Wall Street veteran explains bearish outlook for Bitcoin

Bitcoin (BTC/USD) is battling downside pressure above $20,000, with recent falls below the round number coming amid widespread selling across risk assets.

Michael Purves, CEO of macro research firm Tallbacken Capital Advisors, believes the benchmark cryptocurrency will remain bearish for much longer.

According to him, Bitcoin’s long-term momentum has weakened further, and the price may try new lows in the $15,000 region or lower.

Bitcoin’s bearish outlook

Explaining his bearish outlook for Bitcoin, Purves told Bloomberg Technology in an interview on Tuesday:

“What really made me bearish was really, again, nothing to do with a fundamentally bearish view or a fundamentally bullish view. It was simply the fact that the long-term momentum really started to break in late January, and this particular signal that I was focused on, you know it had done this three times before, and each time Bitcoin corrected 60% to 70% over the next, anywhere from four to a sort of ten month period.”

Purves also notes that the technical picture for the Bitcoin price shows a bearish signal developing around $42,000 in January.

He also says that the declines seen in 2022 have come amid a persistent correlation between Bitcoin and stocks. Over the past few months, the BTC price has fallen along with stocks – the latest being last week’s selloff following US Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole.

The Tallbacken Capital Advisors chief also points out that before the recent bull run, Bitcoin’s largely uncorrelated trading with the NASDAQ had encouraged institutional investors to buy BTC – viewing the asset as a hedge and store of value.

However, with stocks recently locked in trading and with Bitcoin not showing an “ability to be uncorrelated”, it may be difficult for new institutional money to enter the space based on the same “thesis” as before the previous cycle.

“You know if you look at the NASDAQ that there is a pretty clear correlation with prices. And Bitcoin has a pretty clear correlation with the NASDAQ here,” he noted.

“And so I really question you know since it hasn’t shown its ability to be uncorrelated I question whether institutions come in and say hey you know if it’s going to be 15 or if it’s going to be 17 or 18 or twelve if they’re going to rush back to the committee and say hey here’s a dip we can buy because the thesis three years ago I think was you generally know that hey this is an uncorrelated asset, iIt can be an inflation hedge.”