Bitcoin sets up as value-pattern on H4 timeframe



The bitcoin H4 chart shows a value-type pattern. It charted a sideways distribution from the last week of October into the first week of November (blue-shaded area). After which bitcoin dropped from the 20K range to the 16K range, a decline of around 20%.

Since then, the cryptocurrency has shown signs of accumulation (the green-shaded area). As a result, it has now broken to the upside and is looking to trade above its blue 30-period EMA.

The accumulation occurred when the US 10-year real rate declined (red arrow bottom chart). If the real rate continues to trend down, it will provide a tailwind to bitcoin given its pricing in dollars. I.e. a lower real rate generally translates into less demand for the greenback. Moreover, capital will likely be rotating to risk assets, including BTCUSD.

The danger here is the wage inflation rate. Average hourly earnings surprised to the upside on Friday, and the Fed won't allow this to become entrenched. However, one data point does not make a trend. So if the upside beat is a one-off anomaly, and the real rate continues to fall, bitcoin may very well be on the bullish radar.

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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