Is the Bottom In?
Let’s talk about sentiment, speculation, and the real economy. They should help you look at the ongoing crypto bounce correctly.
The markets are forward-looking, which is why during The Great Recession of 2007-2009, the stock market started recovering in advance of the real economy.
However, if we take a look at when the market found its bottom, we will see that it wasn’t until the Fed drastically lowered the interest rate. Only massive Quantitative Easing instilled enough optimism in people to buy into the market and form the bottom.
Federal Funds Effective Rate vs. S&P 500 (Sources: FRED, Investing.com).
As some of the world’s largest businesses are gearing up toward potentially worse economic conditions, there’s a reason to be cautious about their future earnings, which determines their stock performance. Optimizations can help, but only so much economic activity can happen without cheap credit.
I’m just as happy to see the bounce in the market as the next person. But I’m not forgetting Rule #1 of crypto: survive. Since the second half of June, BTC has been staying in a channel between roughly $19,000 and $25,000. I wouldn’t get too excited until we see a breakout to the upside with a confirmation. And, given the above, it’s unlikely to happen soon.
BTC price has been mostly flat (Source: CoinGecko).
That being said, the difficult economic situation doesn’t automatically mean crypto is up for another dive. In my opinion, the worst is behind us, but the boring flat might punish the impatient, especially those who love leverage.
If you’re reading this, chances are that you are long-term-oriented. Hence, picking crypto up at these levels isn’t a bad idea. It doesn’t matter if the bottom is in. If you are responsible and patient, the reward will eventually come.
SIMETRI Portfolio – Awaiting the Pivot
Disclosure: The author of this newsletter holds ETH. Crypto Briefing and members of the research team hold some of the Pick of the Month coins mentioned in the table above. Read our trading policy to see how SIMETRI protects its members against insider trading.
