Matrixport analyst Markus Thielen said that Q1 will be a challenging quarter, as the Bitcoin greed and fear index has not reached the counter-trend buying level yet. BTC may retrace to 38K, but Thielen remains optimistic about ETH as the next potential candidate for an uptrend.
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Q1 will be a challenging quarter
Bitcoin greed and fear index has not reached the buying level yet
Expect BTC to retrace to 38K
Exercise caution with crypto-related stocks, but attractiveness is gradually emerging
Currently in consolidation, the bull market will continue
Keep an eye on the rise of ETH
Matrixport expects the first quarter of this year to face challenges. The trading volume in Korea has dropped to the lowest level since early October, and Dogecoin has become the most active token in Korean trading. This indicates that even creative cryptocurrency investors have exhausted fresh ideas about fund allocation.
Looking at the top 88 tokens by market capitalization, only 24% have risen so far this year, with Bitcoin falling by 2% and ETH rising by 8%.
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Matrixport’s Bitcoin greed and fear index (G&F index) has not yet reached the buying level. In the past 18 months, two readings below 20% have been triggered (marked with red circles):
November 25, 2022, Bitcoin trading price at 17,000
September 6, 2023, Bitcoin trading price at 26,500
Both have proven to be excellent buying opportunities.
Because the Bitcoin greed and fear index has not reached the buying level yet, Thielen maintains his view that it needs more time and expects Bitcoin to retrace to 38K or even the range of 36K to 38K, which will be a painful trading range.
Currently, Bitcoin’s 30-day realized volatility is over 52%, a few percentage points higher than implied volatility (46-48%). Matrixport expects it to fall to 30% in the next two months. This is why straddle options trading may be a winning strategy, even though it may not be as exciting as riding high-beta altcoins in a bull market.
Note: Straddle options: Simultaneously buying or selling call and put options with the same strike price and expiration date for the underlying asset. Selling options at this time can generate higher premiums due to the expected decrease in volatility.
The rise in the fourth quarter of last year was often driven by Oridinals, which is why Matrixport was bullish on Bitcoin mining companies and the upcoming Bitcoin ETF. However, recent lower network fees have also made Matrixport cautious about mining machines (a sell report was issued at the end of December). However, they are gradually becoming attractive compared to the discount on BTC. According to their estimation, the fair value of the following crypto stocks relative to BTC is:
Marathon -40%
MicroStrategy -6%
Coinbase -34%
Riot -56%.
Thielen believes that the fifth bull market of this year will continue, and cryptocurrencies are currently in a consolidation phase. The stock market is hitting new all-time highs. Uncertainty about the US interest rate cut has reemerged, with the 10-year Treasury bond yield rising to 4.20%. He expects this to be a temporary headwind, with things expected to be resolved by March at the latest.
Thielen remains bullish on the rise of ETH because Ethereum’s revenue is much better than Bitcoin’s revenue. From early to mid-December, Ethereum’s weekly fees generated were between 86-88 million US dollars, which has now dropped to 53 million US dollars (-38%), while Bitcoin fees have dropped from 97-102 million US dollars to only 26 million US dollars (-74%).
ETH gas fees have also dropped from 61 Gwei before and after the ETF approval to 13 Gwei, also down from 78 Gwei in mid-December. This indicates that network activity is not congested, as transaction volume is below average levels. This is in contrast to BTC, where the number of transactions and tokens sent by ETH is relatively high, especially when fees are still low.
Currently, ETH has retraced to the breakout level of 2,400/2,440, and if 2,400 fails to provide sufficient support, the price may retrace to 2,200. However, according to Thielen’s prediction last week, ETH is expected to quickly rise to $3,000.
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Matrixport Analyst: Short-term bearish on BTC; ETH will soon rise to $3,000
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BTC
ETH
G&F index
Markus Thielen
Matrixport
straddles
Further reading
Bitcoin falls to 41K, down 15% since the ETF listing, support seen at 38K
Matrixport Analyst: Short-term bearish on BTC; ETH will soon rise to $3,000