Willy Woo, an on-chain analyst who in 2018 forecasted that investors would unwind their leveraged bitcoin positions to seek safety in the US dollar, says the cryptocurrency is looking for a bottom.
“Dump then [the] moon,” he tweeted. “We are undergoing flight to safety right now, BTC is looking for its bottom. But know that once the bottom is in there are strong bullish pressures ahead. It’s this economic environment in the years ahead that Bitcoin was built for.”
Bitcoin markets tanked last week, with the cryptocurrency’s spot price suffering its worst day since 2013. Traders preferred to unload their positions over fears of uncertainty caused by the escalating Coronavirus pandemic. The erratic liquidations pushed the bitcoin’s net valuation down from circa $190 billion to as low as $83.57 billion in just 28 days.
The plunge disappointed a large section of investors/speculators who thought of bitcoin as their insurance against a stock market crash. Prominent market commentator Alex Krüger said Tuesday that the cryptocurrency did not behave either as a store of value or a safe-haven.
Bitcoin maximalists were dead wrong. Bitcoin did not behave like a store of value nor a safe haven, but rather collapsed over 60%. I hear people saying $BTC is holding up well, yet no other asset (ex- some individual stocks and other cryptos) has dropped more than $BTC.
— Alex Krüger (@krugermacro) March 17, 2020
The Gold Deja Vu
Mr. Woo thinks Bitcoin is behaving as Gold did during the housing and credit bubble burst. The yellow metal in 2018 plunged by up to 33.96 percent even as the stock market bust raised opportunities for it to behave as safe-haven. However, investors moved into other offbeat hedging assets, mainly the US dollar.
Gold bottomed-out at $681.75 in October 2018, followed by a steep uptrend that took its value to $1,703.60 earlier this March. Nevertheless, the Coronavirus-led sell-off prompted the metal to rebound by as much as 14.80 percent. So it appears, bitcoin plunged in a similar fashion.
“Flight to safety: everything else sells off to USD,” Woo reminded investors. “[It is] then used to unwind leveraged positions. Afterward, havens like Gold and [Bitcoin] have a bull run.”
$gold : Very bullish medium-term, short-term rather a consolidation/correction.https://t.co/d2lK4FkX90$gld
— Adrian (@highlevelTrader) March 10, 2020
Bitcoin’s Black Swan
A portion of Mr. Woo’s old prediction also mentioned black swan events and their impact on the bitcoin price. The analyst said it would be impossible to guess the cryptocurrency’s future price against surprises. The Coronavirus pandemic turned out to be that black swan event.
Mr. Woo noted that bitcoin is in its first macro bear market led by a surprising virus epidemic. That leaves analysts with little-to-no data to discover its price over the short or long run. Nevertheless, the statistician hoped that investors’ dwindling confidence in the banking sector could push at least Millenials toward decentralized assets.
“This crisis is a catalyst for this effect as heartbreaking as it is,” said Mr. Woo. “$68T of wealth that will pass hands is now accelerated. Millennials love crypto, don’t take much money to move the needle.”
This big dent in the price chart will lengthen the time till we hit the next bull market top (Top Cap model), more time means a higher top. pic.twitter.com/pdhyliUzl7
— Willy Woo (@woonomic) March 18, 2020
Bitcoin was trading at $5,143 at the time of this publication, down 3.43 percent into Wednesday.