BIT Blog

Analysts' Insights

Analysts' Insights

Bitcoin at 'red cycle lows' - buy or sell here?

1) Bitcoin still follows the predictable selling pattern into the monthly U.S. inflation number. Once again, we are at the “red cycle” lows – would / should you be buying or selling here?

2) A stop loss of 27,000 (-3%) could offer great risk/reward with the macro data being released soon.

3) Many still worry about inflation remaining sticky and the Fed remaining hawkish for longer. Since December last year, we have been big bulls for risk assets, calling for a massive rally in stocks (tech) and crypto.

4) While the Nasdaq is up +21% YtD and Bitcoin is up +67%, there is more squeeze to come.

Here is why:

5) Hedge Funds remain massively hedged equities. The CFTC data for S&P500 positions is equivalent to levels only seen during the 2008 financial crisis and during the European Debt crisis in 2011.

6) While this does not mean that Hedge Funds are short necessarily, it means that hedge funds have sold those contracts and will have to cover them at one point. This buying will squeeze prices higher.

7) U.S. interest rate markets are signaling that the Fed is done hiking and that we should see cuts of 100bps, potentially being signaled at the Jackson Hole meeting end of August 2023. .

8) In our 2023 outlook report, we showed that our U.S. CPI model predicts a sharp decline in inflation and when we update the model, we see inflation continues to fall A LOT FURTHER.

9) We could be sub 2.0% CPI by the end of 2023. Would the Fed keep rates at 5% when inflation is at 2.0%? I highly doubt that.

10) Good luck trading...

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