What are the factors that can sink bitcoin further or give it back its bullish momentum?

Bitcoin crypto winter
  • June ends with bitcoin’s worst monthly close since 2011, down 37%.
  • If the control of inflation in the US works, the markets will resume the boom.

Ending the first half of the year, the bearish outlook in the bitcoin market is accentuated. June is about to close with the biggest monthly losses since 2011, around 37%, while the price drop since the beginning of the year reaches 58%.

Even with this significant drop, there are factors that could intensify the crypto winter, suggests analyst Scott Melker. However, he also mentions catalysts that can bring back significant bullish momentum.

Melker refers in his latest market bulletin to the predictions of Tom Loverro, a former director of Coinbase, who makes estimates about the duration of the crypto winter or bearish phase of the bitcoin market. “In 2022, the cryptocurrency market will continue to go down and will improve by the end of 2023,” Loverro notes.

Historically, the transition from an all-time high to the bottom in the bitcoin market takes about 12 months, and that pattern should repeat itself, with some variations, says Loverro. Among the factors that will delay the arrival of the price bottom, the specialist cites the extreme fear that reigns in the market. “Cryptocurrencies are no longer in the headlines, and tourists have left the market. This process can take several months.

With the high correlation between the bitcoin market and stocks, this first half is among the worst for the S&P 500 index, says trader Aurelien Ohayon. Since the inception of this index in 1877, in just 4 years there has been a first semester as bad as the current one. A positive factor within this trend is that in the four semesters with such a negative return, the second half of the year showed positive returns.

Factors that would favor a bullish momentum for Bitcoin

Scott Melker mentions several catalysts that would help turn the current bearish picture around. “When market weather is frigid, days are getting shorter, and it looks like warm weather will never return, it’s time to consider potential catalysts to push the market back into bullish territory.”

First, the analyst refers to the Fed’s strategy to lower current inflation rates. Once inflation is under control, both the market and the economy will resume an upward trend, says Melker. As a second positive factor, Melker points out that we are in a recession and that an official announcement of the exit from that recession is expected soon.

With the results in red for two quarters in a row, we are now officially in a recession, as ForexDominion reported on May 24. On the other hand, major financial institutions such as Deutsche Bank and Citigroup agreed to estimate the probability of a global recession occurring in the next 12 months at 50%, as reported in this media.

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