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It has been two weeks since I wrote my “Outlook for 2023”. In that newsletter I wrote that almost every indicator was telling us that a Bitcoin bottom was nearby.
I also wrote that we might see new lows in the future, but that that would depend on how high Bitcoin could rally before a next correction.
And a rally we got. When I wrote my last piece, Bitcoin still noted $16.8k. In the meantime the Bitcoin price increased almost 30% to a high of $21.6k.
It has been a long time since we’ve seen such a move. It increases the confidence of investors that a new bullmarket is around the corner.
But is it? Or is this another bear market rally and can we expect another large decline later this year?
I already mentioned this in my prior newsletter, but a lot of macro-economists and investors agree that we will need to face a recession. The main question is not if but when.
This means - according to analyst TXMC - that we will at least see one more severe decline in the stockmarket. He claims that historically recessions have never been priced into the market upfront.
But a rally in stocks just before such a “recession-crash” isn’t uncommon. It results in investors being incorrectly positioned, as they get back into the market on beliefs that the new bullmarket has started.
Such a rally seems to be going on at the moment. And as stocks and crypto have been highly correlated the past year, this triggered a massive run in crypto as well.
The price of Bitcoin went parabolic and a sentiment shift has taken place in the market. Apparently the new bullmarket has started.
But although the chart starts to look better, I personally believe that this rally will be temporary. I expect that if that recession-crash happens in the stockmarket later this year, crypto will tumble along one last time.
If that will be to new lows depends on how high the current rally will go.
But what goes up must come down. And that’s often true with parabolic advancements. That idea corresponds to the idea that the current rally is an “echo bubble”. A smaller bubble that occurs after a bigger bubble has popped (Investopedia).
Such a bubble also took place in 2019 (see image) and was already predicted to occur this year by well-know crypto trader GCR:
A lot of investors expect Bitcoin to move higher from here to the important resistance level around $24k or maybe even higher to $28k-$30k.
There’s a good chance this will happen, but I also believe it’s a good idea to take some profits in the run up. Because just as in 2019, most echo bubbles also end with a bubble-like crash.
