Jump to content

Bitcoin Q1 2022 Fundamental and Technical Forecasts

Recommended Posts

Bitcoin Q1 2022 Fundamental Forecast: Macro Will Matter (More) To Bitcoin

Bitcoin Fundamentals – Briefing | Crypto Articles | ForexPeaceArmy



2021 has proven to yet again be an exciting year for bitcoin investors. The nascent asset (yes, I believe it’s still early) has risen to a market cap just under $1 trillion while notching a +100% return along the way.

Over the course of the year, bitcoin has undergone increased institutional adoption, the launch of a futures ETF, and the first major upgrade to the Bitcoin network in four years. The path forward has been anything but smooth as bitcoin investors have consistently weathered periods of gut-wrenching volatility. For some traders, this is an attractive feature of the asset, they eat volatility for breakfast. For others, it’s enough to keep their capital away entirely.


Bitcoin Year Chart

Source: Koyfin

Bitcoin’s volatility is likely to dampen over time, but it’s not going away. The future of crypto is tethered to technological advancements, and higher prices likely hinge on exponential network growth, making the task of forecasting a specific price target a difficult endeavor. Regardless, as bitcoin undergoes further institutional adoption as an asset class, its returns will likely become more of a function of the current macro regime. Hence, without a view of cross asset class relationships and an understanding of where we are in the economic cycle, you might be trading in the dark.


When looking at bitcoin’s historical correlations with traditional assets, there’s a positive relationship with the S&P 500, as well as commodities such as gold and crude oil. This trend in correlations among bitcoin and equities has also been strengthening for much of the year.


BTC Inverse 2017

Source: Koyfin

This could be further evidence that bitcoin is similarly influenced by the outsized impacts of both monetary and fiscal policy in a post-COIVD world, or that growing intuitional adoption has ushered in the same risk management processes employed by these investors across traditional assets. Either way, since January of 2020, bitcoin’s returns have mirrored equities more frequently than ever before.

It’s also worth noting, that like most individual securities within a broad-based equity index, cross asset correlations will strengthen during periods of elevated volatility. Investors often reduce risk exposures in volatile markets, resulting in strengthening correlations across markets. Should equity volatility remain elevated as the Federal Reserve embarks on its process of monetary tightening, this could make for a more challenging environment for bitcoin during Q1 and into Q2.

Bitcoin is also likely to struggle, should the persistent dollar strength of Q4 21 continue. Whether you prefer to view bitcoin as a currency or a commodity (I classify it as a commodity), the dollar is a factor. The strength of this inverse relationship can certainly wane, but going forward, like most commodities, a strong dollar could impede performance while dollar weakness might offer a tailwind.


Bitcoin 2017 to Present

Source: Koyfin


Bitcoin UUP Price Chart

Source: Koyfin


Given these observations, as we look ahead to Q1, I believe bitcoin will ultimately become a prisoner of economic growth and inflation. The macro environment will begin to have a more pronounced impact. The liquidity implications of tighter monetary policy, coupled with a potential growth slowdown, could negatively affect the market’s most volatile asset. No matter how bullish we might be on crypto’s potential over the long run, this warrants consideration.

The yield curve is sending a warning. Bitcoin often exhibits a strong positive correlation with the U.S. Treasury yield curve. As the slope of this curve is often used as a barometer of investors' future expectations for economic growth and inflation, a flattening curve is cause for concern. Bitcoin has done well during periods of curve steepening, while struggling as it flattens. For most of 2021, if you’ve been able to get the slope of the yield curve right, directionally it’s kept you on the right side of the bitcoin trade.

Should this hold true, going forward we’d expect bitcoin’s price to perform well during periods of economic growth and inflation, often coinciding with higher long-term interest rates, while a growth slowdown and disinflationary backdrop could make things difficult for BTC. Similar as to how equities tend to underperform during periods of economic deceleration.


BTC 2021

Source: Koyfin


To establish a realistic expectation for bitcoin’s price over the next quarter, let’s model potential outcomes through the lens of historical volatility.


BTC Volatility Chart

Source: TradingView

As bitcoin has matured as an investable asset, its realized volatility has declined over time. Volatility spikes have resulted in lower successive highs, falling from 190% in 2018, to a lower peak of 110%, during bitcoin’s spring rally.

If we model an expected annualized move using these prior realized volatility highs and a spot reference price of $47,000 BTC/USD, we get the following theoretical trading ranges for the next year.

Volatility & Range

Due to its highly speculative nature, there’s often a positive correlation between the bitcoin spot price and its underlying volatility. Therefore, it's certainly within the realm of possibilities that bitcoin vol can reach levels in excess of 100%, though the price itself cannot go below $0.

To calculate the standard deviation of an expected range for bitcoin’s price over any time period, we can enter our volatility input into the following formula:




n= # days

forward SQRT = Square Root

Applying this same calculation to the Q1 period on a forward basis and assuming a current realized volatility of 90%, we get a statistically probable range for bitcoin of +/- $21,910. Meaning, should bitcoin volatility remain sticky at these levels, it’s entirely reasonable for bitcoin to reach $68,000 on the upside or trade as low as $25,000 on the downside over the next quarter. A wide range, but in line with how bitcoin has traded historically.

By Ryan Grace, 26th December 2021. DailyFX

Link to comment

Bitcoin Q1 2022 Technical Forecast: Putting Pressure on the Long-term Trend

Bitcoin falls by 29% as $2.5 billion of crypto liquidated. What caused the  plunge this time? | Euronews


Bitcoin came off quite a bit in Q4, and could continue to pressure its uptrend in the early part of Q1. This is starting to shape up as another long-term trend test, of which most often BTC has passed. Will this time be the same?

Giving the trend and support from 2020 the benefit of the doubt, a test of the 40k area could bring a bottom that helps send Bitcoin back to the upside. Ideally, we see some type of capitulation price action occur as the test unfolds, demonstrating a wash-out type low that can help clear the way for the upside.

However, should we see support get broken in convincing fashion the retracement would become rather deep for it to indicate a healthy corrective move. On a clear break of 40k the next area of support doesn’t arrive until under 29k.

From a tactical standpoint, it appears longs or would-be longs may want to lean on 40k should we see it come into play soon, but if it breaks then stepping aside for lower levels may prove the most prudent move.


BTCUSD Weekly Chart

BTC/USD Charts by TradingView


Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

Paul Robinson, Strategist, 25th December 2021. DailyFX

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Posts

    • Sainsburys full year earnings and Unilever’s first quarter trading update both say the same thing, UK consumers are in for higher prices. The war in Ukraine, supply chain issues and the effects of ongoing Covid all to blame.      
    • US Dollar (DXY) Daily Price and Analysis US Q1 GDP may stall the greenback’s advance. A 20-year high nears for the US dollar. The multi-month US dollar rally continues with the greenback printing a fresh high today ahead of the first look at US Q1 GDP at 12.30 GMT. The US dollar basket (DXY) has been boosted by renewed weakness in the Euro and the Japanese Yen, as investors move from lower-yielding to higher-yielding currencies, while safe-haven flows continue to benefit the greenback. The US growth release later in the session is expected to show a sharp slowdown from the robust Q4 figure of 6.9%. The markets are currently pricing in growth of just 1% for the first three months of this year, with the slowdown mainly due to a reduction in inventory accrual over the quarter. This release is unlikely to move the greenback, unless there is a large miss or beat, as the Fed believe that 2022 US growth will be robust enough to let them tighten monetary policy sharply without damaging the economy. The latest US Core PCE data – the Fed’s preferred inflation reading – is released on Friday and this may have more effect on the US dollar than today’s GDP data. For all market moving economic data and events, see the DailyFX Calendar. The ongoing US dollar rally has been aided by weakness across a range of G7 currencies including the Euro, the Japanese Yen, and the British Pound. The Euro continues to battle with lowly growth expectations, exacerbated by energy concerns, the British Pound is mired by weak economic data, while the Japanese Yen is in freefall as the BoJ continues with its ultra-loose monetary policy.   The US dollar continues to press higher and looks set to break above 103.96, the March 2020 high. Above here the US dollar would be back at levels last seen nearly two decades ago. The March resistance will likely hold in the short-term, especially with month-end portfolio rebalancing at the end of the week, but US dollar strength is set to continue in the months ahead. USDOLLAR (DXY) WEEKLY PRICE CHART – APRIL 28, 2022 {{THE_FUNDAMENTALS_OF_BREAKOUT_TRADING}} What is your view on the US Dollar – bullish or bearish?   Apr 28, 2022 | DailyFX Nick Cawley, Strategist
    • While Tesla has nothing directly to do with Elon Musk buying Twitter - TSLA stock closed down 12% on news that Musk may have to sell stock and use other holdings to stand against the loan to finalise the purchase of the social media giant.        
  • Create New...