Bitcoin Q3 forecast 2022: where is the bottom?

While the first quarter was tough for the cryptocurrency bulls, the second quarter was a real disaster … As we approach the third quarter, the macro outlook is likely to still be tough for cryptocurrencies, but we could be close to a minimum cycle. Let’s take a perspective on price action by looking at historical cycles and the current macro configuration.

Price action

As of this writing, bitcoin has dropped around 70% from its all-time high near $ 70,000. A devastating move, but certainly in line with how it has historically traded. If bitcoin were a company, a move of this size either represents a huge opportunity or we should question its ability to stay in business.

Since inception, bitcoin’s biggest drop from peak to low has been -81%, with annual withdrawals seeing an average loss of -50% at a low. For long-term bullish investors, the current discount could be attractive, but if history were to repeat itself, an 80% loss from the high represents a potential entry point closer to $ 15,000.

Length of the cycle

Bitcoin’s all-time high occurred more than 200 days ago, on November 10, 2021. Compared to historical withdrawals, this cycle lasted significantly longer than the 117-day average, but below its worst period on record. During the cryptocurrency winter of 2018, it took 343 days for the bitcoin price to find a low.

If this cycle gets closer to the 2018 vintage, the selling pressure could continue until the end of the year or later. That said, when the sale ends, the price of bitcoin tends to change rapidly. Historically, bitcoin has seen an average growth of 69% over the next six months after a minimum cycle.

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Patience is needed

Looking at past cycles helps provide context, but I don’t think anything changes for bitcoin until the macro environment is no longer constructive.

Bitcoin is a very high beta asset that shows a positive correlation with the broader stock market. It is also inversely related to interest rates. If these correlations remain intact, it doesn’t bode well for cryptocurrencies, at least in the short term.

The economy is showing signs of slowing as the Federal Reserve is aggressively raising interest rates and reducing its balance sheet to reduce inflation. This is a scenario where I believe it will be difficult for most risky assets to experience a significant upside, especially cryptocurrencies.

There will inevitably be rescue demonstrations, but macro now matters more than ever. Until there is a change in financial conditions (which are now aggressively tightening), it is difficult to predict a low any time soon.

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