Happy hump day! I hope you are all having a great week.
As usual, we will look at the 4-hour chart first. As you can see bitcoin peaked at a resistance level late last night and is in the process of pulling back. I am watching for support once again at the trendline and for the possibility that bitcoin will form a double bottom pattern.
I actually had to re-write all of this and create a new chart because bitcoin had continued dropping further than I had expected.
Bitcoin 4-hour Chart
The biggest threat to bitcoin bouncing and continuing higher is the stock market. Although, not strongly correlated there are many times especially during a large stock market pullback where it will also affect bitcoin.
Stock Market Charts
This morning there was confirmation that inflation is running much higher than what analysts had expected. U.S. inflation surged to its highest rate since the eve of the 2008 financial crisis. In April the consumer price index rose 4.2% from a year ago, analysts were expecting a number closer to 3.6%. This is something that the stock market has feared for a while now and now that those fears have been realized it is putting downward pressure on the stock market. We'll just have to wait and see if and how bad this does affect bitcoin.
U.S. Dollar Daily Chart
Another headwind for bitcoin this morning is the dollar surging higher due to the high inflation data that came out this morning. The dollar had been trending downward but with the high inflation number that came out this morning that could lead to a recovery which will just put additional pressure on bitcoins price.
So far I don't think any of this changes the fact that bitcoin remains in a consolidation phase that most likely will continue for a while yet. We'll just have to wait and see if this turns into something more serious that could lead to a severe pullback for bitcoin.
Ethereum 4-hour Chart
Looking at the Ethereum 4-hour chart we can see that after hitting another new all-time high this morning, ETH is in the process of pulling back a little. Regardless of this pullback I still believe ETH will continue higher for a while longer before it experiences a deeper pullback or trades sideways for a while. There is no doubt while bitcoin has been consolidating that Ethereum has been leading this market. My feeling is that at some point there will be a switch and bitcoin will once again take over leading this market and Ethereum will either enter a consolidation phase or go through a deeper pullback. I would also expect most of the other altcoins to follow Ethereum as bitcoin surges higher.
As I have said in the past I believe we will see this market move in waves alternating between bitcoin and the altcoins. If I had to guess I would say that we won't see a switch for a while yet, at least a week or so. Of course, this can all go out the window if we see a larger problem develop with the stock market. I think either way we need to prepare ourselves for a wild ride, this market is already like riding a roller coaster and I think as we get deeper into this bull market that will only intensify!
Until the next update, take care!