Technology

Cryptocurrency Shines Despite Disastrous Macroeconomic Conditions

The recent market rally was the most surprising, mainly because macroeconomic conditions have certainly not improved, especially with the latest CPI data, which was up 9.1% year on year, much higher than expected.

However, according to some polls, inflationary expectations of the market are calming down. This is a major contributing factor to the recent price rally that we are currently experiencing, as well as the general oversold situation that we found ourselves in just two weeks ago. In fact, there have been many headlines that the start of 2022 was one of the worst for stocks in decades.

Returning to crypto, BTC has consistently held above $20,000, while ETH, far from the $1,000 mark, has been flagged as a sign of strength by the market. Both had positive performances.

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Here we can see the commentary on the performance of BTC and ETH against US stocks from the market bottom on June 17 until today:

BTC and ETH price dynamics in relation to US stocks according to IntoTheBlock indicators.

The price of BTC is up almost 2%, while ETH is up 21%, certainly on the back of evidence of an upcoming stake merger. As seen above, BTC and ETH were volatile until July 12 when they began their current price rally, leading up to the stock move a few days later.

Some analysts have presented the current situation with Crypto as an indirect indicator of a market society of risky assets. Apart from the big market drop during this year, BTC has remained relatively stable above the $20,000 mark, which was likely seen as a sign of consolidation and is expected to fuel the recovery narrative.

The division mentioned earlier can be easily identified if we look at the historical correlation of BTC with US stock indices such as the S&P 500 or the Nasdaq 100:

BTC historical correlation indicator according to IntoTheBlock.BTC historical correlation indicator according to IntoTheBlock.

Until July 4, the cryptocurrency market was essentially a mirror of the US indices, keeping the correlation close to 0.8-0.9.

After that, compression began and BTC and ETH began to work differently. Interestingly, the strength of the dollar, represented by its orange-colored index, has recently been seen as an inverted mirror of the cryptocurrency market.

But so far its correlation has decoupled over the past month and it looks like Crypto is not highly correlated 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 until the merger date in September. We are currently able to isolate probable support and resistance points based on the data on the network.

To do this, we use our “In/Out of the Money Around Price” chain indicator. This indicator covers buckets within 15% of the current price in any direction. At the same time, IOMAP identifies key buying and selling areas that can serve as support and resistance levels:

In/Out of the Money Around Price indicator according to IntoTheBlock.In/Out of the Money Around Price indicator according to IntoTheBlock.

As you can see in the chart below, most of the addresses were buying ETH at current levels (from $1304 to $1342). This means that the price is likely to act as support in this price range as these traders are not making any profit or loss so their selling pressure may not be significant.

Looking ahead, the $1,552 to $1,595 price range is another where many addresses have been bought in the past. They have been under water for a while and are likely to start selling again when the price gets close to these levels. For this reason, this range is likely to act as a potential resistance level.

It will be interesting to follow the development of macroeconomic conditions in the next few days. Stocks that continue their rally could catapult the cryptocurrency into the chase that many have been looking for, the continuation of the bull market.

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