Crypto Winter Ending Says Veteran Trader

Joel Frank
3 min read
0

Key Points

  • After calling the top last November, Yves Lamoureux sees the “crypto winter” ending.

  • “I see extreme (negative) sentiment from crypto holders, just as we have seen at other bottoms,” he said.

  • At current levels just under $30,000, bitcoin is down over 56% from last year’s record peaks.

Bear Market

Just over six months ago, and just days after bitcoin had hit its highest levels on record around the $69,000 mark, Yves Lamoureux made the now-famous call that cryptocurrencies were headed into a bear market.

Lamoureux, who is president of macroeconomic research company Lamoureux & Co and sometimes referred to as the “Canadian Whale”, got his call last November spot on. Since the record peaks in November, bitcoin has crumbled more than 56% to current levels just below the $30,000 mark.

Over the same time period, the broader market cap of cryptocurrencies has tanked from record highs just above $3.0 trillion to current levels around $1.28 trillion, a drawdown of around 58%.

Cryptocurrencies have been hit hard by a sharp rise in both short- and long-term US yields (which raises the opportunity cost of holding non-yielding assets like precious metals and crypto), as well as a sharp pullback in US tech stock valuations (crypto has become increasingly correlated to US tech in recent months).

Sparking these unfavorable macro trends has been a rapid hawkish shift from the US Federal Reserve. Where last November the central bank was holding onto the belief that inflation would prove “transitory” and no rate hikes would be needed into 2023, the bank has realized the error of its ways.

The bank kicked off a hiking cycle with a 25 bps move back in March followed by a 50 bps hike earlier this month and officials are vowing to press ahead with further rate hikes in order to tackle inflation that is currently running at an annual rate more than four times higher than the bank’s 2.0% target (according to last week’s CPI data for April).

Crypto Winter Set To End?

Despite the ongoing threat of further/faster monetary tightening from the Fed, which many strategists think could result in further pain in crypto and equity markets and further moves higher in US yields, Lamoureux this week called for an end to the so-called “crypto winter”, Yahoo Finance reported on Wednesday.

“I see extreme (negative) sentiment from crypto holders, just as we have seen at other bottoms,” Lamoureux reportedly said, adding that the 80% drawdowns seen in bitcoin’s past are no longer now required to shake out weak hands.

Describing the stages of the recent bear market, Lamoureux said “instead of one big swoon down, bitcoin broke that in two parts — creating less downside than a traditional drawdown”.

Much of bitcoin’s drawdown since last November had taken place by mid/late January, with the cryptocurrency only recently breaking below these lows and under $30,000 in wake of the collapse of TerraUST and LUNA.

“It looks complete in terms of a bear market,” Lamoureux stated.

Given the tight correlation between the beleaguered US tech sector and cryptocurrencies, some respite in the Nasdaq 100 index will likely be needed if bitcoin and other cryptocurrencies are to mount a meaningful recovery.

But Lamoureux is bullish on US tech. “It’s not often I am fully invested… (but) I am now,” he said, before adding that “as inflation drops, techs will reflate hard… Watch the FOMO”.

Lamoureux recently called for a three-year equity bull market.

This article was originally posted on FX Empire

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