According to Bloomberg Intelligence senior commodities strategist Mike McGlone, Bitcoin is currently trading at a significant discount.
He gave this rating because the digital currency, the most valuable in terms of market value, has remained below $25,000 since June, data from TradingView shows.
McGlone relied on several observations in making his case, and he also cited technical analysis, targeting a specific indicator.
“The benchmark crypto hit its all-time low from the 100-week moving average in July,” he noted, describing the situation as an “extreme discount within an ongoing bull market.”
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
The Bloomberg analyst also emphasized the importance of stocks, which have repeatedly shown a remarkable correlation with bitcoin.
“The bottom line is that there are few stronger forces in the markets than when the stock market is falling at a high rate like in 1H,” he explained.
McGlone also highlighted the key role of the Federal Reserve, which has pushed through aggressive rate hikes in 2022.
This development could potentially create headwinds for risky assets such as cryptocurrencies and stocks by increasing the yields of lower-risk securities and making them more attractive.
“Don’t fight the Fed has been my mantra for risky assets since late last year,” he said.
“Bitcoin and cryptos were an important part of the 2021 rush and thus part of the 2022 flush, but I see Bitcoin and Ethereum moving forward.”
“Bitcoin is well on its way to becoming a global digital collateral in a world moving in that direction and Ethereum is a primary driver of the digital revolution, as evidenced by enabling the most traded cryptos – dollar tokens,” McGlone said.
Bitcoin ‘Incredibly Oversold,’ Analyst Says
Budd White, co-founder and chief product officer of crypto software company Tacen, also weighed in on the matter, claiming that the digital currency is currently trading well below its true value.
“I still believe that Bitcoin is not only incredibly oversold, but also in a large accumulation zone. With every price increase with Bitcoin, we are growing both the market value and the use value,” he stated.
“If you look at Bitcoin’s market value to realized value, or MVRV, we see it around one, suggesting that the market value of this asset has fallen to its actual use value,” White noted.
“This also suggests to me that because of the massive liquidations we’ve been through in recent months due to Terra, Three Arrows and the lot, the number of forced sellers left in the market is relatively small. Bitcoin therefore seems to have a pretty solid bottom. at or around $18,000.
White noted that despite strong support near the aforementioned price level, bitcoin has been “floating” close to $23,000 lately.
“So far – and beware that crypto prices can change quickly and dramatically – it has held up a lot despite a jobs report that was much higher than expected,” White added.
“Markets already seem to be pricing in an even more aggressive monetary tightening by the Federal Reserve as a result of these rising numbers. Stocks have fallen and yields have risen,” he noted.
“And again, Bitcoin just floats,” the market observer said.
“I am not saying that we are experiencing a decoupling of Bitcoin from the stock. We could definitely get another leg down in terms of Bitcoin price. ”
“But this relative strength tells me that the bulk of Bitcoin sales may be lagging. And barring an exogenous shock to markets — such as credit markets on the brink of breaking — I think Bitcoin investors are yet to come. always consider it a decent buy at these levels,” said White.
While White talked about bitcoin’s recent price resilience, Tim Enneking, director of Digital Capital Management, stated that the cryptocurrency could fall again to its recent low below $18,000, which it reached in June.
“Bitcoin has made a nice if not completely convincing move from $20k as a recent resistance (until July 15) to support (after that date, tested once on July 26-27 and solidly higher since then),” he stated.
“While that’s been a nice move, it’s been quite slow and seemingly insecure, especially given the summer doldrums,” Enneking said.
“As a result, most people are still hedging their bets on whether BTC will try again to test the June 18 bottom at $17.6k.”
“Going forward, I would expect more general slides, a slightly positive move and that the recent bottom will not be tested again. It’s a 50-50 proposal or $20k will be retested,” he claimed.
According to Alternative.me’s Crypto Fear & Greed Index, investor mindsets have steadily strengthened over the past few weeks.
This index, which ranges between zero for “Extreme Anxiety” and 100 for “Extreme Greed,” currently stands at 31, a number that indicates “Anxiety.”
This figure follows a steady upward trend since June 19, when it reached a reading of six, indicating a state of “extreme fear.”
Furthermore, the index has been at 20 or higher since July 18.
The image below shows the latest status of the measure.
Armando Aguilar, an independent cryptocurrency analyst, commented on how this measure has changed in recent weeks.
“The Fear and Greed Index has recovered from the low 20s after the major collapse of some protocols and crypto service providers,” he stated.
“Investors have returned to buying digital assets and the fear meter is moving into yellow/buy territory,” Aguilar said.
“Historically, the market has seen price momentum as the index reached the mid-1930s,” he noted.
An uncertain prospect
Aguilar moved on to a broader analysis, assessing the big picture.
“There is still macroeconomic and geopolitical pressures lurking, so Bitcoin could hit earlier lows if stocks take a hit and investors pull out of risky assets,” he stated.
“But given the current environment and if Bitcoin can break through the upper resistance levels, it could experience positive price momentum.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.