- According to Fairlead Strategies, Bitcoin is at least seven months away from hitting a “major low” and staging a countertrend rally.
- Fairlead expects Bitcoin to fall near the $13,900 level, representing a potential downside of 18% from current levels.
- “Short-term momentum has turned negative, supporting a bearish near-term bias,” said Fairlead’s Katie Stockton.
Bitcoin’s decline, which began in late 2021, is unlikely to end anytime soon, and the “big low” could be at least seven months away, according to a Monday note by Cathy Stockton of Fairlead Strategies.
That’s because bitcoin has seen a negative shift in price momentum for its short-, intermediate-, and long-term horizons, Fairlead’s Cathy Stockton said. After failing to test its 50-day moving average near $17,400 last week, Bitcoin has taken a turn for the worse and is currently trading around $16,883.
“Short-term momentum has turned negative, which favors a near-term bearish bias. We expect a retest of the November low near $15,600 in the coming weeks,” he said.
But Stockton believes Bitcoin could fall further, falling from the November low to its long-term support level around $13,900. That price drop represents a potential downside of 18% from current levels.
“With long-term momentum still strongly negative, we ultimately expect Bitcoin to have lower lower, long-term support risk around $13,900, defined by the 2019 high,” he said.
For crypto investors, such a decline may not come as much of a surprise given the carnage that hit the industry in 2022. Various explosions in various sectors of the crypto market, including Three Arrows Capital, Terra/Luna stablecoin, and now FTX, have highlighted; investors how risky the area is.
Investors are now dealing with a lack of confidence in the industry and the potential for increased regulation from Congress. But as bleak as the macro outlook is for the crypto space, especially when you factor in high interest rates and tightening financial conditions, Stockton doesn’t really care.
Instead, he focuses his analysis on prices rather than fundamentals, and prices suggest to him that there won’t be a “big low” in bitcoin until the middle of next year.
“For major lows, we like to consult DeMark indicators that are at least seven months away from registering a countertrend signal on the monthly chart,” Stockton explained.
DeMark indicators help technical analysts measure supply and demand for a given security and are known to highlight important divergence points in price trends. DeMark indicators are commonly used by various Wall Street strategists, including Fundstrat’s Tom Lee.
If Bitcoin fails to match Fairlead’s bearish price outlook and moves higher, Stockton will look at various resistance levels, such as the 50-day moving average, to determine whether the rally has legs or not.