Bitcoin prices are trading at an ‘extreme discount’, Bloomberg analyst says

Bitcoin is currently trading at a significant discount, according to Bloomberg Intelligence senior commodities strategist Mike McGlone.

He provided this assessment as the digital currency, the most valuable in terms of market value, has been stuck below $25,000 since June, TradingView data shows.

McGlone relied on several observations in making his case, and he also cited technical analysis, focusing on a specific indicator.

“The benchmark crypto reached an all-time low against its 100-week moving average in July,” he noted, describing this situation as an “extreme discount within an enduring bull market.”

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

The Bloomberg analyst also highlighted the importance of stocks, which have repeatedly shown a significant correlation with bitcoin.

“The bottom line is that there are few more powerful forces in markets than when the stock market is falling at high speed as it did in 1H,” he said.

McGlone also highlighted the key role played by the Federal Reserve, which has made aggressive rate hikes in 2022.

This development could potentially provide headwinds for risk assets such as cryptocurrencies and stocks by increasing the returns paid by lower-risk bonds and making them more attractive.

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“Don’t fight the Fed has been my mantra for risk assets since late last year,” he said.

“Bitcoin and cryptos were an important part of the 2021 rush and therefore part of the 2022 flush, but I see bitcoin and ethereum ahead.”

“Bitcoin is well on its way to becoming global digital collateral in a world going this way and ethereum is a primary driver of the digital revolution, as evidenced by the possibility of the most traded cryptos – dollar tokens,” McGlone said.

Bitcoin ‘Incredibly Oversold’ Says Analyst

Budd White, co-founder and chief product officer of crypto software company Tacen, also weighed in on the matter, claiming that the digital currency is currently trading far below its true value.

“I’m still very much of the opinion that bitcoin is not only incredibly oversold, but also in a huge accumulation zone. With every price increase with bitcoin, we grow both its market value and its utility value,” he said.

“If you look at bitcoin’s market value to realized value, or MVRV, we see it around one, which suggests that the market value of this asset has fallen to its actual utility value,” White noted.

“It also suggests to me that the number of forced sellers remaining in the market is relatively small due to the massive liquidations we have experienced in recent months due to Terra, Three Arrows and fate. So it looks like Bitcoin has a pretty solid bottom at or around $18,000.

Market resilience

White noted that, despite strong support near the above price level, bitcoin has recently been “hovering” close to $23,000.

“So far — and beware that crypto prices can change quickly and dramatically — it’s held up a lot despite a jobs report coming out that was much higher than expected,” White added.

“It seems that markets are already even more aggressive monetary tightening prices to be taken by the Federal Reserve because of these rising numbers. Inventories have fallen and yields have risen,” he noted.

“And again, bitcoin is just floating,” the market watcher said.

“I am not saying that we are experiencing a decoupling of Bitcoin from the stocks. We could definitely be another leg down in terms of Bitcoin’s price.

“But this relative strength tells me that the bulk of the Bitcoin sell-off may be behind. And barring any exogenous shock to markets — like credit markets about to break — I think investors are still looking at Bitcoin as a decent buy at these levels,” White said.

Potential downside

While White spoke to bitcoin’s recent price resilience, Tim Enneking, managing director of Digital Capital Management, stated that the cryptocurrency could fall back to its recent low below $18,000, which it reached in June.

“Bitcoin made a good, if not entirely convincing, move from $20k as recent resistance (until July 15) to support (after that date, tested once on July 26-27, and firmly above since),” he said. said.

“While it was a good move, it was quite slow and seemingly uncertain, especially given the summer slog,” Enneking said.

“As a result, most people are still hedging their bets on whether BTC will again try to test the June 18 bottom at $17.6k.”

“Going forward, I would expect more general slides, slightly positive movement and that the recent bottom will not be retested. It’s a 50-50 proposition whether $20k will be tested again,” he claimed.

Improving sentiment

Investor sentiment has steadily strengthened over the past few weeks, according to the Crypto Fear & Greed Index provided by Alternative.me.

This index, which ranges between zero for “Extreme Fear” and 100 for “Extreme Greed,” currently stands at 31, a number that indicates “Fear.”

This figure has followed a steady upward trend since June 19, when it reached a value of six, indicating a state of “extreme fear.”

Furthermore, the index has stood at 20 or higher since July 18.

The image below provides the latest reading for the benchmark.

Armando Aguilar, an independent cryptocurrency analyst, commented on how this benchmark has changed in recent weeks.

“The fear and greed index recovered from the low 20s following the major collapse of some protocols and crypto service providers,” he said.

“Investors returned to buying digital assets and the fear gauge headed into yellow/buy territory,” Aguilar said.

“Historically, the market has seen price momentum when the index reaches the mid-30s,” he noted.

An uncertain prospect

Aguilar went on to provide a broader analysis and assess the big picture.

“There are still macroeconomic and geopolitical pressures lurking so that Bitcoin could reach past lows if stocks take a hit and investors pull back from risk-on assets,” he said.

“Still, given the current environment and if Bitcoin can break upper resistance levels, it could experience positive price momentum.”

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.