Some high-profile investors have taken the recent market downturn as an opportunity to add to their crypto positions, though others warn there’s still a risk of worse to come.
Some of the highest-profile investors in crypto believe that a crypto market bottom is fast approaching — although one still warns of catastrophic outcomes should prices fall below established support levels.
Billionaire Mike Novogratz, the founder, chairman and CEO of digital asset merchant bank Galaxy Digital Holdings told a Morgan Stanley conference on June 13 that cryptocurrencies may be close to a bottom, with Ethereum (ETH) likely to hold at $1,000 and Bitcoin (BTC) at around $20,000 to $21,000.
The bottom for crypto would be realized faster than that of U.S. stocks, which could fall a further 15% to 20% he said.
Ethereum should hold around $1,000 and it’s $1,200 right now. Bitcoin is around $20,000, $21,000 and it is $23,000, so you are much closer to the bottom in crypto than you are where I think, stocks, are going to have another 15% to 20% decline.
Hayes warns of sell-off risk
Arthur Hayes, co-founder and former chief of BitMEX took a similar view, acknowledging on Twitter on June 13 that on-chain data for Wrapped Bitcoin (wBTC) and Ether indicated that “liquidations have mostly happened.”
However, Hayes warned that should support levels break for BTC and ETH at $20,000 and $1,000 respectively, we could expect “massive sell pressure in spot markets.”
Here we go …
1/
Looking at onchain data for $wBTC and $ETH, the liquidations have mostly happened. Data visualization from @parsec_finance
— Arthur Hayes (@CryptoHayes) June 14, 2022
Pal, Scaramucci loading up
Macro investor Raoul Pal has taken the recent market downturn as an opportunity to add to h crypto positions. On June 14, Pal told his 956,000 Twitter followers that “we are in a buy zone” for Bitcoin (BTC), adding he was getting ready to “significantly” add to his crypto positions “probably starting next week and into July.”
The former Goldman Sachs executive explained that the imminent Bitcoin bottom can also be signaled by the weekly Relative Strength Index (RSI), which is at 31, edging closer to its lowest ever at 28.
Thus in 18 months, the conditions will be more favorable and macro assets tend to discount 12 to 18 months out.
But can things get worse? Absolutely. But for my investment framework, we are in the buy zone…right near the 2 standard deviation log regression channel. pic.twitter.com/Wk7eXv8tJJ
— Raoul Pal (@RaoulGMI) June 14, 2022
RSI is a metric used by investors to measure the speed and magnitude of price changes, which can indicate overbought or oversold conditions. According to Investopedia, an RSI reading of 30 or below indicates an oversold and undervalued condition.
Pal said his framework frequently expects 60% draw turns over the long-term time horizons, adding:
In fact, the best way to optimize returns is to add significantly when the market tests the key trend.
Anthony Scaramucci, founder of Skybridge Capital told CNBC’s Squawk Box on June 13 that investors should “stay disciplined” amidst the crypto slump, noting that his fund has continued adding Bitcoin and Ethereum into its portfolio.
“With incremental cash coming into our fund we have bought more Bitcoin and Ethereum […] So yes, truth be told, people will look back on this debacle and say I wish I had fresh cash to buy into that.”
Novogratz was less gung-ho about investing right now, taking a more conservative approach and telling attendees that it may not yet be time to “deploy lots of capital” as the economy may have further to fall.
“Until I see the Fed flinch, until I really think, OK the economy is so bad, and the Fed is going to have to stop hiking and even think about cutting, I don’t think it is time to really deploy lots of capital.”
Other metrics that could shed light on whether crypto is nearing its market bottom is the Fear and Greed Index which as of today is currently sitting at 8, under “Extreme Fear”, which was last seen on May 17, around the time of Terra (LUNA)’s collapse.
Bitcoin Fear and Greed Index is 8. Extreme Fear
Current price: $21,598 pic.twitter.com/lsbousUzeV— Bitcoin Fear and Greed Index (@BitcoinFear) June 14, 2022
Bitcoin is currently priced at $22,061 and ETH is at $1,215 at the time of writing.