Crypto Outlook: BTC and Ethereum rally once again

Since our last crypto report, Bitcoin appears to have rallied and is currently above the $70,000 key psychological figure, with the next target for the bulls now being the all-time high figure near the 73300 (R1) resistance level. 

Crypto bulls seem to have re-asserted themselves as the dominant party, with some cracks appearing from the bears who have ceded control over the coin’s direction. In this report, we aim to shed light on the possible factors aiding to the recent developments in combination with a technical analysis of Bitcoin.

Crypto: Overview Report

Ethereum ETF speculation mounts.

According to various sources, the approval for a spot ETH ETF could be as soon as Wednesday, with Bloomberg Intelligence ETF Analysts Eric Balchunas and James Seyffart raising odds for an approval of the related 19b-4 form, not the full approval, from 25% to 75%. Furthermore, according to Coinbase, exchanges are being asked to update their 19b-4 fillings on an “accelerated basis” by the SEC. Moreover, the increased hype and market optimism appears to have resulted in the liquidation of roughly $260 million crypto market-wide short positions, which may have predominantly aided in the coin’s ascent.

Thus, we would predominantly attribute the recent surge in ETH’s price, to the aforementioned short squeeze, rather than Ether ETF approval ambitions. However, this would be a 180-degree turn, from the SEC which recently revealed that it was preparing to sue Consensys for the sale of Ethereum, which the SEC alleges could be a security. Therefore, it is our view that the SEC may be “rushing” the process in order to garner more ammunition in their battle against Consensys and that the revised applications could be rejected, with the exception of the blockchain firm Prometheum. In particular Prometheum, unlike its competitors, decided to soft launch their ETH custody as a security service earlier on this week.

Hence, the SEC’s perceived attempt to rush the process, could be in order to give the “nod” to Prometheum and to indicate to the rest of the market, that they intend to classify ETH as a security. Therefore, should the Ethereum ETF applications be rejected, or if  Prometheum is granted an exception, it could weigh on the coin’s price. Whereas, should the Ethereum ETFs be given the green light by the SEC, it could further support the coin’s recent rally.

Lastly, the third scenario that appears to be making its way around the market, could be that the SEC may classify ‘staked ETH’ as a security, thus threading the needle between in Ethereum’s classification. Hence, should the SEC classify ‘staked ETH’ as a security, it could lead to a mixed market reaction, as the uncertainty surrounding the coin’s classification may remain.

The aforementioned theory of the staking aspect of Ethereum being considered a security seems to be what Fidelity Investments is worried about, as they have allegedly revised their S-1 filing for an ETH ETF.

According to some media outlets, Fidelity has allegedly stated that the trust’s Ether “will not be staked”. In conclusion, with the variety of theories being floated around and the possibilities, as to how the SEC will act, we remain vigilant and urge caution for next week or so as volatility could be on the rise in either direction.

Regulatory framework for digital assets introduced to the House of Representatives

The H.R.4763 – Financial Innovation and Technology for the 21  Century Act, was introduced to the US Congress on the 6    of May.  The bill aims to establish a regulatory framework for digital assets by assigning and clarifying to which agency the responsibility falls to (SEC 或者 CFTC).

The proposed bill, has not yet been placed on the floor for a vote, yet seems poised to pass, as a recent report cited that despite Senior Democratic Party officials seemingly being against the bill, they would not “whip” their members to vote against it.

Therefore, should the bill pass and provide some legal clarity for digital assets, it could provide support for the crypto market as a whole and in particular Bitcoin.

On the flip side, increased regulation could also have the opposite effect, as the “independent” status of crypto may be under siege and thus could instead weigh on the price of cryptocurrencies.

Crypto Technical Analysis

BTC/USD Daily Chart

• Support: 62900 (S1), 51800 (S2), 43500 (S3) 
• Resistance: 73300 (R1), 83000 (R2), 90000 (R3)  

BTC/USD appears to be moving in an upward fashion and now appears to be aiming for its all-time high figure near our 73300 (R1) resistance line. For the time being, we opt to maintain our bullish bias for the coin and supporting our case is the RSI indicator below our chart, it currently registers a figure near but below  70, implying a bullish market sentiment.

Furthermore, we would also like to note the upward-moving trendline, which has been guiding the coin’s price since the 2  of May. For our bullish outlook to continue, we would like to see a clear break above the 73300 (R1) resistance line with the next possible target for the bulls being the 83000 (R2) resistance level.

On the flip side for a bearish outlook we would require a clear break below the 62900 (S1) support level, with the next possible target for the bears being the 51800 (S2) support base. Lastly, for a sideways bias, we would require the coin to remain confined with the sideways channel defined by the 62900 (S1) support level and the 73300 (R1) resistance line.

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