Risk assets are starting to price in a deal being done, Brent crude is significantly lower but then strikes from the USA and Iran panic everyone that the deal is not as near as we think. So how is crypto reacting? Well initially, there was positive movement upwards on rumours and talk of a deal being near but the move wasn’t protracted. However, in response to the strikes, crypto came off a fair bit so clearly there is still fear there in markets. The S and P is trading above levels it was at when the USA initially began the war with Iran. It’s surprising to a lot of market participants especially with oil trading as high as it has but underscores the belief that a deal and resolution is coming no doubt with free access to the Straits of Hormuz.
Downside risks are in play if the war was to really escalate again. With the rumours that Masoud Pezeshkian has offered his resignation due to a complete takeover of power by the IRGC, it seems less likely the war will escalate again and more likely that in fighting within the Iranian regime could lead potentially to regime collapse or civil strife. Still we must be aware that Dogecoin could fall below 8 cents were things to really escalate and Bitcoin below 60,000 USD.
For the upside, clearly a deal that brings the war to an end AND facilitates the free shipping of oil through the Straits of Hormuz is going to be bullish for the crypto space. It always takes time for the full effects of major news to filter through to markets as banks and funds position themselves. I would expect if a deal is signed and agreed that Dogecoin heads towards 16 cents which is quite a major level. The previous double bottom at 11.70 cents acted as resistance but with the creaky ceasefire that was not really surprising. Similar story to my previous call, long at 8.5 cents as mentioned previously looking a good trade and an exit of a partial amount of it at 11.5 cents with a view to running the rest higher towards 16 cents. There may be plenty of momentum by that time though and a case for holding the rest to move higher. Always keep in mind that digital assets can range trade without much volume and suddenly explode on news and the arrival of volume.
Until next time….stay displined.
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