Bitcoin doesn’t like changes. Forecast as of 09.12.2021

Bitcoin used to be compared to gold due to limited assets. Now, investors are focused on the growing correlation between Bitcoin and US stocks. How will the BTCUSD react? Let us discuss the cryptocurrency market outlook and make up a trading plan.

Weekly Bitcoin fundamental forecast

Not so long ago, retail investors welcomed the arrival of professionals in the cryptocurrency market, seriously hoping that capital inflows would drive prices up. At first, it was going according to the expectations. However, the dominance of institutional investors has revealed a number of vulnerabilities that long-term Bitcoin fans will hardly welcome. Its value is no longer determined by the limited nature of an asset and a fanatical desire to buy because of the fear of missing out. Fundamental factors gain more and more influence on the cryptocurrency market.

A couple of years ago, the cryptocurrency market was simple. If you had bitcoins, you became a bull, if not, you became a bear. The number of buyers was constantly increasing, and prices were rising. The sector leader has often been compared to gold in the 1970s when high inflation pushed up the demand for the precious metal among the generation of baby boomers. Nowadays, the main fans of cryptocurrencies are millennials. They are also fanatically committed to new assets like their ancestors.

According to CoinShares, in 2021, the assets of crypto funds increased from $18.8 billion to $73 billion. These institutions attract more professional traders than mobile applications – retail investors. Professionals do not rely solely on the limitedness of an asset and a fanatical belief in its further price growth. They see bitcoin as a trading instrument that grows when the global economy is doing well and falls when things are not that good. Simply put, Bitcoin behaves like a risky asset that has a lot in common with stocks.

Dynamics of Bitcoin and Nasdaq Composite

 

Source: Trading Economics

If the cryptocurrency market continues following the stock market trends, there is both good and bad news for traders. According to JP Morgan, in 2022, the world economy will fully recover, and humanity will win the fight against the pandemic. A decline in US unemployment tends to boost the stock market.

Dynamics of S&P 500 and US unemployment

Source: Bloomberg

However, over the past 75 years, the second year in office of the US president has been worse for US stocks than the first. Strong rallies in the S&P 500 tend to alternate with dull gains. And the 25% rise in the stock index in 2021 may be replaced by a modest 6% gain in 2022, according to the CFRA.

The Fed’s monetary tightening and a slowdown in the US economic expansion will put pressure on the stock market. The growth of corporate profits will slow down from 43% to 7%, according to the CFRA estimates. Investors will be reluctant to buy US stocks because they are overvalued. The shares included in the S&P 500 have a P/E of 30% above the 20-year average.

Weekly BTCUSD trading plan

If institutional investors continue entering the cryptocurrency market and bitcoin further follows the US stock market trends, the BTCUSD will find it hard to break through all-time highs. The uptrend could resume if the price breaks out level 53000 upside. If the buyers fail, there will be strong reasons to sell Bitcoin against the US dollar.

  

Price chart of BTCUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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