BTCUSD more pain to come

28 ต.ค. 2022

Hey! I haven't posted lately, but taking a look at the chart this morning and being an avid follower of news around the world I'd like to share my thesis on Bitcoin and the overall crypto market. As a macro trader, you want to look at the big picture and forget about the short-term noise. It's clear that we're living in very challenging times for the whole economy and the sentiment is more driven by fundamentals. This means TA is just a guideline. We are on a very strong support level of 20k, which is the previous bull cycle top and historically Bitcoin hasn't fallen below the previous top (give or take few thousand depending on the exchange you're looking at). Having said that, I still strongly believe that the current downtrend reversal to the upside in the near future is very unlikely.

Truth is - we have no idea how Bitcoin and crypto will hold up in a recession.

However, if we know anything from TA - history tends to repeat itself. Looking back to the previous bull cycle in 2017 we had an 80% drop in BTC price. The last drop came in at the very end of the flattening bearish curve, which was then followed by new excitement coming to the market and kicking off another bull cycle.

So, let's assume here that we will live through something similar and macro trends support a more extended low volatility period or even a slightly bearish tone for crypto as FED, and the whole world's economic monetary policy is focusing on combating inflation. This means asset prices may fall faster than the cash at hand loses its value.

The same 80% drop from our current top would take Bitcoin to around 10k-13k before we expect to go even higher. This range also aligns well with Fibonacci levels which indicates even stronger support at this range. The more pessimistic scenario of going back to 2k-3k is way too extreme and unlikely. The more optimistic scenario that we're already at the bottom and we can only go up from here, is also unlikely for the reasons mentioned before.

All that being said I'm setting myself ready to start averaging into the market when we get to the range of 13k USD per Bitcoin and not before unless we see a major change in the world's monetary policy. Also, 10k is likely a big even level that a lot of investors are looking to buy.

When does all this come to play? Usually, recessions and downtrends don't last decades. And we cannot predict when we'll see changes in monetary policies. My gut feeling here is that we might get to the bottom in late spring or summer of 2023. This means we will not see another bull cycle until early 2024 or even later.