Bitcoin peaked at $42K on January 8 and has been headed more or less downhill ever since. That date capped a meteoric rise from below $20K that began December 15. The narrative behind the rise was that institutional demand for bitcoin was picking up in a secular fashion. There is some truth to that, it seems, but on the other hand there’s not enough truth in it to keep bitcoin’s price afloat.
This article recaps some recent events that have affected bitcoin’s price, and explains why I believe bitcoin is headed lower from here. To begin with, let’s look at the chart:
For the last three weeks, BTC-USD has been in one of the prettiest descending triangles I have ever seen, with a baseline around $30,600 and four consecutive lower highs. Technically, it should continue lower, but it popped higher out of this pattern on Friday. Below I’ll explain why I think this is a fake-out.
How Much Institutional Demand Is There?
In my view, bitcoin is a trade. The investment case is that it’s becoming viewed as an asset, worth allocating to, particularly by institutions. Since the supply is limited, institutional demand will drive the price up. Get on board. A month ago, the headlines were about how institutional demand for bitcoin was surging. Today, at least some headlines are telling a different story.
Guggenheim CIO Says Institutional Demand Not There to Sustain Bitcoin Above $30K
It is easy to find other voices saying institutional demand is just fine. Usually these folks are talking their book. It’s hard to know who is right, but if institutional demand were all that robust, it would be reflected in price.
However, there is another piece of evidence that is also a bearish indicator.
The Unwind of the Grayscale Carry Trade
One of
