Michael Purves, the chief executive officer of the macro research firm Tallbacken Capital Advisors, believes that the benchmark cryptocurrency will continue to experience adverse trends for a considerable amount of additional time.
According to him, Bitcoin's long-term momentum has further deteriorated, and the price may retest fresh lows in the range of $15,000 or lower. Moreover, he believes that this trend may continue.
The pessimistic forecast for Bitcoin
Purves, in an interview with Bloomberg Technology on Tuesday, provided the following rationale for his pessimistic prognosis towards Bitcoin:
"What really got me bearish was really nothing to do with a genuinely bearish view or a fundamentally bull view," said the bearish investor. "Again, the fundamentals are irrelevant." It was simply the fact that longer-term momentum was really starting to break in late January, and this one particular signal I was focusing on, you know that it had done this three times prior, and each time, Bitcoin corrected 60% to 70% over the next, anywhere from four to sort of ten month period."
Purves also observes that the technical picture for the Bitcoin price suggests a bearish signal emerging around $42,000 in January. This is something that Purves observed in January.
He further claims that the drops seen in 2022 have happened with a persistent correlation between
Bitcoin and equities
, and that this association is the reason for the declines. Over the course of the past few months, the price of Bitcoin has plummeted in tandem with that of stocks, the most recent example being the sell-off that occurred last week in response to a speech given by the Chairman of the US Federal Reserve, Jerome Powell, at Jackson Hole.
The chief executive officer of Tallbacken Capital Advisors also brings up the fact that prior to the most recent bull run, institutional investors were enticed to purchase BTC due to Bitcoin's highly uncorrelated trading with NASDAQ. These investors saw the asset as a hedge and a store of value.
However, recent lockstep trading with stocks and with Bitcoin not demonstrating a "ability to be uncorrelated," then it might be difficult for new institutional money to come into the space based on the same "thesis" as before the previous cycle. This is because lockstep trading occurs when two markets move in tandem.
If you take a look at the NASDAQ, you'll notice that there is a rather strong link between prices and rates. "And there's a pretty obvious connection between Bitcoin and the NASDAQ here," he pointed out.
"And so I really question you know since it hasn't demonstrated its ability to be uncorrelated, I question whether institutions are going to come in and say hey you know if it gets to 15, or gets to 17, or gets to 18, or twelve, whether they're going to go rush back to committee and say hey here's a dip we can buy because the thesis back three years ago I think was you know generally that hey this is an uncorrelated asset, iIt can be an inflation hedge," the author
The article "Bitcoin pessimistic prognosis explained by veteran of Wall Street" was initially published on Invezz.