SVET Markets Tuesday Update (June 21, 2022). Are We Bottoming?
Is investors capitulation already here or we still have to wait for it?
In January 2022 I optimistically predicated that we’ll reach the bear market bottom at the Independence Day. Today I assign 80% probability to that markets have already priced in two major macro-factors affecting prices — the war, with the majority of capital holders expecting it to last at least one more year, and the recession (I believe it’s already with us), which almost everyone is mentally prepared to linger for another 10–12 months.
However, there is at least 40–60% probability that some of the following events will take place dramatically lowering investors low-entry targets:
1) a major successful onslaught of occupiers armies on Ukrainian defenses, which will lead to a drastic shift in expectations about the duration of this war (from 2 years to 3–5 years);
2) a surge in the inflation expectations (f.e. after the next CPI reports are published and FED deciding to increase the rate for more than expected 0.75%), leading to main-stream analysts worsening their recession’s severity and duration outlooks (from 1–2 years to 3–4 years);
3) a sudden outbreak causing the next wave of medicinal paranoia among ruling elders and the second world-wide lock-down;
4) anti-business world-wide ‘political campaigns’, including, the ‘regulatory strengthening’, which, among another things, will de-legalize the great majority of digital assets;
5) some other swan-events (f.e a new war, a natural cataclysm, an act of violent resistance to govs etc), which will dis-proportionally excite the populace and lead to the next big exodus of investors from risky assets.
In that situation we might expect BTC falling to its second lowest support zone of 12k-9k. Moreover, if there are several of the above-mentioned unrealized catalysts affecting markets simultaneously we can expect BTC reaching its ‘doomsday zone’ of 4k-2k.
If neither of those catalysts are realized, then, still, we will have the great majority of strategic investors behaving very conservatively (not as they did in 2019) and not buying into digital assets at least until some major positive factors appear on the macro landscape.
It will lead to prices slowly drifting downwards months after months (with some technical corrections on a way) as many big holders will be gradually selling out BTC either to support their day-to-day activities or to avoid margin calls.
Therefore, long-term investments positions might be opened with the extreme caution and by those investors only, which might immobilize their assets to at least 3–5 years. Risking more than 1–5% of the disposable capital is not wise at this point.