Bitcoin Q3 2022 Forecast: Where is the Bottom? – DailyFX
If the first quarter was a difficult one for cryptocurrency bulls, the second quarter was an absolute disaster… The macro-view is likely to still be challenging for the cryptocurrency as we enter the third quarter, but we are at the bottom of a cycle. level may be close. Let’s have some perspective on price action by looking at historical cycles and the current macro setup.
price action
At the time of writing, bitcoin is down almost 70% from its all-time high of $70,000. A disastrous move, but certainly in line with the way business has historically been. If bitcoin were a company, a move of this size either presents a tremendous opportunity or should make us question its ability to stay in business.
Since inception, Bitcoin’s biggest drop from peak to trough is -81%, with the annual drop registering an average loss of -50%. For bullish investors with a long-term outlook, the current discount may be tempting, but history should repeat, an up to 80% loss indicates a potential entry point closer to $15,000.
cycle length
Bitcoin’s all-time high was 200 days ago on November 10, 2021. Compared to the historical decline, the cycle has been much longer than the 117-day average, but less than its worst period on record. It took 343 days for the price of bitcoin to reach its lows during the 2018 crypto winter.
If this cycle is more closely related to the 2018 vintage, then selling pressure could last towards the end of the year or later. That said, when the sale finally ends, the price of bitcoin changes quickly. Historically, bitcoin has gained an average of 69% over the next six months following the low of the cycle.
patience is needed
Looking at past cycles helps provide context, but I don’t believe anything changes for bitcoin until the macro environment becomes more constructive.
Bitcoin is a very high beta asset that shows a positive correlation with the broader equity market. It is also inversely correlated to interest rates. Should these correlations persist, it does not bode well for crypto, at least in the short term.
While the economy is showing signs of slowing, the Federal Reserve is aggressively raising interest rates and shrinking its balance sheets to bring down inflation. This is a background where I believe it will be difficult for most risky assets to experience meaningful upside, especially crypto.
There will inevitably be relief rallies, but the macro matters now more than ever. Unless financial conditions eventually change (which are now aggressively tightening), it’s hard to predict a bottom anytime soon.
Element inside element. Maybe this is not what you wanted to do! Instead load your application’s JavaScript bundle inside the element.
