Analysts Divided on Near-Term Bitcoin & Crypto Outlook as Market Stabilizes

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With the Bitcoin (BTC) and crypto market appearing to stabilize after last week’s brutal crash caused by the collapse of Terra (LUNA), analysts are offering their takes on where the market may be headed next. And as usual, opinions are divided, with some predicting the bear market is “complete,” and others arguing that we are still “early in the Fed’s tightening cycle.”

Perhaps most optimistic about the digital asset space among analysts from traditional finance was a group of analysts led by Alkesh Shah from Bank of America.

Writing in a private note to clients on Tuesday, Shah said that concerns over a so-called crypto winter have little basis other than the negative influence that currently comes from the crypto market’s correlation with stocks.

Cryptoassets still trade like an “emerging tech asset class” similar to high growth, speculative risk assets, the note said. It added that crypto is thus suffering from the same headwinds as traditional assets, including increased interest rates, higher inflation, and a rising risk of recession in the US.

Transformative bubbles

Notably, Bank of America’s take differed from that of the Zurich-based private bank Julius Baer Group. According to a Bloomberg report, the bank’s CEO, Philipp Rickenbacher, said during a presentation to investors on Thursday that we could be seeing “a bubble-burst moment of the crypto industry.”

Despite the gloomy short-term outlook, Rickenbacher still maintained a positive outlook for the longer term, saying “we all know what happened after the dot-com bubble […] It paved the way for the emergence of a new sector that indeed transformed our lives.”

The comments from Rickenbacher came one day after one of the most high-profile investors in crypto, Galaxy Digital CEO Mike Novogratz, for the first time in 10 days opened up about the collapse of Terra and its algorithmic stablecoin terraUSD (UST).

Following the initial comments from Novogratz, the investor once again took to Twitter today, sharing a pessimistic outlook for the near-term:

“One issue with risk modeling is that all the examples of stress in the past 3 decades which lead to bottoms happen in an environment of [US Federal Reserve] easing,” Novogratz said

He further stressed that we are still early in the Fed’s tightening cycle, and said this means “confidence in models and even ‘intuition’ has to be lower.”

‘No scenarios’ under which MicroStrategy would sell BTC

Meanwhile, offering some reassurance for at least the bitcoin investors on Wednesday, the American enterprise software firm MicroStrategy, which holds BTC 129,218 (USD 3.8bn) in its reserves, said it will not change its BTC strategy despite the market turmoil.

“At this time, we do not have any intention to sell,” Andrew Kang, the company’s new chief financial officer, told the Wall Street Journal. 

“There are no scenarios that I’m aware [in which] we would sell,” he added.

Moreover, Kang agreed with the Bank of America analysts who argued that the recent bitcoin market downturn had little to do with bitcoin itself.

“Some of the more recent volatility was certainly around some of the activity outside of bitcoin,” Kang said. He added that the company “monitor[s] that from a market perspective,” and said “there [isn’t] anything fundamental to bitcoin that we believe presents any issues against our strategy.”

Bear market ‘looks complete’

Also optimistic about crypto’s outlook was Yves Lamoureux, president of the macro-focused research firm Lamoureux & Co.

“I see extreme [negative] sentiment from crypto holders, just as we have seen at other bottoms,” Lamoureux was quoted in a Yahoo Finance newsletter as saying. “Instead of one big swoon down, bitcoin broke that in two parts — creating less downside than a traditional drawdown. It looks complete in terms of a bear market,” he added.

Plan to hold ‘for quite some time’

Lastly, speaking on CNBC on Thursday, Peter Smith, the CEO and co-founder of Blockchain.com, said we’re now seeing “a washout of risk and leverage” from all financial markets, and said this has been felt particularly hard in crypto in the last few weeks.

“This is going to be a very long process of adoption and growth, and so when you’re thinking about a crypto position, you need to average into it slowly and plan to hold it for quite some time,” Smith said.

As of 16:41 UTC, bitcoin traded at USD 30,230, up 4% for the past 24 hours and almost 6% for the past 7 days. At the same time, ethereum (ETH) stood at USD 2,017, 3% more than a day ago, but still down over 2% in a week.  
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