Economist Not As Optimistic On Bitcoin Longer-Term; Says BTC Has Yet To Prove Itself
Usually, the market is bearish in the short and medium-term with strong confidence in Bitcoin in the long term. But economist and trader Alex Kruger who is also not at all in favor of the stock-to-flow model or its unrealistic price targets is “not as optimistic as bitcoin bulls” in longer-term.
“Popular prediction models are all fatally flawed,” said Kruger on a fundamental basis, gold is best to play the inflationary narrative and negative real yields paradigm. “Bitcoin should go up yet it still has to prove itself,” he said.
BTC Price Support & Resistance Levels
Ahead of halving next month, the price of the digital asset has been hovering around $7,000 this month. As we have been seeing this month, BTC has been trading in a range that is getting tighter.
“The range has been compressing and is now below its 200 day moving average, even with price 11% below its corresponding average,” said economist and trader Alex Kruger.
The digital assets have a 200-day moving average at $8,000 and 100-day moving average at $8,050. The minor resistance price levels are at $7,300, $7,500, $7,700/$7,800 and major at $8,400/$8,500. As for the support, $6,800 and $5,800 are minor levels with support levels present at $6,400 and $5,500.
While $6,400 is the most traded price since 2017, $8,040 is the most traded since 2019. The implied volatility measures the likelihood of changes in the asset’s price, is also relatively cheap with one-month volatility now at 76%.
Realized volatility, the assessment of variations in returns for an asset by analyzing its historical returns within a defined time has to mean reverted, one-month volatility at 82%. While implied volatility is forward-looking, price in an option, realized volatility is backward-looking meaning it already took place.
Bitcoin Futures Market
BitMEX funding meanwhile has been negative since “Black Thursday”, meaning “shorts have been paying longs for the privilege of being long.” It also speaks for the presence of more aggressive shorts than leveraged longs.
Historically, negative funding is a forerunner to upwards moves. Also, liquidity is now back. After the massive sell-off, order books on BitMEX were empty for a long while but are now seeing activity.
Bitcoin perpetual swaps are backwardated into June, a reflection of negative short-term rates and miners selling the month which Kruger said could be likely miners hedging against the halving that will cut the inflation rate in half amidst the surging hash rate and network difficulty rendering them unprofitable. June onwards, perpetual swaps have a slight contango.
On the CME and Bakkt front, the volume has started picking up after the collapse but is still 62% lower than the 50-day moving average as of March 11, in USD on CME. Bakkt meanwhile isn’t looking good with its daily futures having zero volume while monthly futures physically settled 117 BTC last month.
The Macro Backdrop
As reported, the crypto market is seeing a lot of money flow into stablecoin, Tether volumes are exploding higher, surpassing Bitcoin, with a large fraction sitting on exchanges.
This money parked in stablecoins, “should be used to buy the dip, and some will FOMO if prices break up, adding to momentum, which tells me the risk-reward is asymmetric and skewed right,” said Kruger.
But given the fact that it is all against a backdrop of fear, market participants are mostly bearish. Moreover, bitcoin’s correlation with S&P 500 remains at historic highs which according to the analyst is the “main downside risk curiously stems from non-crypto risk sentiment.”
With Bitcoin “trading like a spastic stock. If equities were to nosedive, crypto should follow.” However, he isn’t concerned about stocks downside any longer.
He is actually expecting the stocks to continue higher and recession to be brief because the size of fiscal and monetary stimuli is larger than the world’s estimated loss output for 2020-2021.
“Bitcoin is a relatively easy market to manipulate that trades mostly on sentiment & momentum” and with halving coming, few will be incentivized to attempt to fuel growth internally.
The third bitcoin reward halving is coming in about 18 days which will cut down the miner flow from 1800 BTC per day to 900 BTC per day.
The cut down of BTC flow in half means inefficient miners could once again be forced to sell their bitcoin. However, a lot of them are already replaced by the efficient miners after the Black Thursday. This has the economist long on altcoins like Ether (ETH) and Tezos (XTZ).