- Lower market liquidity: the M2 money supply dips in September, negative implications for traditional stocks, as well as cryptocurrencies.
- History has proved that a rising VIX above 45, and its decrease below 30 may indicate good entry points for purchasing both the S&P 500 and bitcoin.
- Despite being a lucrative investment option, bitcoin experiences a great deal of selling pressure at critical prices using chart patterns like the “island reversal.”
For smart crypto investors, it is important to be aware of the long-term market trends. In a recent analysis by Crypto Banter, they advised their viewers to pay extra attention to the M2 money supremacy chart that depicts the level of liquidity pervading the various financial markets. Comparing it with the S & P 500 Index, this chart demonstrates that historically, September was weaker for stock markets because of the lower liquidity resulting from vacations.
Market liquidity has been traditionally linked to the M2 money supply, which looks at the overall amount of money in circulation. When the Federal Reserve opens up the money supply, credit expands and normally lifts the value of assets. On the other hand, low liquidity provided due to vacations in core markets during the month of September often results in poor stock returns.
This occurs especially during the off-season, although the phenomenon is not just limited to conventional markets. Cryptocurrencies can also experience low liquidity at times resulting in fluctuations in their prices.
Volatility Index and Market Patterns
The Volatility Index known as VIX is perhaps one of the most important forecasting instruments. Historical trends suggest that substantial hikes in the VIX, particularly when crossing the 45 level and then receding under 30, have marked value buying opportunities.These movements often come before substantial gains in both the S&P 500 and Bitcoin. The connection between the VIX and Bitcoin implies that volatility in traditional markets may set the stage for a potential Bitcoin rally in the upcoming months.
Bitcoin’s price movements are closely monitored, with significant resistance levels at$56,937.40 and$62,490.53 on the 4-hour chart. Chart patterns such as the “island reversal,” which signify intense resistance levels, are particularly notable. These patterns involve sharp price movements and gaps that can trap investors, creating both risks and opportunities.
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