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Bitcoin took a considerable hit, dropping 10% on August 15 to hover around $26,000 since then. Despite this, Matrixport, a crypto services provider overseeing over $3 billion in assets, sees a silver lining. Markus Thielen, the company's research and strategy chief, broke down the firm's cautiously optimistic outlook during a Tuesday market briefing.
According to Thielen, Matrixport is leaning towards a long bitcoin position with prudent stop-loss measures. His strategy hinges on expectations of lower U.S. Treasury yields and an upswing in tech stocks. He indicated that they had foreseen a 10% market adjustment by summer's end, which has already come to pass. Thielen advises traders to go long, but to watch carefully for the cryptocurrency's value to plummet below $25,800—a scenario that would activate the stop-loss.
At present, the 10-year Treasury note yield in the U.S. has slumped 18 basis points to 4.18% in just a week. This downturn has been favorable for high-risk assets like cryptocurrencies. When Treasury yields dip, investors often turn their attention to higher-risk portfolios like tech stocks and digital currencies. Earlier this month, the yields had peaked at their highest since 2009.
Thielen is banking on declining yields due to a cooling U.S. inflation rate. Last week, Federal Reserve Chairman Jerome Powell seemed to confirm the pause on interest rate hikes. Thielen believes this cessation could foster a deflationary boom, fueling U.S. stock markets to reach unprecedented highs by year's end.
Additionally, Thielen predicts that market makers, entities that provide liquidity through constant buying and selling, will be inclined to purchase bitcoin to maintain a neutral portfolio. He points out that derivatives data reveals a notable wall of call options between $30,000 and $35,000. Even a small uptick could force market makers to buy more bitcoin as a hedge, catalyzing a surge back to the $30,000 mark.
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