With Stock Market Coming Off Parabolic Advance, What’s in for Bitcoin?
This week, Bitcoin seems to be staying under $7,000. The Crypto Fear and Greed Index is still signaling “Extreme Fear” in the market with a reading of 19 but in the past month, the situation has gotten a bit better as last month we were around 8 on a scale of 1 to 100.
However, bitcoin is trading in a range which is getting even tighter, not a lot of activity in the market. Analyst Bob Loukas said,
“I do not have strong opinions for bitcoin in the short-term, although favor down first, then higher. No edge for me so no trading position. Further out, late May & beyond, believe new intermediate uptrend will establish.”
According to Galaxy Digital’s Michael Novogratz, “Bitcoin has this moment right now” where the money is growing on trees with the central bank printing money announcing yet another half a trillion-dollar stimulus yesterday.
As such, crypto and other hard assets like gold are in a “big position” as more and more people want to know about something with scarcity, Novogratz told CNBC.
And bitcoin is that asset which has a hard limit of only 21 million out of which 87% of the supply is already mined. Next month, halving will have its inflation cut in half as well.
With bitcoin, the problem has been adoption but now “macro tailwind and adoption tailwind is happening in bitcoin,” amidst the QE which is a “powerful story,” he said.
Bitcoin in Macro Backdrop
As we have been seeing since the March sell-off, Bitcoin has been moving in line with the stock market, and “If & when we leg down, risk-on assets like BTC probably sell off. Bitmex liquidation engine won’t make the same mistake twice. But bitcoin could fill low orders,” said analyst Cole Garner.
$BTC still moving steady with stock market
Again, not a 1:1 correlation but no reason to draw $2k to $3k BTC meme charts
Unless the $SPX tanks, Bitcoin will hold above $6k
Potential future pullbacks in both markets but until stocks drop, I'm not bearish on Bitcoin price pic.twitter.com/17NfYla28O
— Josh Rager 📈 (@Josh_Rager) April 22, 2020
As one of the most successful hedge fund managers, Ray Dalio has said, “We’re heading into a great recession.”
As the coronavirus pandemic started spreading fast all over the world outside of its epicenter China, global markets took a hit, and already more than 16 million people have filed for unemployment claims in three weeks.
However, the stock market is already up 30% from its bottom in March all the while the central banks are firing up their money printers and buying junk bonds.
Just so we are clear: A recession usually leads to a 30% to 40% fall in equities, a big recession usually has a 40% to 60% fall and a depression is 60% to 80%. We haven't even priced in a recession yet. There is a long way to go.
— Raoul Pal (@RaoulGMI) March 9, 2020
But the market movement of 2020 is uncannily similar to that from the Great Depression suggesting this uptrend could lead to a bigger drop.
have been tracking this for nearly 2 months now and the similarities between these 2 eras are uncanny, we have been following along pretty closely and now have some bearish reversal candles printing at key levels.
brace yourselves pic.twitter.com/e1qlRG8Bab
— 🍄🌲Benjamin Blunts🌲🍄 (@SmartContracter) April 21, 2020
We might not have that deep of a fall with Fed overworking their money printers but given the fact that SPX is coming off a parabolic advance, pain would be felt though Fed could keep things afloat and have the market ranging.
As such, the digital asset would be affected too. But it won’t be that worrisome because “most BTC is already in strong hands. Beyond a certain point…the more time passes, the tighter hands gonna grip.”
Also, the USD-pegged stablecoins are seeing a flood of new supply, having surpassed $9 billion in market cap collectively. This liquidity is likely for Chinese wealth bypassing capital controls, institutions that’ll de-risk on the next leg down, and smart money accumulating a fixed-supply hedge against collapse, said Garner.
As we reported, Bitcoin whales have also reached a level not seen since December 2017. The big picture is bullish no doubt, but the analyst says in the short term, a sweep of the lows could come first.
“If we leg down, I’m a buyer from $5600 on down to $4800,” Garner said.