Standard Chartered’s digital asset research team suggests that Bitcoin (BTC)’s steep recent drop may have reached its conclusion. Head of digital-asset research Geoffrey Kendrick noted in an email sent out to clients that recent selloffs follow a familiar pattern and year-end rallies remain his base case scenario (CoinDesk +1).
Reproducible correction patterns
Bitcoin prices have seen an abrupt decrease from their early October peak above US$126,000, declining nearly 30 % since then. According to Kendrick, this retracement represents “three major 30 % corrections since last year’s debut of spot BTC ETFs in the U.S.”
He based his claims on various on-chain and valuation metrics which have historically marked market bottoms, such as modified net asset value (mNAV) of MicroStrategy (MSTR), which serves as a proxy for large corporate bitcoin holdings, dropping below one suggesting sellers may have exhausted themselves and the market may be approaching equilibrium. (COINDESK.)
Kendrick noted: “Several other metrics have now reached zero levels… This alone should indicate the sell-off is over.” CoinDesk Why a year-end rally remains possible
Kendrick maintains his expectation for bitcoin to rebound into the fourth quarter despite its weakness, noting the cyclical nature of corrections coupled with supportive institutional flows and regulatory tailwinds as key factors. We at beINCrypto share this optimism.
Standard Chartered’s prior research had already suggested significant potential gains for BTC by year’s end, with targets set for US$135,000 by Q3 and US$200,000 under bullish assumptions for year end. With this new analysis in hand, The Block (+1) may see its value surge even further in 2018.
Recent history suggests that recent economic decline may simply have set up for further gains to come.
Risks Remain
However, Standard Chartered is aware of potential headwinds. While the sell-off has subsided significantly since August, its road ahead could still be bumpy; Standard Chartered notes that macroeconomic factors, including interest-rate policy, liquidity conditions and regulatory developments will continue to impact bitcoin’s trajectory.
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A prime example is bitcoin’s fall under US$90,000. It demonstrates the extent to which crypto remains sensitive to global sentiment.
Kendrick cautions that while conditions exist for a recovery, this doesn’t preclude further declines if adverse conditions intensify.
What this means for investors
Entry Opportunity: Should the sell-off have come to an end, investors may view current levels as advantageous in relation to risk.
Patience Required: While an end of year rally remains likely, volatility could remain while markets evaluate flows, ETF behaviour and macro signals.
Monitor indicators: Metrics to monitor for on-chain metrics include realisation losses and market valuation of Treasury positions as well as institutional flows.
Risk management remains essential: Given cryptocurrency’s continued high degree of volatility and macro sensitivity, prudent sizing and diversification remain indispensable.
Conclusion
Standard Chartered’s assessment offers a cautiously optimistic perspective: recent bitcoin sell-off may have reached its final phase and set up for a rebound into year end; yet macro uncertainty, institutional behaviour and structural changes in crypto markets remain significant risks, suggesting upside is plausible but by no means guaranteed for market participants; their message to market participants: although groundwork has been laid, their next move requires close monitoring.
