Analysis

What Matters for Bitcoin in 2022 as It Catches a Stock Liquidity Storm?

Macro strategist Jurrien Timmer at financial giant Fidelity readjusts his outlook on Bitcoin after the leading cryptocurrency fell below a key price level.

In a thread on Twitter, Timmer to say He was surprised to see that BTC failed to hold $40,000 after a steady decline from ATH to above $69,000 in November.

“It’s been a bad ride for crypto. Glassnode’s bitcoin-sensitive stock index has hit a 2021 low, which doesn’t bode well.

I figured $40,000 would be the bottom based on my demand model and on-chain momentum (via the inactive coin flow indicator), but BTC slipped to $35,000.”

Glassnode BTC sensitive equity indicator | The source: Jurrien Timmer

Next he cites the earlier tendency of “weak hands” to yield to “strong hands”. Based on this, Timmer sees the potential for BTC to reverse course and bounce back.

“However, bitcoin often moves back and forth between ups and downs, so maybe that’s all that’s happening here.”

The chart below shows the “entity-cleaned dormant coin flow” that measures the transition from weak hands to strong hands. The indicator is now in a range that prevented previous declines.”

EASYCoins don’t work | The source: Jurrien Timmer

Commenting on BTC supply and demand, the analyst said:

“The more bitcoin falls, the more it is essentially undervalued.”

Bitcoin Supply and Demand Model | The source: Jurrien Timmer

Too emphasize BTC to Gold ratio “is returning to support and stands at 1.51 standard deviations from its trend line.”

Bitcoin to Gold Ratio | The source: Jurrien Timmer

In the final chart, the strategist shares “the short-term momentum that is currently showing bullish divergence.”

The source: Jurrien Timmer

Conclusion of the analysis, Timmer to say Although Bitcoin has endured a rough patch that has also seen speculative stocks plummet, its strong fundamentals have remained untouched.

“Bitcoin is clearly caught up in the liquidity storm currently sweeping through the more speculative side of the stock market.

But unlike tech stocks, which aren’t profitable, BTC has an underlying foundation that’s becoming more attractive over time.

With the liquidity wave back, fundamentals will matter more than ever in 2022.”

At the time of writing, Bitcoin is trading sideways at $36,699. Compared to the start of the year at $47,292, the price is down 22%.

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Annie

Championing positive change through finance, I've dedicated over eight years to sustainability and environmental journalism. My passion lies in uncovering companies that make a real difference in the world and guiding investors towards them. My expertise lies in navigating the world of sustainable investing, analyzing ESG (Environmental, Social, and Governance) criteria, and exploring the exciting field of impact investing. "Invest in a better future," I often say. That's the driving force behind my work at Coincu – to empower readers with knowledge and insights to make investment decisions that create a positive impact.