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Bitcoin Bears May Still Be a Bit Early, Though Caution Urged: Matrixport
Crypto investors should cut exposure by 50% if bitcoin prices fall below $22,800, the report said.
By Will Canny
Updated Mar 3, 2023, 8:38 p.m. Published Mar 3, 2023, 8:53 a.m.
Matrixport, a crypto exchange and lending platform, said it has been bullish on digital assets since mid-December, but signals from the U.S. economy are now forcing it to be more cautious.
In a research report published early Friday, the firm said it is still not the time to be outright bearish, but suggested cutting exposure by 50% if bitcoin (BTC) prices fall below $22,800. The largest cryptocurrency by market cap slumped overnight and was trading around $22,400 at publication time.
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U.S. stock markets have started to sell off again and U.S. bond yields are moving higher, the note said. The two-year Treasury now yields about 4.87%, above the November 2022 high of 4.8%, and the difference, or spread, between the two-year and 10-year yields is at an “unhealthy level of -0.87%."
The rallying U.S. dollar is another negative sign and “adds to the restrictive monetary policy overhang,” wrote Markus Thielen, head of research.
Daily crypto trading volumes have dropped to $60 billion from around $80 billion, which shows less interest from traders to engage with the crypto market, “while the ongoing outflows from Paxos-Binance (BUSD) stablecoin have resulted in the market cap declining to now $10 billion,” the report said. A stablecoin is a type of cryptocurrency whose value is pegged to another asset, such as the U.S. dollar or gold.
The 60-day correlation between bitcoin and the Nasdaq stock index is at its lowest level since December 2021, when the U.S. Federal Reserve first started to communicate to the market that interest-rate increases were on the horizon, the report noted.
“This correlation breakdown is supportive for holding long crypto exposure as investors can hold onto the future technological growth expectations while the downside from macro data appears to be more impactful for U.S. listed technology shares.”
Matrixport said it remains convinced that U.S. inflation will fall sharply this year and that as a result, the Fed will stop raising interest rates, setting up the market for a relief rally.
Read more: 2023 Will Be Year of Crypto Token Price Divergence: Bank of America
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Japan’s Higher Rates Puts Bitcoin in the Crosshairs of a Yen Carry Unwind
A stronger yen typically coincides with de-risking across macro portfolios, and that dynamic could tighten liquidity conditions that recently helped bitcoin rebound from November’s lows.
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- The Bank of Japan is expected to raise interest rates to 0.75% at its December meeting, the highest since 1995, affecting global markets including cryptocurrencies.
- A stronger yen could lead to de-risking in macro portfolios, impacting liquidity conditions that have supported bitcoin's recent recovery.
- Governor Kazuo Ueda indicated a high probability of a rate hike, with officials prepared for further tightening if their economic outlook supports it.
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