Key Takeaways
What informed Fidelity’s crypto market floor call?
Fidelity’s Chris Kuiper said STH capitulation and weak sentiment levels mirrored past local bottoms.
What’s holding back a strong reversal, then?
Macro uncertainty and Fed rate cut expectations could derail a strong rebound.
Crypto market bottoms calls are increasing as Bitcoin consolidates above $90k.
Chris Kuiper, VP of Research at Fidelity Digital Assets, is the latest to join this camp, citing short-term holder (STH) capitulation and market sentiment dropping to levels that triggered reversals in the past.
He added,
“If this indeed is a regular 20-30% drawdown within the current bull market, then the MVRV ratio is showing a similar valley as before, testing the mettle of short-term holders before resetting to move higher.”
Source: Glassnode
Interestingly, Swissblock analysts also made a similar market stabilization projection, citing the same metric.
For perspective, the negative (red) MVRV means an extreme STH capitulation, similar to past local bottoms during this bull run.
Kuiper also noted that the current Bitcoin [BTC] market sentiment was at an extreme fear level of 10, which historically marked past reversals, adding,
“These data tips may assess probabilities in favor of this being a regular and healthy drawdown.”
An extra drop before a rebound?
Fundstrat CIO Tom Lee echoed Kuiper’s stance and stated,
“This is the reality in crypto. Near the bottom, but as my friend Eric S says, bottoms are ‘ugly’.”
The only caveat to the projection is that, in past drawdowns, rebounds occurred at key support (the 50-Weekly Exponential Moving Average) on the price charts.
While the current pullback was within the normal 20%-30% correction during bull runs, it broke below the key support.
Source: BTC/USD, TradingView
On the ‘extreme fear’ level being a reversal sign, analyst Benjamin Cowen countered,
“One sign of a cycle being over is when you get to ‘Extreme Fear’ and no bounces occur. I would argue that the signs of the top being in continue to mount.”
Cowen added that he would only flip bullish if BTC reclaims the 50W EMA by next week.
Macro uncertainty remains
Additionally, the potential expected relief from the macro front, via a Fed rate cut, became more uncertain.
The September Jobs report will be released as scheduled, on the 20th of November. However, the October report has been canceled after the Bureau of Labor Statistics failed to conduct a key survey.
In short, the Fed will be flying in half blind into the December rate decision. And markets immediately repriced the expectations.
The odds of a rate pause jumped to 66%, while the chance of a 25 pbs cut dropped from 50% to 33%, as of writing.
Source: CME FedWatch Tool
Overall, on-chain signals suggested that a potential local bottom was near. But with no strong catalyst for a reversal from the macro front, the market could remain fragile.