Bitcoin is currently trading at a substantial discount, according to Bloomberg Intelligence Senior Commodity Strategist Mike McGlone.
He provided this assessment because the digital currency, the most valuable in terms of market value, has been stuck below $25,000 since June, according to data from TradingView.
McGlone relied on several observations to make his point, and he also cited technical analysis, focusing on one specific indicator.
“The benchmark crypto hit an all-time low against its 100-week moving average in July,” he noted, describing the situation as an “extreme drawdown in a sustained bull market.”
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
The Bloomberg analyst also highlighted the importance of equities, which have repeatedly shown a notable correlation with bitcoin.
“At the end of the day, there are few more powerful forces in the markets than when the stock market is falling at high speed like it did in 1H,” he said.
McGlone also pointed to the key role played by the Federal Reserve, which made aggressive rate hikes in 2022.
This development could potentially create headwinds for risky assets such as cryptocurrencies and stocks by increasing the returns paid by low-risk securities and making them more attractive.
“Don’t fight the Fed has been my mantra for risk assets since late last year,” he said.
“Bitcoin and cryptos were a key part of the 2021 rush and therefore part of the 2022 surge, but I see Bitcoin and Ethereum coming out on top.”
“Bitcoin is poised to become a global digital collateral in a world moving in that direction and Ethereum is a key driver of the digital revolution as evidenced by the creation of the most widely traded cryptos – dollar tokens” , said McGlone.
Bitcoin ‘incredibly oversold’, analyst says
Budd White, co-founder and chief product officer of crypto software firm Tacen, also weighed in on the matter, saying the digital currency is currently trading well below its true value.
“I’m still of the view that Bitcoin is not only incredibly oversold, but also in a major accumulation zone. With every price rise with Bitcoin, we are increasing both its market value and its utility value,” he said. -he declares.
“If you look at Bitcoin’s market value relative to realized value, or MVRV, we see it around one, suggesting that the market value of this asset has fallen to its true value in use,” White noted. .
“It also suggests to me that due to the massive sell-offs we’ve been experiencing in recent months due to Terra, Three Arrows and the lot, the number of forced sellers remaining in the market is relatively low. Bitcoin, therefore, seems to have a pretty solid bottom at or around $18,000.
White noted that despite strong support near the aforementioned price level, bitcoin has been “hovering” near $23,000 as of late.
“So far – and beware that crypto prices can change rapidly and dramatically – they have held up very well despite a jobs report well above expectations,” White added.
“Markets already appear to be pricing in even more aggressive monetary tightening to be taken by the Federal Reserve following these soaring numbers. Stocks have fallen and yields have surged,” he noted.
“And, again, bitcoin is just hovering,” the market watcher said.
“I’m not saying we’re seeing a decoupling of Bitcoin from equities. We could definitely have another leg down in terms of Bitcoin price.
“But this relative strength tells me that most of the Bitcoin selloff could be lagging. And barring an exogenous shock to the markets — like credit markets looking like they’re about to crash — I think investors still view Bitcoin as a decent buy at these levels,” White said.
As White spoke about bitcoin’s recent price resilience, Tim Enneking, managing director of Digital Capital Management, said the cryptocurrency could fall again to its recent low below $18,000, which it reached in June.
“Bitcoin made a nice, if not totally convincing, move from $20,000 being recent resistance (until July 15) to support (after that date, tested once on July 26-27, and solidly above it ever since. )”, did he declare.
“While it was a good move, it was quite slow and seemingly uncertain, especially given the doldrums of the summer,” Enneking said.
“As a result, most people continue to hedge their bets on whether BTC will try to retest the June 18 low at $17.6,000 again.”
“Going forward, I would more generally expect some slippage, a slight positive move, and the recent bottom not to be retested. It’s a 50-50 proposition if $20,000 will be retested,” he said. he asserted.
Improve the feeling
Investor sentiment has steadily strengthened over the past few weeks, according to the Crypto Fear & Greed Index provided by Alternative.me.
This index, which varies between zero for “Extreme Fear” and 100 for “Extreme Greed”, currently stands at 31, a figure that denotes “Fear”.
This figure has been on a steady upward trend since June 19, when it reached a value of six, indicating a state of “extreme fear”.
Moreover, the index has been at 20 or more since July 18.
The image below provides the last reading of the measurement.
Armando Aguilar, an independent cryptocurrency analyst, commented on how this metric has changed in recent weeks.
“The Fear and Greed Index recovered from the low 20s after the major collapse of some crypto protocols and service providers,” he said.
“Investors have returned to buying digital assets and the fear gauge has moved into yellow/buy territory,” Aguilar said.
“Historically, the market has seen price momentum when the index hits the mid-30s,” he noted.
An uncertain prospect
Aguilar then provided a broader analysis, assessing the big picture.
“There are still macro and geopolitical pressures lurking, so Bitcoin could hit previous lows if stocks take a hit and investors pull back from risky assets,” he said.
“Still, given the current environment and if Bitcoin can break through the upper resistance levels, it could experience positive price momentum.”
Disclosure: I own bitcoin, bitcoin cash, litecoin, ether, EOS, and sol.