Bitcoin: Choosing Between DeathCross Threat and Goldman’s Domination Prediction

The total Market Cap of all cryptocurrencies dropped to $2.1 trillion during yesterday's digital asset rout following the release of the Fed Minutes of the FOMC Meeting. The growth of Bitcoin and altcoins, as much as one of the equities, highly depends on the direction of the Fed's monetary policy, but the released Minutes of December FOMC meeting made it clear that everything will change in 2022, as the board members voted for an earlier rate hike, if the labor market’s health allows it. This is a kind of unfortunate set of events, as just as soon as on Thursday and Friday, statistics on U.S. unemployment and job creation reports will be released, which can trigger another wave of digital currencies’ selloff.

In this case, the bears will get a chance to break through the important December low of last year, which became the pivotal point of Bitcoin's rebound from around $41000 to the area of $50000. The recent sell-off is deserving investors’ special attention, judging by the truly extraordinary volatility spike. Such implication has around 80% probability to represent a signal of a turnaround.

Conversely, a prolonged drop of Bitcoin will lead to the formation of the notorious "DeathCross" on the crossover of moving averages (MA), with a period of 50 and 200 days. Traders perfectly remember this signal from 2018’s “crypto winter”, when BTC lost more than 80% of its value. Now prices of the main cryptocurrency are below historical highs by 40%.

However, according to Goldman Sachs Group, Bitcoin will continue to take market share from gold as part of broader adoption of digital assets, making the often ridiculed price prediction of $100,000 by advocates a possibility. Goldman estimates that Bitcoin’s float-adjusted market capitalization is just under $700 billion, which accounts for around 20% share of the “store of value” market which it said is mainly represented by Bitcoin and gold. The value of gold that’s available for investment is estimated at $2.6 trillion.

If Bitcoin’s share of the store of value market were “hypothetically” to rise to 50% over the next five years, its price would increase to just over $100,000, for a compound annualized return of 17% or 18%, Zach Pandl, co-head of global FX and EM strategy, wrote in a note Tuesday.

So, whose prediction is correct – the one of the doomsayers or of the Golman’s? The reality may be, as it often happens, somewhere in between. The current selloff is likely to represent a one-off opportunity to enter the market (if someone who felt attracted is still lingering) because there are next to no chances for the Fed to undertake the priced-in three rate hikes. In that case, the U.S. and global economies would literally plunge into the omicron-exacerbated brutal recession. Instead, the U.S. central bank will likely decide on just one rate hike which won’t change the current bond yields significantly thereby prompting investors to return to their old devices.