julian woodDirector of Global Macro at Fidelity asked a question Is Bitcoin’s rebound to $95,000 a return to trend or a “counter-trend” trap?
The executive warned that the “major outlier” status of Bitcoin’s momentum curve could indicate that further rebalancing is needed before a true bottom is established.
In Friday’s market update, Timmer compared the dominant performance of the world’s largest digital asset to the solid performance of gold. The latter continues to hit new highs as a reliable hedge against global financial expansion.
$116 trillion benchmark
Timmer’s analysis begins with the “ever-expanding” global money supply, which now stands at a staggering $116.5 trillion and is growing at an annual rate of 11.4%.
Fidelity executives say gold is doing exactly what it was intended to do in this environment. “Gold continues to perform very well in this evolving global world order,” Timmer said.
However, the signals for Bitcoin are not so clear. The cryptocurrency corrected sharply and then rose to the $80,000 to $95,000 range.
“It’s hard to know if the correction is over and the uptrend is restarting, or if the rally from $80,000 to $95,000 is a countertrend rebound,” Timmer wrote.
Mr. Timmer pointed to two key liquidity indicators that indicate institutional fatigue. First, forward rates are “significantly lower,” meaning leverage is leaving the system. Additionally, inflows into spot Bitcoin ETFs have cooled significantly.
momentum outliner
Perhaps the most bearish aspect of Timmer’s assessment is his view of Bitcoin’s “momentum curve.” He said the asset’s recent price velocity was a “significant outlier” compared to historical norms and other asset classes.
“Perhaps a rebalancing is needed here as well,” Timmer concluded.
Timmer’s analysis provides a sobering reality check for some bulls who believe the worst is already over.
