Macro crypto currency market outlook

Bitcoin has been in a sideways chop since bottoming out earlier this year. The market has been struggling into rallies, with plenty of resistance coming in ahead of $50,000. At this stage, there is risk for deeper setbacks in the weeks ahead, though any setbacks should be very well supported down into the $30,000 area. Key levels to watch above and below therefore come in at $50,000 and $30,000 respectively. Overall, look for setbacks to be well supported for an eventual push back through $50,000 and towards a retest and break of the record high.

Seasonality trends were not helpful as an indicator for performance in the month of April. Heading into the month, there was an expectation we would see outperformance in crypto assets, with April being the strongest month of performance over the past several years. But in the end, it was anything but, with bitcoin and ether under pressure for the entire month and closing at the lows of the month, both down some 17%.

Of course, the price action was consistent with price action in traditional markets, with a massive bout of risk liquidation weighing on crypto, clearly reflecting the strong correlation. And while we believe this correlation between risk off and crypto off will fade sooner than later, for the time being, it is alive and well.

Worry around rising inflation and slower growth around the globe has put pressure on risk correlated assets. And to many out there, cryptocurrencies are considered to be risk correlated assets given the fact that they are still young and maturing.

Nevertheless, we are getting down to levels where we believe medium and longer-term players will be happy to step in to take advantage of crypto’s exceptional value proposition. In our view, we could see fallout from downside pressure in US equities that takes bitcoin and ether back down into the $30k and $2k areas respectively. But we don’t see these markets moving much lower than that.

The amount of bitcoin changing hands over the past year has been exceptionally low, a statistic that shows investors having plenty of conviction. Meanwhile, we continue to see positive updates from the regulatory front.

The Central African Republic was the second country to officially adopt bitcoin as legal tender, while Panama has just passed legislation to bring crypto into its regulatory framework. This news also follows another important update in April, which was the news that Fidelity would soon offer bitcoin as investment option in 401(k) plans.