Macro crypto currency market outlook

Bitcoin remains confined to a well-defined downtrend since topping out at a record high in late 2021. Recent recovery attempts have stalled just over $25,000, with a possible lower top now in place ahead of a bearish continuation and the next major downside extension. A break below the yearly low at $17,560 would confirm the bearish continuation and open a measured move downside extension targeting a test of the major psychological barrier at $10,000. At this stage, the market would need to push back above the August high at $25,220 to take the immediate pressure off the downside.

Global markets remained under pressure in September, with setbacks in the S&P 500 accelerating to the downside. No assets have been safe in the current market environment, unless we’re talking about the US Dollar and US yields. Having said that, bitcoin did hold up rather well in September when considering an S&P 500 that was down about 10% on the month. Bitcoin was only off some 3% in September, even outperforming gold, which was down closer to 4% on the month.

Of course, with ether being the more risk correlated cryptocurrency, setbacks here were going to be more pronounced in September. On the month, ether was off some 15%. But even here there was room for optimism, with a lot of the selling coming from profit taking post a successful Merge and with ether still holding up well ahead of the yearly low, despite fresh yearly lows in US equities.

And although crypto prices were lower in September, the fact that bitcoin broke away from correlations with risk-off showed signs of the market recognizing the value proposition beyond bitcoin being a risk correlated, emerging market asset, and something more attractive as a monetary system and store of value alternative.

Moreover, despite the price declines, crypto adoption has been trending higher and is quite encouraging. Major payment service providers like Visa, MasterCard, American Express, Paypal and Stripe are all continuing to build out their crypto payment solutions. Meanwhile, the net number of entities using bitcoin has continued to grow as well. And major financial institutions continue to enter the market or look to grow their presence. Goldman Sachs, JP Morgan, Fidelity, and Blackrock are just a small handful of such names. We’re also getting closer to more clarity from the regulatory front, something that will make larger institutional players that much more comfortable about entering the space.

As far as the price outlook goes, there could be additional downside risk in 2022. At the same time, we also believe we have seen most of the downside risk and are probably only looking at one more healthy decline before we start to see the market finally bottom out and begin making its way back to the topside towards a retest and break of the record highs. We don’t believe such a decline will be crypto related and believe it will likely come from additional downside pressure in stocks, setting up a good opportunity for market participants to build more exposure at attractive valuations.