4 October 2021: Bitcoin appears to be trying to create a floor just above the 50 day moving average (50 DMA) as prices continue to fluctuate amongst ongoing speculation surrounding the weakening of global markets. So, how long does the cryptocurrency bullmarket truly have left? It depends. This article will offer some insight into a handful of things to watch for as we move into October.
Can the Fed Money Printing Continue Despite Growing Debt, Inflation Crisis?
Back in Februrary of 2020, the Fed initialized some rather unprecedented quantitative easing to apply stability to the stock market and key asset classes as Covid-19 sparked major fears of a total economic collapse. Since then, the Fed has been printing enormous amounts of fiat money that has been injected into assets like the stock market, effectively inflating prices astronomically. With major efforts by governments to create massive stimulus packages, asset classes like cryptocurrencies have undoubtedly benefited.
An additional concept to consider - a side effect of a large increase in institutional adoption? - is higher instances of correlation between cryptocurrencies and stocks. Today, stock prices within major indexes - particularly in the NASDAQ and S&P 500, are pulling lower. Prices have fallen over 2% in the NASDAQ since opening today. This is already pulled Bitcoin and the cryptocurrency market down with it - though only slightly in terms of Bitcoin as it has bounced back over $48,000 USD again.
Visible in the chart above is the recent price movements of the S&P 500 US index. The index has recently fallen well off all time highs, below the 50 DMA , and is actually heading lower towards the 200 DMA. This is a bearish development and comes with some obvious ramifications for world markets = including cryptocurrencies. If stocks have already seen their top of the bullrun, which is absolutely a possibility, the chances that cryptocurrencies have also topped is growing in probability each day. Does this mean that the bull run could already be over? Yes - but no one will ever be able to tell you for sure until time gives us the confirmation.
Trying to time the tops of markets is something no one can do with absolute certainty.
The Argument for a Supercycle
An interesting argument for the ending of traditional cryptocurrency markets cycles, the supercycle is a concept in which increasingly mainstream adoption and a collapsing purchasing power of the USD and other fiat currencies could promote an environment in which no one, institutions included, have no incentive to sell out of cryptocurrencies like Bitcoin.
This possibility of such a thing occurring all depends on the sentiment and actions of the big institutional players joining in on cryptocurrencies. Solvency issues with outstanding debt, liquidity issues, and other factors all will be detrimental in the continuation of upward momentum within the cryptocurrency market as institutions cope with external global economic problems.
Bitcoin - Short Term Positive Indicators
For this assessment, we are going to jump straight into the data and chart itself and allow it to do the storytelling here. Take a look at the 1 Day Bitcoin chart below:
For some clarification in the above chart - the blue line is the 50 day moving average (50 DMA) and the gold line is the 200 DMA. Within the black circle is the recent Bitcoin price action over the last several days. As you can see, bitcoin has effectively used the 50 DMA as solid support to bounce the price back up towards $50,000 USD. This is a very positive move up.
However, we would like to caution eager investors to wait until a confirmed breakout on Bitcoin. A breakout will be confirmed IF Bitcoin can manage to get above and close above the red line visible at the top of that chart - which would be around $51,000 USD. Until that happens, Bitcoin should still be treated as in a short term downtrend.
Summary
Generally, continuing with a neutral perspective on the short to medium term outlook within markets allows for the best mental assessment of the investing environment. In terms of probabilities, the probability of a bear market on the horizon is increasing and needs to be considered. That said, each investor must conduct their own assessments of the environment - both internally within crypto and externally in the global economy - to determine the best course of action moving forward.
It is important to note that many investing experts, both inside and outside of cryptocurrencies, are calling for new all time highs on Bitcoin with a potential top over $100,000 USD. This could be interpreted in two ways - those investing or looking to invest in Bitcoin and crypto are seeing a positive investing environment for the short to medium term or these analysis are your signal that it will in fact not happen this cycle and assets have already topped. What you choose take away from current market sentiment and the state of the global economy is up to you.
Our Reccommendation
With growing uncertaintly and speculation in the global economy, it is smart to strategically evaluate your current positions and reposition portfolios for protection against a possible longterm downtrend. This means rebalancing your portfolio to have a larger percentage of it in safe asset classes and away from riskier investments. Remember - time in the markets is always better in the long run than trying to time the markets.
Don't sell out on a probability - simply prepare for all possible outcomes. We will be back this coming weekend! Best of luck this week.
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