Q4 Crypto Market Outlook: Bitcoin and Ethereum Consolidation Continues

Bitcoin and Ethereum Takeaways

Global interest rates are finally reaching their peak, presenting a more favorable backdrop for cryptoassets in Q4 and beyond.
Market internals show the market is poised for a new bullish cycle if a catalyst emerges.
Bitcoin remains relatively strong vs. Ethereum, but both are generally consolidating within their mid-year ranges.

Bitcoin and Ethereum Fundamental Analysis

“The opposite of love isn’t hate; it’s indifference.” – Elie Wiesel

Despite a dramatically fluctuatuating macroeconomic outlook, the highest interest rates seen in decades, and a complicated regulatory backdrop, Bitcoin and Ethereum have spent the last 6+ months consolidating within a few thousand points on either side of the $28K level. More to the point, all speculative interest in the entire cryptoasset space has been gobbled up by the latest investment theme du jour, Artificial Intelligence.

In other words, traders have gone from loving Bitcoin and Ethereum two years ago, to hating them at this time last year, to being completely indifferent to them today.

Under the surface though, there are signs that the cryptoasset space may be ever so gradually entering a new bullish cycle. From a monetary policy perspective, global central banks appear to be approaching their peak interest rates, barring a surprise resurgence of inflation, with fewer and fewer central banks raising interest rates each month:

Source: Alphacast

Even if the Fed or Bank of England is able to squeeze in another rate hike this quarter, it would likely be a “one and done” scenario before a longer period of either holding interest rates steady or outright cutting them if economic growth stumbles.

Keying in on crypto market internals, the proportion of Bitcoin’s supply that is held by long-term holders (>155 days) is approaching record highs above 75%. In contrast to short-term traders who try to capture quick moves, these investors tend to be “true believers” who rarely ever sell their coins, suggesting that the true supply of Bitcoin available to buy and sell may be lower than it has been in nearly a decade:

Source: Glassnode

Like a pile of dry kindling, this situation sets the stage for a potential “supply shock” if there is a catalyst that leads to an increase in Bitcoin demand. Meanwhile, Bitcoin’s “dominance,” or Bitcoin’s market capitalization relative to the total market cap of all cryptoassets, continues to trend higher above 50%. Traders will be watching for this ratio to roll over to signal increasing speculative appetite in the crypto market and the next bull market to start in earnest:

Source: TradingView, StoneX

Bitcoin Technical Analysis – BTC/USD Daily Chart

Source: TradingView, StoneX

Turning our attention to Bitcoin itself, prices remain within the broad $25K-32K range as we go to press. Looking ahead, the first zone of support to watch will be from $25,000-25,500, which has put a floor under prices multiple times already this year; a break below this zone exposes the Fibonacci retracements at $23,700 and $21,700 next. To the topside, there’s little in the way of resistance until the top of the 6-month range in the $31,000-32,000 area, and on the off chance that resistance zone is overcome this year, the next level to watch will be closer to $36,000, the 38.2% retracement of the 2021-2022 drop.

Ethereum Technical Analysis – ETH/USD Daily Chart

Source: TradingView, StoneX

Looking at Ethereum, the world’s second-largest cryptoasset has trailed Bitcoin of late. Ether is arguably in a bearish channel since peaking for the year in early April, with prices failing to exceed $2,000 since then (though bulls are putting up a fight to defend support in the $1,500-1,550 area as of writing at the end of September. Looking ahead, a break below $1,500 support would leave little in the way of nearby support until the Q4 2022 lows around $1,150. In terms of levels to watch on the topside, a recovery back to $2,000 would certainly satisfy many bulls after starting the year below $1,200, and a move much beyond that may be too much to ask in the current environment.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.