Regarding the background, optimism comes and goes. On the one hand, it is thought that prices have fallen so low that enough is enough. In addition, the current level has shown great strength. Which could be telling us that we have already hit rock bottom. Or, in the worst case, the bottom is very close. Of course there is still a lot of volatility and uncertainty. However, investors still know to know a super offer when they see one.
On the other hand, our current situation is so complex that it is still too early to assume that the worst is over.. We still have a war in Europe. Time goes by. But things there do not seem to improve. In fact, in many respects, the contest has escalated. Putin is not a baby. And his broken pride can still give us a surprise. Europe is entering a recession fueled by an energy crisis. The Chinese economy is experiencing a major slowdown caused by the fight against Covid-19. Inflation in the United States refuses to go down thanks to an overheated economy and insufficient supply.
In these times of volatility and uncertainty, investors are finding stability and predictability by adding cash and bonds to their portfolios. The dollar, of course, is not a perfect solution. It can be quite a safe haven. However, the yields are usually very low. In fact, they can be negative when taking inflation into account. Of course investments are good or bad relative to their alternatives. For most investors, it is better to lose 3%-8% a year than to lose 30% or more in the S&P 500. Or better than to lose 60% or more in Bitcoin and other cryptocurrencies.
We must remember that debts are usually fixed in dollars. Although it is true that annual inflation is close to 8%, the dollar has increased its value a lot lately in relation to other currencies. And this, for those who have dollars in their pocket, represents an advantage when paying off debts and when making purchases outside the United States. Then, As strange as it may seem, the dollar is currently presented as the least of all evils for investors.
During a down cycle, opportunities abound. That’s true. Nevertheless, mirages also abound. And there are dangers everywhere. The resourceful investor thinks (wrongly) that every drop in price is a discount. The greed to buy the fall causes many to buy prematurely. Because bearish cycles are thought to be a walk in the park. This is not the case. During a down cycle, there is usually a lot of blood and pain. And things usually get a lot worse before they get better.
It is true that Bitcoin has dropped a lot in price. But that doesn’t mean you can’t go lower. Many assume that Bitcoin is “cheap”, because its current price is considerably lower than its all-time high. But we forget that we hit that all-time high because of exceptional optimism caused in large part by historic monetary stimulus. This 2022 is not the same as 2018. This time, we will have no rescue. In this opportunity, we will not have rain of cheap money falling from the sky.
The last crypto winters took place in totally different conditions than this crypto winter. What we have we have not experienced in 40 years. Of course, thanks to social networks, a digital tribe has found its identity in Bitcoin. So, we have a group of fans with lights coming out of their eyes and parroting the same old lines to create an illusion of certainty. Gentlemen, nothing is certain in this world. The dinosaurs were the owners and lords of this planet until it took a meteorite to mark a before and after. Right now, we even have a nuclear threat. And there are still people thinking that Bitcoin has its future guaranteed. Humanity does not have its future guaranteed. To think that a computer code is a safe bet is, without a doubt, a very delusional expectation.
Forecasts are not made with the past in mind. They are made with the future in mind. It is invested with an expectation. Key question: Will there be more demand tomorrow than today? The demand for risky assets like Bitcoin comes from two sources: economic growth (income) and liquidity injections (monetary policy). What we think about these two sources in the future determines the current sentiment. Optimistic expectations generate bullish sentiments. And pessimistic expectations generate bearish sentiments.
There is no room for emotions here. It is not a matter of having faith and waiting. The price will not go up, for the sole fact of having faith. The price is not going to go up either, because we have lights coming out of the eyes on our Twitter profile. In fact, in relation to the price of Bitcoin, the opinions of the most committed bitcoiners are not as relevant as the opinions of nobitcoiners. Why? Because the price will rise with the new demand. And the new demand is not coming from those who have already bought. The new demand will come from those yet to buy.
It is not necessary for many to sell for the price to drop. With the lack of buyers, it is enough for a capitulation to be generated. Our current consolidation channel ($21.6K-$18.7K) has shown incredible strength. If we manage to hold above this support for several more weeks, we may start to feel lucky. Because you could say that the miracle happened. Of course we need a bullish catalyst to propel us higher. We need some victory in the battle against inflation. Or something that tells us that a soft landing is possible.
Of course, if something can go up, it can also go down. Of course the scenario of a new fall is still on the table. In fact, it is not only possible. In fact, it is quite likely. What happens is that when many things can go wrong, something usually goes wrong. The dollar continues to rise. Which tells us that investors are still looking for a safe haven in order to survive what is coming. At present, there is not much evidence that is indicating the beginning of a new bullish cycle. The next two quarters do not promise much improvement. Rather, hope for the best. But at the same time, you have to be prepared for the worst.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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