FX.co ★ Strategy poised for third Bitcoin sale

Bitcoin and Ethereum are still going through a correction, which could take quite a long time. Over the past month and a half, Ethereum and Bitcoin have managed a modest recovery, but there are still no signs that the downtrend that began last year has ended. The fundamental backdrop remains weak for the crypto market, primarily expressed in low spot demand, capital flowing into the artificial intelligence sector, and the Fed's commitment to bringing inflation to 2%, which implies at least a continued tight monetary policy. Thus, we still see no reasons for a sustained rally in Bitcoin and Ethereum.

Meanwhile, analysts have noticed new transfers of Bitcoin from wallets belonging to Strategy, which may indicate looming sales of the "digital gold." In recent weeks, Michael Saylor's company has already executed two Bitcoin sales. The first was negligible, while the second exceeded 1,500 coins. Importantly, Michael Saylor is no longer the head of the company, and the new management has decided to abandon his "always buy and never sell Bitcoin" policy. Strategy will now sell its holdings when necessary — for example, to replenish dollar cash reserves, which are needed at the very least to pay dividends on common and preferred shares, the proceeds from which had been used to buy Bitcoin.

We believe that each new Bitcoin sale by Strategy will signal to the market that the largest public holder of Bitcoin does not believe in its further appreciation. Not to mention that Strategy's sales increase Bitcoin supply on exchanges while demand, as we know, remains low. Mr. Saylor recently said that his calls to never sell Bitcoin were never part of Strategy's official philosophy and were aimed at private investors. A convenient explanation. In our view, Strategy will continue to sell a loss-making asset — not fully exit, but significantly reduce its holdings. The company is unlikely to abandon Bitcoin investments altogether, but it is obvious that its current holdings are too large. In essence, the company's fate now depends on the Bitcoin price.

Trading recommendations for BTC/USD

Bitcoin continues to form a full-fledged downtrend. We continue to expect a decline toward $57,500 (the 61.8% Fibonacci retracement of the three-year uptrend), although this level has essentially already been tested. We do not believe the downtrend is over. The most recent bearish FVG was formed in the $68,000–$70,700 area on the daily time frame, so this zone acts as a POI for short positions over the coming weeks. On the 4-hour time frame, Bitcoin is again inclined to fall, but moves are likely to remain choppy and swing-like.

Trading recommendations for ETH/USD

The daily time frame still shows a downtrend that began in August last year. The key sell pattern remains the bearish order block on the weekly time frame. We do not think the current downtrend is over, as there are no signs of its end for either Bitcoin or Ethereum. We are currently in the second leg of the correction, which may resume soon since a bullish order block has formed and buy-side liquidity has been taken out. At the same time, however, Bitcoin is once again "looking down." The order block ultimately produced a buy signal and price reacted to that pattern, but if Bitcoin renews its decline, Ethereum will also weaken, because Bitcoin's dominance index remains high and an "altcoin season" is not starting.

Comments on the charts

CHOCH is a change of character / break of the trend structure. Liquidity means traders' Stop?Losses that market?makers use to build their positions. FVG is Fair Value Gap (area of price inefficiency). The price often moves quickly through such areas, indicating the absence of one side in the market. Later, the price tends to return and react to these zones. IFVG stands for Inverted Fair Value Gap. After a return to such a zone, the price does not react but impulsively breaks through and then tests it from the other side.

OB means Order Block. A candle on which a market?maker opened a position in order to harvest liquidity and then form their own position in the opposite direction.