Fidelity Director Remains A Bitcoin Bull, But Says Short-term Traders Have Not Capitulated Enough

While Jurrien Timmer sees another leg down, the crypto market expects Bitcoin to remain choppy and boring for some time. However, positive signs can be seen in the market.

The price of Bitcoin continues to trade sideways, and the crypto market is further expecting the leading digital currency to remain boring and in chopping session for some time that could last anywhere between weeks and months, which is a very long time for this rapidly advancing industry.

Bitcoin’s 10-day volatility has fallen back to 106% from a high of nearly 162% on May 24.

Meanwhile, on the regulatory front, China seems to be cautious ahead of the politically sensitive 100th anniversary of the ruling Communist Party on July 1 and particularly focused on high leverage derivatives trading.

Despite the reports of the Chinese government’s crackdown on Bitcoin miners, the largest network, however, remains secure. Not only has the hash rate remained healthy, though down from its ATH, the amount of BTC also sent from miner addresses had not seen a decline since May 23rd when it peaked, suggesting miner selling is abating.

In the US, financial authorities are preparing to take a more active role in regulating the market. The fact that Bitcoin price is unaffected by this reinforces “the likelihood Bitcoin has bottomed, given bad news is not creating new lows,” said Tom Lee, co-founder of independent research firm Fundstrat Global Advisors LLC, in a note to clients.

Lee has predicted Bitcoin surpassing $125,000 by the end of the year but is currently watching for a rise above $40k as a sign that the crypto asset has seen its lows for 2021.

“As regulators engage, there may be some unnerving headlines for the market, but engagement is a medium-term positive for institutional adoption,” Jonathan Cheesman, head of over-the-counter and institutional sales at crypto derivatives exchange FTX told Bloomberg.

“There are some tentatively positive signs at least that the worst fears haven’t become a reality.”

Too Far Too Fast

Jurrien Timmer, Director of Global Macro Fidelity, also chimed in with his technical take on bitcoin, which he said: “lends itself well to technical analysis.”

Based on the Elliott Wave Theory, he noticed that a textbook 5-wave decline is unfolding. According to EWT, primary trends move in 5 waves, and corrections are 3 waves.

Wave 1 is generally dismissed as noise. Then wave 2 comes as a sharp and deep retracement of wave 1, creating a false comfort of a minor correction only for the biggest one wave 2 to come; this recognition wave is typically the longest & most impulsive wave, explained Timmer. After wave 3 low, the 4th wave is often a triangle or “zigzag.”

On this basis, according to him, wave 5 projects a downtrend to $23,076 as a final low or bottom at 29,872.

To him, it looks like short-term traders have not capitulated enough, but Timmer’s hunch is that the low would be closer to $30k than $23k.

While Bitcoin did see $30k on Coinbase and $28k on other exchanges during this correction, the Fidelity executive still sees another leg down.

“I remain a secular bull, but according to my version of the S2F model & S-Curve model (& the analog of gold during the 1970s), the trip to 64k was a bit too much too fast, prematurely reaching my year-end target of 68k in April.”

“Bull markets are more sustainable when the tree gets occasionally shaken, and my best guess is that this is what we are seeing now.”

Jurrien Timmer Director of Global Macro Fidelity

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