Bitcoin Outlook and Forecast

Bitcoin and other cryptocurrencies have seen big corrections but could we now see a bounce? Yes, but longer-term we think there is more pain to come in the crypto space….

In terms of Bitcoin three are problems trading it due to volatility and value: Bitcoin is of course a highly speculative asset class that has a history of massive drawdown and just like in late as in 2018 we have seen a huge 80% drawdown. One of the problems of trading Bitcoin is you cannot link it to a macro-view. A lot of the risk from BTC has been idiosyncratic that cannot be explained by any other asset; how can you explain it via macro? You can’t.

In terms of Bitcoin as we have pointed out before it has no asset to value it against its not backed by anything and relies on pure sentiment this creates huge volatility. We have seen Dogecoin collapse and while Bitcoin is holding up better our view is there is more downside pain to come.

On the chart below we can see the big picture we have a range, for now, our view is we could trade a lot lower to 20,000 and longer maybe even 12,000.

We can only look at sentiment when getting clues to Bitcoin’s movement and traders in our view remain to bullish which points to more downside

Despite the big fall in Bitcoin, the chart below shows the skew over various maturities on the chart below. Skew remains well bid, but people are also “happy” to pay for upside calls, especially further out the money calls which is a low odds strategy as time will kill these call options.

There are a significant amount of traders who believe in buying the dip so we would expect some upside from here and then another move to the downside

Technical Analysis

On the chart below we would look to sell back to the top of the range or sell a downside breakout. A downside breakout and a close below support could see the next major move to the downside.

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