Despite the bullish sign, it might be a while before the fun returns. From Moneyweb.
Bitcoin (BTC) has broken above its 100-day moving average for the first time since December 2021, hitting its highest level so far this year.
Having cleared the 100-day moving average, the next and more important hurdle is the 200-day moving average, currently at around $48 500. BTC would need to clear this level before popping the champagne – and there are a few other obstacles along the way.
As the second chart below shows, there is a tightening correlation between the Nasdaq and BTC, and with the Nasdaq primed for further weakness, it should drag BTC down with it. The correlation between BTC and US markets has been strengthening in recent months, and last month approached levels last seen in the bear market of 2018/2019, according to Arcane Research.
What a difference a month makes. BTC has started to shake free of the overbearing S&P 500 and Nasdaq, registering strong gains in the last two weeks.
BTC was conceived as the ‘anti-market’, so the idea that it would become a proxy for the tech-heavy Nasdaq or other risk-on indices is disturbing to some.
Mike McGlone, senior commodity strategist at Bloomberg Intelligence, warned recently of a significant equities correction – and that poses a headache for BTC hodlers, as cryptos will get dragged down with the rest of the market. His advice? Don’t buy the dip. He told The Wolf of All Streets podcast that the forecast of a $100 000 bitcoin might still be achievable some years out but it might easily see $30 000 first.
‘Ebbing tide’
“This is the year of the ebbing tide, led by the stock market and cryptos following that. Cryptos is the most speculative, reactive market in the world and is a leading indicator, with BTC coming out ahead.
“I fully expect about a one-third correction in the stock market, and people haven’t found the dip yet,” says McGlone.
“If you’re buying the dip, you’re fighting the Fed,” he added, in reference to the potential misstep of ignoring signals from the US Federal Reserve that rates might be hiked seven times this year, with a 50-basis point hike also on the cards instead of the usual 25 basis points hike. This is an indication to sell the rally, he says.
This is the most extended stock market in 20 years, and the most expensive stock market in GDP terms in history.
End-stage bear market in sight
Research elsewhere suggests we are nearing the late stage of the bear market.
Blockchain research group Glassnode reports that 82% of short-term holders of BTC (those holding for less than 155 days) are nursing unrealised losses, while the total supply in the hands of long-term hodlers (investors who hang on to their crypto regardless of what happens) is near an all-time high. Any rise in BTC prices will likely flush out weak holders. ‘Hodling’ remains the preferred strategy, with the number of younger coins in investor hands now at all-time lows. This is historically associated with late-stage bear markets.
BTC-USD moves above 100-day moving average for first time since December
Source: TradingView
While McGlone warns against buying the dip (whether in the stock market or cryptos) due to the likelihood of a 30% drawdown, dollar cost averaging has proven itself a fairly solid investment strategy that avoids trying to time market peaks and troughs.
This is where investors buy at regular time intervals, such as weekly or monthly, regardless of price.
This works where the overall trend is bullish, and has been shown to be extremely effective in both the Nasdaq and BTC.
BTC vs Nasdaq
Source: TradingView
Glassnode notes that BTC has been range-bound for much of 2022, and that might avert a “capitulation event” that typically marks the tail end of a bear cycle. A capitulation event is where the market takes one final plunge down to shake out any remaining weak holders, before commencing a rally.
