First Mover Americas: Bitcoin Awaits Triangle Breakout, Focus on Dollar

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By Omkar Godbole

Bitcoin fell to $39,000 during the overnight trade as global market euphoria cooled after negotiations between Ukraine and Russia broke down in merely two hours, signaling a long road ahead to peace.

Late Wednesday, the U.S. House passed legislation banning imports of Russian oil and other energy products in a bid to impose stricter punitive sanctions on Moscow for invading Ukraine. Oil and other commodities have been on a tear ever since the conflict started and threaten to send a new wave of inflation worldwide.

The top cryptocurrency’s options market saw bullish flows, with buying an outright call options and purchasing call spreads being the most popular trades. A call buyer is implicitly bullish on the market.

“At present, the short-term bullish sentiment appears relatively strong,” Griffin Ardern, a volatility trader from crypto-asset management company Blofin, said while commenting on flows.

“Ahead of the quarterly delivery, the only uncertainty is from the European Central Bank. Other things like Fed rate hikes are effectively already priced in,” Ardern added.

Most alternative cryptocurrencies followed bitcoin lower, with privacy coins taking a bigger hit than coins associated with smart contract blockchains, decentralized finance protocols and gaming tokens.

THORChain’s RUNE token surged 37%, topping $5.50 after the cross-chain protocol listed synthetic assets on its platform. Synthetic assets are tokenized derivatives representing traditional assets like stocks or bonds

The dollar index (DXY), which tracks the greenback’s value against majors, traded steady above 98.00, having tanked 1% on Wednesday.

Traders eyed the U.S. consumer price index data due at 13:30 GMT, which is expected to show the cost of living rose at an annualized 7.8% in February following January’s 7.5% increase.

The European Central Bank (ECB) left key policy tools unchanged, as expected. ECB’s President Christine Lagarde will hold a news conference at 13:30 UTC.

By Omkar Godbole

While bitcoin reversed Wednesday’s spike, it remained trapped in a triangle pattern marked by Jan. 24 and Feb. 24 lows and Feb. 10 and March 2 highs.

“The news has gotten better for bitcoin lately, but technically speaking, there is not much to say until we see a breakout from these triangles,” Jurrien Timmer, director of global macro at Fidelity, tweeted.

A potential decline below the lower line of the trendline would imply a continuation of the broader drop from record highs. On the downside, support is seen at $30,000, below which the next technical price floor is seen directly at the December 2017 high of $19,891.

A rise above the upper trendline, if any, may see chart analysts call a bullish revival.

Whether bitcoin will break higher or lower from the triangle is anybody’s guess. That said, the impending U.S. inflation figures might inject volatility into the market. A big beat on expectations may bring selling pressure to bitcoin, as discussed here.

“In my opinion, investors have not fully priced in the possibility of an early shrink of the [Fed] balance sheet (say, starting in April),” Blofin’s Ardern said. “That could happen if the CPI data beat expectations by a wide margin. It also depends on what the Fed chair Powell will say next week.”

Focus on DXY’s triangle

The DXY’s monthly chart shows the greenback has formed a triangle pattern identified by connecting January 2017 and March 2020 highs and February 2018 and January 2021 lows.

A potential triangle breakout might pave the way for a notable bull run. A dollar rally is usually considered bearish for bitcoin, gold and other assets priced in the greenback.