Crypto: Failed Rally Builds Ambiguous Pattern

Before starting the crypto update, I would like to check an assumption circulating in the media regarding a strong correlation of Bitcoin with the Nasdaq 100 index in the chart below.


It is safe to say that over the past two years, most of the time, Bitcoin was in a positive correlation with the Nasdaq 100 index. However, the current positive relationship is cooling down as we saw an almost absolute correlation at the beginning of February at 0.91, and these days it slipped down to 0.34.

Miscorrelation periods usually appear due to the higher volatility of Bitcoin and longer periods of price inertia in the stock index. In other words, these two instruments have different speeds.

I added another major crypto Ethereum to see if there is any visible difference. To my surprise, it does better than Bitcoin as its reading stands at a high reading of 0.66, showing a much stronger correlation with Nasdaq 100. A head-to-head comparison shows that Ethereum had not as many drops into a negative area as Bitcoin had. It could be a harbinger for Ethereum to catch up with the main coin acceptance and market share.

The green sub-chart displays the relationship with the best performing coin for the past year (over 500% gain). The Luna is the native coin of the Terra blockchain protocol. The latter uses fiat-pegged stablecoins to power price-stable global payment systems. However, it was founded in 2018, so its coin is relatively young.

Most of the time, the Luna just resembled Bitcoin’s correlation pattern; however, this month, it collapsed into a negative zone to -0.30. It comes from the strong growth lately amid the falling stock index.

Which of these three cryptocurrencies do you prefer?

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Let us move on to the major cryptos as we start with the Bitcoin (BITSTAMPUSD) chart.

Crypto: Bitcoin Daily Chart

The main crypto coin had a promising rocket move started at the end of last month as I shared a bullish alert in my earlier post titled “Major Cryptos Enter Bullish Mode”.

In spite of strong momentum, the rally of Bitcoin could not pass over the confirmation trigger above $46k, as it stopped at $45.3k and then dropped like a rock to establish the most recent valley of $37k. However, this collapse did not break below the former bottom of $34k as the price has stuck in the narrowing range.

This combination of the falling peaks and growing valleys have shaped the well-known Triangle pattern. This could terminate the bullish outlook on the breakdown and further drop below the bearish confirmation trigger located at the former valley of $34k. The downside target is set at $22k. It was computed by subtracting the widest part of the triangle ($13k) from the breakdown point ($35k). The bearish aim is in the area of leg 2 down extension to 1.272x of leg 1 down ($22.8k). The minimum target is located in the valley of leg 1 down at $28.6k (orange).

The breakup of the triangle would support the bullish stance, especially when it overcomes the bullish confirmation trigger set at the former top of $45.3k. The upside target is located at $58k.

To which side will the Bitcoin price will break out?

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It is time for an Ethereum (ETHUSDBIT) update.

Crypto: Ethereum Daily Chart

Ethereum has run out of ammo too far from the bullish confirmation trigger compared to the main coin due to a deeper retracement preceding the rally.

The Triangle pattern in Ethereum chart looks like in a textbook due to its beautiful symmetry.

The breakdown confirmation trigger is set on the former valley of $2,300. The downside target is located at $1,250. It is quite deep as the widest part of the pattern we use for calculating is huge at $1,100. The 1.414x extension in leg 2 down is just below $1,100. The minimum downside target is in the area of 2021 valley of $1,700 (orange).

The bullish confirmation trigger is located at the former top at $3,041. The upside target is set in $4k sharp.

Where the Ethereum price will head?

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Intelligent trades!

Aibek Burabayev Contributor, Metals and Crypto

Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from for their opinion.