by Sarah R

Client Advisory: Sell BItCoin At These LEvels ($37K)

Nov 16, 2023

Current Spot Price Of Bitcoin: $36,700

The financial markets and the Federal Reserve (the Fed) seem optimistic about achieving a ‘soft landing’ for the economy, but our analysis suggests a different perspective. We assign a 30% probability to a soft landing and a 70% probability to a more challenging ‘hard landing.’ Let’s delve into what each scenario could entail:

  1. The Recession (Hard Landing) Scenario: With a 70% likelihood, a hard landing would likely usher in a recession. We’d see a significant rise in unemployment coupled with a decrease in inflation. The Fed might then lower interest rates, which could trigger a decline in the stock market while propelling bonds upward. This ‘pain trade’ scenario diverges sharply from current market expectations.
  2. The Soft Landing Scenario: Conversely, there’s a 30% chance of achieving a soft landing, where the economy slows down enough to control inflation without causing a recession. In this case, the Fed might maintain higher interest rates for an extended period. The stock market might attempt to surpass its 2023 highs, but success seems unlikely, particularly if technology stocks, or ‘NQ names,’ lose momentum.

As for Bitcoin, we currently advise clients to consider selling at these levels (around $37,000). Bitcoin has shown significant volatility, rising nearly 50% since late September and recently closing the price gap from May 2022. A retracement to around $31,000 could be on the horizon, making this a potentially opportune moment for selling. Bitcoin investors often lean heavily on technical analysis, sometimes overlooking broader economic conditions.

In the short term, to gauge market sentiment about a potential recession, we recommend monitoring not just Bitcoin, but also crude oil prices and the Russell 2000 Index (R2K), which is heavily influenced by energy stocks.

In summary, the market is at a pivotal point, with various indicators pointing towards different economic outcomes. A careful assessment of these indicators is essential for navigating the potential paths ahead.