As the cryptocurrency market seems to finally be getting some respite after a long bearish period, some technical analysts, like the Fairlead Strategies founder Katie Stockton, predict a relief rally, albeit muted due to the downside momentum across the board.
Specifically, Stockton, whose firm focuses on technical analysis, discussed the outlook for Bitcoin (BTC) and other cryptocurrencies, with Bloomberg Daybreak: Australia’s Vonni Quinn and Haidi Stroud-Watts on June 21.
According to her, the magnitude of Bitcoin’s decline has been shocking in terms of downside momentum and that it “infected the entire space,” but stabilization can be expected. As she highlighted:
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“With this kind of decline, support levels are being taken out and our last support level was broken decisively enough that we’re already to the next support level and these are long-term levels. For Bitcoin, we’re watching about $18,300 to $19,500 (…) so that’s the key level in play here. It’s a very natural place to see some stabilization and kind of relief rally.”
However, due to the current downside momentum, Stockton said that “we do think that relief rally would be muted.”
Going forward
In terms of the correlation of crypto with equities, she explained that it will stay very high, “maybe not as high as they have been (…) but very high and that’s very normal when you have a downtrending tape and you have just this general risk of fear in the marketplace, so investors are treating Bitcoin, Ether, and equities like risk assets.”
Furthermore, she stressed that the current situation would change the way that crypto investors look at the market going forward, “but I don’t think it’s going to shake them out indefinitely.” As she stated:
“I think it’s a matter of watching for momentum to shift to get that kind of basing phase in place and that’s where confidence will be restored. So I think it’s a bit of a shakeout (…).”
In this shakeout, Stockton believes “the weaker companies just aren’t going to survive, but after we come out of this, there’ll be some great opportunities and perhaps the opportunities will have a little bit more longevity and maybe with a little bit less volatility, which is natural as an asset class matures.”
The Fairlead Strategies founder also predicts increased institutional interest over time, but not before relief from volatility happens and “companies that don’t pass the muster from a fundamental perspective are shaken out of the industry.”
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