(Kitco News) With Bitcoin down 15% on the day and trading around $23,100, the world’s largest cryptocurrency could risk retesting 2018 price highs below $20,000, according to Founder and Managing Partner of Fairlead Strategies, Katie Stockton.
After failing to hold the $27,000 support level, Bitcoin now risks retesting a range between $18,300 and $19,500, Stockton told Kitco News on the sidelines of the Consensus 2022 conference which took place. held in Austin from June 9-12.
“This area has a double significance. Many people will remember the $19,500 level as an old high. people say, ‘I’d love to get back to that level. Just think about the psychology of the market. That’s what creates the phenomenon of resistance becoming support,'” she explained.
Bitcoin is in an oversold state, but these trends can take months to change, which is why Stockton does not foresee a quick recovery for Bitcoin.
“What we’re trying to do with these indicators is to make sure we’re on the right side of the prevailing trend. And in the short term that trend looks slower, in the medium term it looks lower, and at longer term, it looks lower,” Stockton said. “And that’s just a reminder that the risk is heightened, and rather than taking contrarian positions, we feel more comfortable being on the sidelines.”
Bitcoin was caught in a selling frenzy along with the rest of the risky assets. Even before the warmer than expected inflation data was released on Friday, there was a minor breakdown and the oversold conditions remained uncorrected.
“Any risky asset you’re looking at is in a downtrend. That’s why we need to contextualize short-term rallies as being countertrend,” she noted. “When you see sustained oversold conditions, it means you are in a downtrend.”
Stockton’s assumption going forward is that this downward trend in Bitcoin will continue until there is significant momentum to change the narrative. But even when that happens, the change will be slow and dominated by lots of sideways trading.
“I suspect it won’t happen dramatically, but rather after a baseline phase. A decline of this strength and magnitude doesn’t tend to end quickly or easily. It’s usually a process. And this process is characterized by an initial phase of supporting discovery, but often a series of re-tests of that support, which overall can end up looking more like a sideways trading range before Bitcoin and others can break out of this posture”, she described.
As long as Bitcoin is caught in such volatile price swings, it will be difficult to suggest that the cryptocurrency is a closer asset to gold, Stockton added.
“Gold has outperformed year to date, and that’s normal when the stock market goes down. And obviously we haven’t seen the same with Bitcoin or cryptocurrencies. We certainly see the “Gold staying more true to its kind of safe-haven qualities. And that’s even though gold hasn’t really been a source of momentum either,” she said.
However, Bitcoin could expand its risk characteristics as it matures and gains institutional exposure. “As it matures from a fundamental point of view, that’s when you can expect it to take on its own characteristics in a way that I think it didn’t. I think as it matures, you’ll see more institutional adoption of bitcoin,” Stockton said.
Stockton’s Fairlead launched an ETF called the TACK Fairlead Tactical Sector ETF this spring, with the primary goal of capitalizing on the sector’s relative strength. And due to the current risk environment, the ETF holds over 20% of gold.
“We start with SPDR funds. But then when the market demands it, it will move to a combination of short-term treasuries, long-term treasuries and gold. And the gold coin is obtained through the GLD ETF. And TACK is holding a position of over 20% in gold right now. It’s very risky the way it’s positioned,” Stockton pointed out.
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