Bitcoin To Be Recognised as Legal Tender Amid Broad Market Stability

All signs point to a ranging market as Bitcoin refuses to commit one way or the other. But will the news of El Salvador’s Bitcoin adoption have any immediate impact on the market?

Let’s dig in.

El Salvador to Make Bitcoin Legal Tender

As the global monetary system threatens to unwind, El Salvador is hedging its bets by looking to become the first country on earth to recognise Bitcoin as legal tender.

The news comes weeks after Central Bankers like the US Federal Reserve and the European Central Bank (ECB) announced accelerations in the development of Central Bank Digital Currencies (CBDCs).

Check out the full article here!

Technically speaking

Bitcoin Ranges in Oversold Territory

BTC/USD is ranging in oversold territory. The 3-day bitcoin chart shows a coiling-up effect on the stochastic Relative Strength Index (RSI) within technically oversold territory below the 20-point region. The developing structure indicates that the trend should come to an end by the 15–18th of June, at which point volatility should pick up.

While the RSI is a derivative of price, StochRSI is derivative of RSI itself, or a second-order derivative of price. One of the main differences is how quickly the indicators move. StochRSI moves very quickly from overbought to oversold, or vice versa, while the RSI is a slower moving indicator. One isn’t better than the other, StochRSI just moves more (and more quickly) than the RSI.

On lower time frames, BTC/USD price-action is tightening. There are various ways to draw the chart, but since the pennant structure was not respected, we’ve gone ahead and assumed that prices are ranging until further notice. In a ranging market, horizontal support and resistance levels (S/Rs) are more reliable, but there is no right or wrong answer to charting techniques.

Levels to watch

Close above $39,230 suggests a move to the 20-weekly EMA
4-hour close below $33,470 suggests a move to $30,000

Perpetuals are Suppressed

Due to the oversold nature of the market more broadly, the likelier scenario is a strong retest of higher levels in my view. The drawn out price-action reduces long-term bearish continuation probabilities since when patterns are not respected that often means that something else is going on.

Furthermore, tighter and tighter ranges produce pockets of liquidity which increase momentum in the direction of the breakout (since levered traders need to buy back, creating a self-perpetuating feedback loop). As such, fakeout scenarios and liquidity plays on lower time-frames in either direction should not come as a surprise.

All in all, the market is ranging in oversold territory until further notice. Major news regarding bitcoin adoption in El Salvador, and in Paraguay today has not had any material impact on the BTC/USD price just yet. At the same time it’s Monday so this could change in the 24–48 hours as traditional mainstream press pick up the news. That said, price-action is far more important than news when trading, generally speaking.

Meanwhile, perpetual contracts funding rates are neutral to negative across the board as open interest lingers at February-2021 levels.

This dynamic tells us that bitcoin futures markets have not recovered and are effectively in hibernation until the next trend becomes more apparent.

To summarise, BTC/USD is showing signs of ranging and re-accumulation. The tightening low-time-frame price-action suggests that volatility within the larger range is on the horizon. Perpetuals have yet to recover from the crash and the worst is probably over for now.

Catch you next time.

Join the Telegram channel for live updates & setups!
Follow me on Twitter & Gab and my social portals below.