Blocksmith Says: Don’t be Fooled by ETH’s Bump

11 August 2022

US CPI (consumer price inflation) data came in for July yesterday at 8.5% against an expected 8.7%. This cooler than expected print was taken by the market as a lead indicator that the Federal Reserve would only hike rates by 50 basis points in September, rather than the harsher 75 expected and priced in.

As a result, risk rallied and major equity index futures (S&P, Nasdaq, EuroStoxx, Nikkei) on average are up 1.8% since yesterday’s open, Ethereum has gained 11.5% and Bitcoin 6%. Since the CPI is pretty much dodgy data and since the Fed has announced that it still aims to curb inflation and has not changed its rate hike path and on top of which the Dems have just won a ludicrous spending package in the house, this little spurt in risk does not necessarily signal a new dawn and big rally extension.  

Had the CPI print been hotter than expected then Ethereum would very likely have continued down and yesterday’s note would be panning out nicely and we could have stuck with the failed upside break thesis. Now we are looking up again at the next potential barrier and that sits between here around US$1,900 and US$2,100, tracing horizontal lines back to the upper end of the May upside price reaction and failure phase. 

In the chart, even if price reaches the first barrier around US$1,980 and pulls back, it would still represent a failure to reach the top of the mid-July up channel (which would be the second and is technical weakness) and notice that nine-period RSI has spiked from (8 August peak) of 77.5 versus 76.3 so far this session. So it has dropped slightly despite the price thrust. This is a small signal so far, but does imply that the ramp up is not all that it could be.

Christopher Grafton
Christopher Grafton

Chris has been working in the markets for over 15 years variously as a broker, analyst and researcher. He is the author of a well-known book on Hurst cycles analysis, and runs his own market analysis software platform on Bloomberg. He’s also a keen student of both the cello and Brazilian Jiujitsu.

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