Navigating the Financial Seas: Rate Hikes, Stocks, Crypto Movements and ETH Shapella

Welcome to this edition of the Onchain Edge newsletter, your go-to source for market updates, technical analysis, and on-chain insights. In today's edition, we delve into the US CPI number's impact on the Federal Reserve's decision and its ripple effects across various asset classes. Keep an eye on the S&P500's performance and the US Dollar Index's path as we dissect market trends for you.

We've got you covered with in-depth technical and on-chain analyses of major cryptocurrencies, including Bitcoin and Ethereum. Discover the current global market cap trends, the state of the altcoin market, and good entry points for long-term investments. Our newsletter also sheds light on Ethereum's Shapella update and its implications while examining key on-chain metrics like RSI, VMC, Puell Multiple, and NUPL.

Stay ahead in this dynamic market landscape with our insights and guidance, empowering you to make well-informed decisions every step of the way.

Enjoy!

Onchain Edge

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Global market

In today's market update, we focus on the US CPI number, which is set to determine whether the Federal Reserve will hike or pause during its May meeting. The market predicts a 66% probability of a 25 basis point hike to 5.00%. However, should the CPI number fall short of expectations, we could see the odds of a hike dropping below 50%, with additional cuts further down the line. Conversely, a higher-than-anticipated number may push the odds of a hike closer to 80%.

The S&P500, currently trading at $4,107, remains below the significant resistance level of $4,171. Therefore, a bullish move is anticipated, with S&P500 E-mini futures already at $4,138. However, should the market face rejection from this resistance or fail to make a new high, it could cast doubt on the strength of the bear market rally for stocks. So, is it still accurate to label it as a bear market rally?

The outcome of today's rate hikes will further clarify the market direction and its impact on various asset classes, including stocks and cryptocurrencies.

The US Dollar Index (DXY) is trading at $102, having found support on the grey trendline at $101.4. There is no clear indication of whether the index will continue to fall lower or attempt to break above the blue trendline, which is currently acting as resistance.

Technical Analysis

Global market cap with BTC

The current global market stands at $1.074 trillion, with a monthly high of $1.10 trillion and a monthly low of $995 billion. A significant support level can be found at $944 billion. Given the bullish daily trend, we must respect the trend and adjust our strategies accordingly. This means primarily seeking long spot entries at significant support areas, such as the monthly low and the significant support. We will likely revisit these areas at least once over the next few weeks.

The key levels to watch include the 128-week moving average at $1.35 trillion and the grey distribution area between $1.35 trillion and $1.55 trillion. Keeping a close eye on these critical areas will help find suitable areas to take some profits when the rally happens.

Global market cap without BTC (USDC + USDT caps removed)

Despite high expectations, altcoins have yet to take off. The altcoin market currently sits at $493 billion, and so far, it hasn't managed to break through the $500 billion resistance. Nevertheless, there's a possibility that we may retest the monthly lows at $467 billion, which should act as solid support and present an attractive entry point for your favorite long-term altcoins.

It could take a week or two for the altcoin market to break above the resistance, but once it does, brace yourself for a face-melting rally. The following areas of interest include the 128-week moving average, currently at $675 billion, and the subsequent distribution range between $680 billion and $750 billion.

I think it's essential to position yourself with strong altcoins that performed well during the first few months of the year. Laggards, or coins that haven't seen much movement since the beginning of the year may not perform as well. However, coins like $OP, $Grail, $Magic, $GMX, and many others are poised for success in the upcoming altcoin rally.

BTC technical analysis

After consolidating for three weeks, BTC finally broke out of the $28k range and rallied to $30,000. This movement aligns with the bullish scenario I discussed earlier this week. Although we may experience a few minor pullbacks along the way, with $27.8k being the closest support, Bitcoin will likely continue its rally to the top of the range at $31,800 to $32,000. The strength of the rally will dictate what happens next.

If BTC fails to break out, it could range for a few weeks between $28,000 and $32,000. However, should a breakout occur above the distribution range, the next area of interest would be the 128-week moving average, around $35,000. If the stock markets show any weakness, I plan to accumulate aggressively at either of the accumulation ranges.

Ethereum TA

Ethereum is on the brink of a historic event in the coming hours. The Shapella update will enable ETH 2.0 validators to withdraw their ETH from their validators, a capability that has been unavailable for the past two years.

I discussed in a thread here (link) why I don't believe we'll see a significant dump following the unlocks. In summary, the amount unlocked represents a mere 3% of the daily ETH trading volume, which should be absorbed relatively quickly. I intend to buy in if there are any more substantial dips.

ETH is currently trading at $1,872 after reaching a high of $1,937. Although there may be a minor dip following the Shapella update, I don't expect it to be long-lasting. The sentiment surrounding the update has been somewhat bearish, which may have suppressed ETH's price. The monthly low stands at $1,746, and should ETH manage to rally, the next significant resistance would fall between the 128-week moving average at $2,000 and the next significant resistance at $2,225. My game plan is to buy any dips and anticipate the rally that is likely to occur.

On-Chain Analysis

BTC on-chain analysis

BTC has successfully breached the major liquidity hurdle I discussed last week. However, breaking above this level will prove to be challenging. As a result, we're likely to witness some slow sideways movement, or "crab action," before attempting to climb higher. As BTC continues to rise, a retest of the $24,000 mark becomes increasingly unlikely, although it cannot be ruled out entirely.

BTC is trading at $30,024, representing a 4.97% increase since last week. The RSI has risen slightly to 67.9, which indicates a somewhat oversold condition but not yet at extreme levels. The VMC has also increased considerably, though it has not reached concerning levels yet. Analyzing these indicators, the market appears strong and not yet at a risky level. There is still ample room for further upward momentum based on technical analysis and on-chain metrics.

The Puell Multiple has risen to 1.38, up from 1.34 last week. The next significant resistance level is 1.87. This increase indicates that the market possesses considerable strength, suggesting a positive outlook for the near future.

The NUPL has risen to 0.34, reaching a critical resistance level. Many investors are currently enjoying significant profits. However, a concern is that we are at a level where some investors who experienced substantial losses following the June 2022 crash might want to cash out, as they are now at breakeven or slightly in profit if they purchased additional coins at lower levels.

The combination of technical analysis and on-chain metrics, such as RSI, VMC, Puell Multiple, and NUPL, suggests a strong market with the potential for further upward momentum. However, investors should remain cautious due to the possibility of profit-taking, particularly among those recovering from the June 2022 crash.

Conclusion

In conclusion, this market update focuses on the US CPI number's influence on the Federal Reserve's decision, the S&P500's position, and the US Dollar Index's current status. Key takeaways from the technical and on-chain analysis include the global market cap's bullish daily trend, altcoins' potential for a rally once resistance is broken, Bitcoin's recent breakout, and Ethereum's upcoming Shapella update.

The market appears strong, with potential for further upward momentum. However, investors should exercise caution due to the possibility of profit-taking, especially among those recovering from the June 2022 crash.

Cheers,

Onchain Edge