experiencing, as well as the generally oversold situation we found ourselves in just two weeks ago. In fact, there have been plenty of headlines that 2022 has had one of the worst starts to the year for equities in decades.
Coming back to crypto, BTC continuously holding above $20,000 and ETH being far from the $1,000 mark was seen as a sign of strength by the market. Both had positive performances.
Here we can see how the performance of BTC and ETH against US stocks since the market bottom on June 17 until today:
BTC price gained nearly 2% while ETH appreciated 21%, certainly on the back of evidence of the upcoming stake merger. As seen above, BTC and ETH were volatile until July 12, when they began their current price rally, preceding a move stocks would follow a few days later.
Some analysts view the current situation with Crypto as an indirect indicator of the market’s thirst for risky assets. Apart from the big market unraveling over the course of this year, BTC has held relatively steady above the $20,000 mark, which was likely seen as a sign of consolidation and helped fuel the recovery narrative.
The previously mentioned decoupling can be easily spotted if we look at the historical correlation of BTC against US stock indices such as the S&P 500 or the Nasdaq 100:
Prior to July 4, the crypto market was essentially a mirror of US indices, keeping a correlation close to 0.8-0.9.
After that, the compression started and BTC and ETH started to work differently. Interestingly, the strength of the dollar represented by its index in orange has been seen as an inverted mirror of the crypto market lately.
But so far in this past month, its correlation has decoupled, and it looks like Crypto doesn’t hold much correlation with what the dollar is doing, as now the correlation between BTC and the dollar is close to 0. ,2.
When it comes to Ethereum, everyone is wondering if the extraordinary price rally it is experiencing will continue longer until the merger date in September. At this time, we can highlight likely support and resistance points based on the on-chain data.
For this, we use our chain indicator “In/Out of the Money Around Price”. This indicator covers buckets within 15% of the current price in either direction. In doing so, IOMAP spots key buy and sell areas that could serve as support and resistance levels:
As can be seen in the chart below, a large portion of addresses have been buying ETH at current levels ($1,304 to $1,342). This means that the price is likely to act as support in this price range since these traders are neither profiting nor losing, so the pressure to sell from them might be negligible.
Looking ahead, the price range of $1,552 to $1,595 is another where many addresses have bought in the past. They have been underwater for a while and are likely to sell again when the price approaches these levels. For this reason, this range is likely to act as a potential resistance level.
The next few days will be interesting to keep an eye on evolving macro conditions. Stocks that continue their rally could catapult the crypto into a pursuit long sought after by many, the continuation of a bull market.