The I/O Fund has been an advocate of technical analysis since inception. Sentiment is a major driver in growth, and the only way to measure it with some accuracy is through technical analysis.
While we use this practice as an addendum to our fundamental analysis, it is the primary tool that we use within crypto. The reason for this is that crypto does not have consensus estimates or earnings reports. There are sparse news events regarding crypto, yet we tend to see wild swings in both directions. Though these moves may seem random, they are not. And, because of this reality within the crypto space, we lean into technical analysis more so than with equities.
In this report, you will get a snapshot of the larger pattern we believe is playing out, as well as the I/O Fund’s buy plans for each of our 3 crypto holdings, plus one new addition that we are watching – Solana.
Bitcoin (BTCUSD)
If we zoom out to a weekly chart, The larger pattern I am following has the 2021-2022 bear market as a correction within a larger uptrend. That would put us around the halfway point for the final 5th wave rally, which should take us to the $100,000 region.
The risk remains elevated until Bitcoin goes vertical. The current pattern off the 2022 low is only 3 waves up. Because the new bull cycle is only 3 waves, it leaves the door open to the possibility that the 2023 bull cycle is actually a correction within a larger bear market. As long as any further weakness in Bitcoin holds above $25,100 we see no need to game plan for this more bearish potential.
If we zoom into the new bull market structure, there are three paths this new bull cycle can take.
- Red Count – This path has us in a large degree 3 wave pattern, marked with an (A), (B), (C). Here, we should see a deep retrace back into the $35,000 – $27,000 region. This will complete the (B) wave drop, as the following (C) wave will take us to our overhead targets.
- Green Count – This path has the current bull cycle taking a standard 5 wave pattern. If this is in play, we should see the current bounce fail under $47,000, then drop back to the $37,000 – $36,000 range. We should then turn back up in a vertical move higher. This will be a more direct path to our overhead targets.
- Blue Count – This is a more bullish variation of the Green path. This path will not see a further drop. Instead, we will see a direct breakout over $47,000 and head to $56,000 next.
These are all bullish interpretations of the current price structure. As long as any further weakness holds $25,100, then I see no reason to abandon these outcomes. Below this critical support, and the bull cycle that is targeting $100,000, is in jeopardy of not playing out. This would imply that all of 2023 was a large degree corrective bounce in a much larger bear market. The early tell will be a 5 wave drop through some of our listed supports.
Ethereum (ETHUSD)
All coins that we follow are tracking the larger crypto cycle that is expressed above through Bitcoin. Ethereum also has a large degree bullish pattern that is playing out.
When it comes to the potential bullish patterns, we find it helpful to always take it one step at a time. As of now, we are in a minor correction that must hold $1,650, then turn back up in a vertical fashion. If this happens, we will raise our critical support and fine tune our overhead targets.
When we zoom in on this pullback, we can get a better idea of potential targets.
It looks like ETHUSD needs one more drop toward the $2000 region in order to complete this pullback. If we instead continue to push higher, we will need to break above $2592 in order to suggest this correction is over. We could even see Ethereum push toward $1845 and $1645 and still maintain the bullish uptrend. However, below $1650 will threaten the larger bullish count we are tracking.
Chainlink (LINKUSD)
The larger pattern has LINKUSD in the 5th wave of a very large diagonal pattern. The 5th wave should play out as a large 3 wave pattern, marked A,B,C on the chart below.
If we zoom into the current uptrend, it appears to be developing into a solid 5 wave pattern. This is encouraging, and supports the bigger pattern above.
The current breakout above $17.60, if it holds, should see a move to the $20 – $23 region. This should complete the 1st series of 5 wave moves higher, and then give way to a notable pullback.
Solana (SOLUSD)
Note how vertical the uptrend in SOLUSD is. It is clearly a 5 wave pattern, that is incomplete. This is supportive of higher levels.
It appears that the correction has completed, and we are making a higher low before pushing into the $130 – $140 region. Ideally, we will get one more drop into the low $90 – upper $80 region. Any further weakness needs to hold $84, or we could see a deeper retrace back into the $70s. the critical support for SOLUSD is the $60 region. This level must hold if the larger uptrend is going to continue.
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