Cryptocurrencies: Run or Wait?

Fight for $20,000 does not subside for more than three weeks. At times, it seemed that a catastrophe was imminent, and the BTC/USD pair would fly further into the abyss in a moment. Moreover, some analysts predicted that it would lose another 50-80% of the current value. And Robert Kiyosaki, author of the bestselling book Rich Dad Poor Dad, predicted an even more powerful collapse, by 95%, to $1,100. But the bulls have managed to hold this front line so far. 
We already wrote that $20,000 is historically the most important level for the main cryptocurrency. Suffice it to recall the disaster of December 2017, when bitcoin approached this mark, reaching a height of $19,270, and then collapsed by 84%. True, the attack on $20,000 came from the south then, and it is from the north now.

Some crypto enthusiasts are still trying to insist on the independence of the digital asset market. They believe that the reason for the large-scale sale of coins and the collapse of the market three times was the collapse of a number of projects. But, in our opinion, the causal relationship is violated in this statement. In fact, global risk aversion is at the heart of all the problems. Frightened by the expectation of a global recession and a sharp tightening of the US Federal Reserve's monetary policy, they are actively getting rid of all risky assets. Global stock markets are under pressure from sellers, which is clearly seen on the charts of such stock indices as S&P500, Dow Jones and Nasdaq Composite, with which BTC is in direct correlation. Where they go, bitcoin goes, and there has long been no talk of any independence of it. It was these global problems of the world economy that led to the collapse of a number of important crypto projects, which, in turn, only increased panic among digital asset holders.

Analyzing the situation, Former hedge fund manager Cramer & Co and host of CNBC's Mad Money show Jim Cramer announced the US Fed has won a "remarkable victory" in the fight against cryptocurrencies. “There is a front in the war against inflation with the Fed's outstanding victory: it's a battle against financial speculation. [...] The work on destroying cryptocurrencies is almost complete, but they don't seem to know about it yet,” he said.

According to Glassnode, bitcoin's record price decline in June almost took the rest of the “market tourists” out of the game, leaving only hodlers “at the front”. In the context of monthly dynamics, the situation was worse only in 2011. The number of daily active addresses has dropped from over 1 million in November to the current 870,000. The growth rate of the number of participants decreased to the anti-records of 2018-19. and do not currently exceed 7,000 new users per day.

The largest outflow is recorded among institutional investors (companies with investments from $1 million), public miners (expanding production on credit), as well as speculators and casual players. Institutions withdrew a record $188 million from crypto funds in June, and the volume of “illiquid supply” rose to the highest level since July 2017 at 223,000 BTC.

Thanks to a correction in the US stock market, bitcoin managed to rise above $20,000 last week. At the time of writing this review (Friday evening, July 08), the coin is trading in the $21,800 zone. The total capitalization of the crypto market is $0.966 trillion ($0.876 trillion a week ago). The Crypto Fear & Greed Index has slightly improved over the week, rising from 11 to 20 points, but is still in the Extreme Fear zone.

What is the future of the main cryptocurrency? According to Timothy Peterson, investment manager at Cane Island Alternative Advisors, the price of bitcoin will continue to fall in the coming months under the pressure of the American factor. According to the expert’s calculations, the probability of a recession in the United States has increased to 70%, respectively, capital will continue to leave risky assets, and the BTC price may collapse by 20% or even 40% by the end of summer. Recall that, according to Arcane Research researchers, the potential for a decrease in the price of bitcoin remains until the level of $10,350.

The financier Michael Burry, who predicted the 2007 mortgage crisis, also admits that the current market situation is only the middle of a bearish cycle. This investor, who became the prototype of the hero of the movie "The Big Short", believes that the first cryptocurrency can continue to fall. «Adjusted for inflation, 2022 first half S&P500 down 25-26%, and Nasdaq down 34-35%, Bitcoin down 64-65%. That was multiple compression. Next up, earnings compression. So, maybe halfway there,” wrote Burry.

Deutsche Bank specialists believe that the price of bitcoin may rise to the level of $28,000 only by the end of 2022. And they also attribute this growth with the growth of the US stock market. In their opinion, the Nasdaq-100 and S&P500 indices will be able to recover to January levels by the end of the year and pull bitcoin with them.

The forecast of Nikolaos Panigirtsoglou, a representative of another bank, JPMorgan strategist, looks quite accurate. He admits that the worst of the bear market may be over now, as the strong players in the crypto industry “rescue” the weak ones to contain the “infection”. The specialist could have in mind the interest of the FTX cryptocurrency exchange in buying the BlockFi landing platform. The media also mentioned the online broker Robinhood as a target for the takeover. Previously, the FTX exchange supported the cryptocurrency broker Voyager Digital. Panigirtzoglou also added that "the echoes of the deleveraging process will continue for some time yet," citing the default of hedge fund Three Arrows Capital.

Crypto trader Rekt Capital is waiting for the market to run out of sellers at some point, and long-term investors will be able to buy BTC in a price range that offers the maximum reward. “Historically, the 200-week moving average has been considered a bottom indicator for BTC. Things may be a little different in the current cycle. Instead of bottoming out at the SMA200, bitcoin could form a macro range below it. In fact, anything below will represent a peak buying opportunity,” wrote Rekt Capital.

The trader noted that while bitcoin remains in a strong downtrend, the prerequisites for a new bull cycle will eventually open up: “Bitcoin may still be in the acceleration phase downtrend, and it will precede the stage of multi-month consolidation, followed by the stage of a new upward macro trend.”

All of the above forecasts indicate that it will take at least several months to wait for a new bullish rally. But former stockbroker Jordan Belfort advises to be patient not for months, but for years. “If you look beyond the 24-month horizon, you can definitely make money if you're lucky. If you take a three- or five-year period, I will be shocked if you do not make money, because the basic principles of bitcoin are unshakable,” he said, explaining that the supply of the first cryptocurrency is limited to 21 million digital coins, and inflation in the world continues to grow. Recall that earlier Jordan Belfort was convicted of fraud related to the securities market. His memoir inspired director Martin Scorsese to create the famous film The Wolf of Wall Street. But if earlier this broker violated the law, now he actively advocates for a clear regulation of crypto assets.

Charlie Erith, CEO of investment firm ByteTree, shared a view similar to Belfort’s. Like The Wolf of Wall Street, he looked far into the future, identifying bitcoin and gold as important components of long-term investment portfolios. Not because they are guaranteed to increase in price, but because they work as insurance against mistakes in an era of inflation. However, according to the financier, much will depend on the policy of the US Federal Reserve and other central banks.