Macro crypto currency market outlook

Bitcoin has entered an overdue period of correction after pushing to a fresh record high in January. The recent break below consolidation support at $89k has opened the door for the possibility of a deeper pullback towards major previous resistance turned support in the $74k area. But setbacks are expected to hold above $70k on a monthly close basis in favor of the next major higher low and a bullish continuation back towards and through the record high.

February was a challenging month for the crypto market. Investors had high expectations heading in, especially with February standing out historically as a strong month of performance. In the end, bitcoin closed out -18%, while eth struggled even more at -32%.

We believe there were two material factors contributing to the February price weakness. The first came down to what had already been priced in. Indeed, there had been plenty of optimism around a crypto friendly US administration. At the same time, a lot of this optimism was already reflected in the price action from November through January, leaving the market exposed to a sell the fact type reaction. Investors are now looking for more follow-through on the administration’s policies, which should act as a catalyst for the next wave of demand.

The other drag came from the world of traditional markets where risk appetite cooled off in response to global trade tension and a more hawkish Fed outlook. As far as this goes, we believe correlations between bitcoin and risk-off flow in traditional markets can be misleading, with bitcoin easily capable of generating sizable demand as an attractive portfolio diversification asset, given properties that align more with that of a store of value.

Looking ahead, now that we have seen a healthy price correction off bitcoin’s record high, and now that the rest of the crypto market has undergone its own intense price pullback, medium and longer-term players should be excited about stepping in to start adding to exposure at discounted prices.