Bitcoin and Ethereum continue to trade not far from their one?year lows. Over the past week, the two major cryptocurrencies have managed a small correction, but there are still no signs that the downtrend that began last year has ended. There is only a liquidity grab on Bitcoin's 4?hour timeframe that allowed a small correction — which is what we are seeing now. The fundamental backdrop remains weak for the crypto segment, mainly expressed in low spot demand, capital rotation into the artificial intelligence sector, and the Fed's commitment to bringing inflation to 2%, which implies at least a prolonged tight monetary policy. Thus, we still see no grounds for a sustained rally in Bitcoin or Ether.
Meanwhile, StarkWare CEO Eli Ben-Sasson voiced the idea of removing Bitcoin's 21?million supply cap. Ben?Sasson said that every year some network users lose access to their wallets and their coins are effectively lost forever, which reduces the total supply of available "digital gold." He proposed replacing the fixed supply cap with an annual issuance limit of about 4%. Importantly, as early as 2017, the total number of lost coins was estimated at 3–4 million — nearly one-fifth of the total available supply. Ben?Sasson also admits that a time may come when all or most private keys will be lost.
We would like to point out another important issue. How attractive is an asset to which you can lose access at any moment? Imagine a bank card whose PIN you forget and instantly lose all your funds. Who would use bank cards in that case? In our view, this is precisely Bitcoin's main drawback — its decentralization. You are solely responsible for your wallet and your coins, which effectively makes Bitcoin a "safe with money" in your apartment. If you lose the key, you can never get back in. When Bitcoin is soaring, this factor interests investors little. When Bitcoin is not rising (as now), nobody uses it as a payment method if access can be lost at any moment.
Trading recommendations for BTC/USD
Bitcoin continues to form a full downtrend. We still expect a drop toward $57,500 (the 61.8% Fibonacci level of the three-year uptrend), although this level has essentially already been tested. We do not believe the downtrend will end there. The last bearish FVG was formed in the $68,000–$70,700 area on the daily timeframe, so that zone serves as a POI for short positions in the coming weeks. On the 4-hour timeframe, Bitcoin is undergoing another corrective swing, but sell trades remain more attractive.
Trading recommendations for ETH/USD
On the daily timeframe, the downtrend that began in August of last year continues. The key sell pattern remains the bearish order block on the weekly timeframe. We do not think the current downtrend is over, as there are no signs of reversal for either Bitcoin or Ether. Ethereum has resumed its decline with targets at $1,391 and $788, although the market is currently in a flat pause on the daily timeframe. In the near term, we would advise watching for deviations to the upper boundary of the sideways channel to open shorts with targets of $1,680 and $1,505. On the 4?hour timeframe, Ether is sitting near the top of the flat and has taken out sell liquidity. A drop in the second-largest cryptocurrency is possible in the near future.
Comments on the charts
CHOCH is a change of character / break of the trend structure. Liquidity means traders' Stop?Losses that market?makers use to build their positions. FVG is Fair Value Gap (area of price inefficiency). The price often moves quickly through such areas, indicating the absence of one side in the market. Later, the price tends to return and react to these zones. IFVG stands for Inverted Fair Value Gap. After a return to such a zone, the price does not react but impulsively breaks through and then tests it from the other side.
OB means Order Block. A candle on which a market?maker opened a position in order to harvest liquidity and then form their own position in the opposite direction.
