We are still looking at an environment where people are going to be fading rallies.

• Bitcoin has rallied slightly during the trading session on Monday to show signs of life, but still struggles with the idea of rallying.
• After all, why should it rally, in a situation where there is a significant lack of momentum.
• I do think that given enough time, the market is likely to see more selling pressure, but at this point it’s obvious that the market is going to be very noisy, and therefore you need to have a larger outlook.

Bitcoin Is Trying to Figure Out Where to Go Next

When I see this chart, I recognize that we are essentially hanging about and trying to figure out where to go next. Bitcoin does struggle in general as the markets will try to figure out how to take risks in an environment that central banks continue to tight monetary policy. There was a little bit of excitement during the day as the Australian central bank decided to raise rates by only 25 basis points, but that’s a long way from loosening monetary policy. Nonetheless, some people looked at it as the “green light” to start buying risk assets. Ultimately, this is a rally that will get squashed again, as there is no fundamental reason to think that anything has changed.

The Australian central bank has an entirely different situation than the Federal Reserve, and it’s foolish to think that the Federal Reserve is going to take its cues from Australia. The Federal Reserve has been very blunt about what it is trying to do, and therefore there should be no misunderstanding. However, in an environment where traders have been spoon-fed liquidity for 14 years, most traders have no idea how to deal with a central bank that isn’t day trading right along with them. Remember, Powell and company are no longer allowed to front run the market, so they don’t have any real interest in seeing it go higher or lower. They can behave like a central bank again. If you don’t believe me, backtrack to when they got out. It was the very high of the stock market.

In this environment, they will do what they can to fight inflation therefore risk assets will be eviscerated over time. Yes, this has been a good run for Bitcoin during the day, but it hasn’t changed anything. We are still looking at an environment where people are going to be fading rallies.

(Click on image to enlarge)

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