CRYPTO Still risk-off for Bitcoin, not a matter of price…

Still risk-off for Bitcoin, not a matter of price…

Several hurdles expected to improve before year-end.  Plus, looking at mini-GBTC effect

For the most part, our current framework is that ‘crypto winter’ ended in late-2018 and Bitcoin is in a new bull market.  But like prior bull markets, the rise in price is not continuous and we are in the midst of a consolidation, with potential downside risk near-term (our TA Rob Sluymer has identified several downside targets).  In other words, the crypto market is not about being greedy, but rather, to keep sufficient dry powder to take advantage of dips.

  • The start of this risk-off period was July 31st because Fundstrat’s proprietary Bitcoin Misery Index (BMI) fell below 66.  Historically, a downturn in the BMI and a break below 66 signaled forthcoming weakness (see our report dated 7/30 –> click here for report).  And this has largely played out in 2019.  We are now waiting for the BMI to fall below 30 before concluding sentiment has properly reset.
  • Other factors subsequently fueled the risk-off call for Fundstrat (Slide 3).  Among the factors:
    —August, S&P 500 rangebound and unpopular opinion is Bitcoin waiting for S&P 500 breakout;
    —Sept. 19th, White House banned “vaping,” highlighting Bitcoin lacks sufficient regulatory protection;
    —Sept. 25th, Bitcoin fell below its 200-day moving, raising questions whether bull market ended;
    —Oct. 23rd, Congressional testimony/hearings on Facebook is ultimately hostile to crypto and Bitcoin.
  • First positive catalyst before YE is BMI falling below 27.  We expect the BMI to fall below 27 within the next 6-8 weeks (Slide 4). A fall below 27 was last seen in November 20, 2018, and shortly preceded the tradable bottom. The most analogous period is 2016 and the price decline for Bitcoin is not substantial if waiting for the BMI to fall to 27—in fact, it rose in 2 of 3 cases, but fell 20% in the third case.
  • Second positive catalyst, we reiterate our unpopular opinion that ‘nowhere S&P 500’ constrained bitcoin—but S&P 500 rally expected. But since we expect the S&P 500 to rally into YE (decisively), this paves the way for Bitcoin to participate in a risk-on rally.  The reason for this correlation, we believe, is that Bitcoin holders are largely retail investors.
  • What could go wrong?  White House and Congress have incrementally turned hostile to crypto, particularly because of Libra.  As we have noted multiple times recently, we think the US remains the central crypto story over the next few years.

Bottom line: We remain risk-off for Bitcoin and crypto but see a higher probability of conditions improving within the next 10 weeks.  Thus, Bitcoin below $7,000 would be an attractive risk/reward (current ~$7,500).

Look for BMI (Bitcoin Misery Index) to fall below 27 (Slide 3)…

STILL RISK-OFF: Headwinds for Bitcoin remain same issues (Slide 6)…

Bitcoin needs to re-attain 200-day moving (Slide 7)…

2019 has more tailwinds than 2018 (Slide 10)…

Disclosures (show)

This research is for the clients of FS Insight only. FSI Subscription entitles the subscriber to 1 user, research cannot be shared or redistributed. For additional information, please contact your sales representative or FS Insight at fsinsight.com.

Analyst Certification (Reg AC)
Tom Lee, CFA, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships. Neither I, nor a member of my household is an officer, director, or advisory board member of the issuer(s) or has another significant affiliation with the issuer(s) that is/are the subject of this research report. There is a possibility that we will from time to time have long or short positions in, and buy or sell, the securities or derivatives, if any, referred to in this research.
Conflicts of Interest

This research contains the views, opinions and recommendations of FS Insight. At the time of publication of this report, FS Insight does not know of, or have reason to know of any material conflicts of interest.

General Disclosures

FS Insight is an independent research company and is not a registered investment advisor and is not acting as a broker dealer under any federal or state securities laws.

FS Insight is a member of IRC Securities’ Research Prime Services Platform. IRC Securities is a FINRA registered broker-dealer that is focused on supporting the independent research industry. Certain personnel of FS Insight (i.e. Research Analysts) are registered representatives of IRC Securities, a FINRA member firm registered as a broker-dealer with the Securities and Exchange Commission and certain state securities regulators. As registered representatives and independent contractors of IRC Securities, such personnel may receive commissions paid to or shared with IRC Securities for transactions placed by FS Insight clients directly with IRC Securities or with securities firms that may share commissions with IRC Securities in accordance with applicable SEC and FINRA requirements. IRC Securities does not distribute the research of FS Insight, which is available to select institutional clients that have engaged FS Insight.

As registered representatives of IRC Securities our analysts must follow IRC Securities’ Written Supervisory Procedures. Notable compliance policies include (1) prohibition of insider trading or the facilitation thereof, (2) maintaining client confidentiality, (3) archival of electronic communications, and (4) appropriate use of electronic communications, amongst other compliance related policies.

FS Insight does not have the same conflicts that traditional sell-side research organizations have because FS Insight (1) does not conduct any investment banking activities, and (2) does not manage any investment funds.

This communication is issued by FS Insight and/or affiliates of FS Insight. This is not a personal recommendation, nor an offer to buy or sell nor a solicitation to buy or sell any securities, investment products or other financial instruments or services. This material is distributed for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice.
The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.
Intended for recipient only and not for further distribution without the consent of FS Insight.

This research is for the clients of FS Insight only. Additional information is available upon request. Information has been obtained from sources believed to be reliable, but FS Insight does not warrant its completeness or accuracy except with respect to any disclosures relative to FS Insight and the analyst’s involvement (if any) with any of the subject companies of the research. All pricing is as of the market close for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, risk tolerance, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies. The recipient of this report must make its own independent decision regarding any securities or financial instruments mentioned herein. Except in circumstances where FS Insight expressly agrees otherwise in writing, FS Insight is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice, including within the meaning of Section 15B of the Securities Exchange Act of 1934. All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client website, fsinsight.com. Not all research content is redistributed to our clients or made available to third-party aggregators or the media. Please contact your sales representative if you would like to receive any of our research publications.

Copyright © 2025 FS Insight LLC. All rights reserved. No part of this material may be reprinted, sold or redistributed without the prior written consent of FS Insight LLC.