Bitcoin (BTC) Price Correction Not Surprising, These Are Two Key Technical Levels to Watch - Morgan Stanley

January 28, 2022 9:28 AM EST
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Morgan Stanley equity strategist Sheena Shah said she expects Bitcoin (BTC) to continue to feel the impact of news related to the central bank and its policy changes.

“BTC's 50% correction is within historical norms,” said Shah in a client note.

Reflecting upon the current state in the crypto market, Shah said that the 50% pullback in Bitcoin price is not very surprising. Forecasting the fair value of crypto assets is a challenging task given that these currencies continue to trade in a speculative manner.

In order for cryptocurrency markets to become more stable there need to be indications of less tight policies from central banks or some kind of a new liquidity/leverage in the crypto space, the bank’s strategist said.

“Bitcoin has seen 15 bear markets since its creation in 2009, with the 50% correction in recent months within the range of what has happened before. Throughout prior bullish markets, many have said bitcoin was expensive at $1k, $10k, $20k and then $30k, yet in November 2021 it traded at close to $69k. Which is the "correct" valuation or price?” asks Shah.

The strategist adds that it is “hard to value bitcoin on fundamental demand beyond the asset speculation” before it is widely adopted as currency for goods and services.

From a technical point of view, Shah noted that Bitcoin could see a further price drop if the cryptocurrency drops below the $28k mark, which was also its low point from last year. On the other hand, $45k is the mark to keep an eye on to the upside as it could indicate that the current downturn could be turning around.

By Senad Karaahmetovic | [email protected]

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