Coinbase Institutional: Stop 'Catching Knives'; Wait for Bitcoin Breakout as Fed Ends QT

Source: CoinEdition Original Title: Coinbase Institutional: Stop ‘Catching Knives’; Wait for Bitcoin Breakout as Fed Ends QT Original Link: https://coinedition.com/coinbase-wait-for-bitcoin-breakout-as-fed-ends-qt/

Key Takeaways

• The end of QT will favor risk-on assets, including Bitcoin.
• Several factors led to the sustained decline in Bitcoin price.
• Current market conditions favor breakouts over the knife-catching trading strategy.

A certain institutional crypto analysis platform favors breakout trades over knife-catching techniques under the current Bitcoin market conditions. In recent analysis, the platform highlighted the key factors surrounding Bitcoin’s current price trajectory, noting why a knife-catching technique may not be the best approach for investors at this time.

With quantitative tightening ending, the Fed is back in the bond market and the drain of cash from markets may be behind us. That’s usually good for risk-on assets like crypto.

So why did BTC dump?

• BTC broke major bull market support bands • Options traders leaning bearish

Ending QT Favors a Bitcoin Rebound

According to the analysis, the Federal Reserve is about to return to the bond market following the end of quantitative tightening (QT), which could end the drain of cash from the markets. Such a scenario typically favors risk-on assets such as Bitcoin and cryptocurrency.

However, before going bullish on the crypto market, the analysis firm highlighted the main reasons behind the latest BTC dump, including the breaking of major bull market support bands and options traders leaning bearish.

The platform also noted that OG whales resorted to a prolonged BTC selling spree, alongside large outflows in spot Bitcoin ETFs. These factors, in addition to a pause in Direct Access Treasury (DAT), cumulatively led to the sustained decline in Bitcoin’s price.

How to Approach the Current Bitcoin Market

In the meantime, following the ending of QT by the Fed, the crypto market is likely to experience a notable rebound. However, analysts have asked users to take a cautious approach when re-entering the market. As mentioned above, the group suggests that traders avoid “Knife-Catching” techniques.

For context, the knife-catching trading strategy involves entering the market during sharp price declines. Traders use this technique when they anticipate rebounds, which could deliver notable profits. However, it could turn out to be a high-risk venture, particularly during an extended price decline, leading to significant losses.

The breakout system favored by institutional analysts involves buying cryptos after confirmed rebounds. Such a strategy requires traders to wait for the price to break above resistance before entering the market, with the hope of riding the trend to higher levels.