With hindsight, the laser eyes were the top signal for Bitcoin (BTC-USD).
Bitcoin is still young and competing with centuries-old monetary premiums held by gold (GLD), bonds and fiat currencies. As a result, Bitcoin is currently more correlated to NASDAQ (QQQ) than gold.
For Bitcoin to rise or maintain stability in an uncertain market, investors must shift to view Bitcoin as a hard trump Rather than a speculative investment.
Right now the beginning of this change of feeling East create demand for bitcoin. However, this demand was not enough to overcome the selling pressure from allocators who view Bitcoin as risky.
Price cycle theory
The outlook for traditional markets looks bearish and Bitcoin has the opportunity to drop. The decline depends on the extent to which the equity and credit markets unwind and the spike in commodities, as well as monetary policy decisions by world governments.
The chart below displays Bitcoin’s Elliott waves and logarithmic growth curves, along with a fractal projection taken from Bitcoin’s price movements throughout 2020:
Given similar high-fear economic environments, it seems likely that Bitcoin will follow its 2020 move and accumulate in the 30Ks until the anxiety sets in.
Moreover, this accumulation movement would align with that of Bitcoin price cycle theory. In line with Bitcoin cycles, halving events regularly lead to parabolic highs and then 80% crashes.
Notably, now that Bitcoin is a $700+ billion asset, it appears that 50% bicycle accidents replaced the previously standard 80% crash.
The short-term AT shows that Bitcoin is ready for a relief rally; however in the long run. Bitcoin needs more time to accumulate near its lower logarithmic growth curve. As we can see in the chart above, this curve has served as Bitcoin’s price floor in previous bear markets.
Bitcoin’s move from November’s all-time high to the January 22 close of $35,000 likely triggered a larger bear market. If Bitcoin follows the Elliott waves shown below, it may hit $28,000 within the next two months.
At the time of writing, $38,000 is Bitcoin’s Pivot. A sustained trade above $38,000 generates FOMO buying pressure, while a move below $38,000 makes the market bearish.
During times of stress (like a war), sentiment can fluctuate wildly. The currently very fearful market has resulted in volatile price movements for Bitcoin over the past 2 months.
This shows that Bitcoin and the crypto market are still fragile. Therefore, expect $38,000 to act as critical support in Thursday’s CPI print. Inflation is expected to reach around 7.9%, which will likely hurt Bitcoin’s bullish momentum.
- A developing positive correlation with commodities (especially gold, silver and precious metals).
- Resistance to censorship, which may be increasingly important as governments become more commanding.
- Increase long-term growth of illiquid holders/supply.
- Increasing Bitcoin dominance.
- Lightning Network miners and developers continue to innovate and grow.
- Increase in oil prices and strengthening of the dollar.
- almost inverted 10A-2A yield curve.
- Stock market down.
- Upcoming Federal Reserve rate hikes.
- Stagflation concerns.
- Macroeconomic fear and uncertainty.
- Weak open interest in the derivatives market.
- Russian and European Central Bank debt default concerns.
Since Bitcoin is always treated as a “risk” rather than a risk, anything that affects traditional finance will also affect Bitcoin. The risk of Russian and European debt default is of vital importance.
The Russian-Ukrainian invasion led to significant downgrades of the credit ratings of Russian sovereign and corporate debt issuers. Bad credit increases the cost of borrowing and thus slows down the global economy (which hurts Bitcoin).
Additionally, looking at the Bitcoin derivatives market, we can see falling interest and traders leverage on bearish sentiment. As we can see in the chart below, quarterly futures annualized basis keep falling. This means that the hype of last year is now gone and only long-term investors (usually spot buyers) remain in the crypto market.
Judging from Bitcoin’s past cycles as well as current Elliott Wave projections, it seems likely that Bitcoin will reach its lower log growth line (currently located at $30,000) in the next few months.
Throughout 2022, demand increased each time Bitcoin hit below $35,000. However, retail investors are currently feeling the pain of high inflation and fixed salaries, which affects their ability to invest. For this reason, it is unclear how long Bitcoin’s $35,000 support may last.
In today’s market, it’s best to keep stop-losses tight, not FOMO above the $40,000 price range, and look to start accumulating Bitcoin in the $35,000-$38,000 range.