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Jamie Coutts, Real Vision’s Chief Crypto analyst has issued a warning to Bitcoin for the coming months. Coutts cites his Bitcoin Derivatives Risk Score Model (DRS), claiming that Bitcoin’s leading cryptocurrency faces two extreme outcomes.
Bitcoin’s Q2 outlook
You can also find out more about the following: commentary Coutts shares his highlights via X Today “first pass” DRS, pointing out that it is the latest instance on the market. “Cat 5 euphoria” A pullback in the first quarter of 2024 was only about 30%. He contrasts this with a comparable episode in 2019, which saw a 50% decline—widening to 70% if the COVID shock is accounted for.
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“Looking back at Q1 2024’s Cat 5 euphoria—which I flagged back then (in February 2024)—I’m still surprised the pullback was only -30%. The only similar move outside a cycle top was in 2019, with a 50% drop (70% if you factor in the COVID shock),” He explains.
Coutts says that the year 2019 provides a much better indicator of market conditions today than does 2021. He explains that the rally in 2019 preceded an expansion of global liquidity. Bitcoin was already 12x higher than its previous lows by the year 2021. liquidity Growth was 30% reflecting an entirely different macro-environment.
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Coutts, in assessing the current risk level of the market, points out that Bitcoin’s DRS has fallen into the “low-risk quantile,” A zone, he claims, offers little predictive power of future prices. “So, where are we now? Bitcoin’s DRS is in the low-risk quantile—where predictive power is low. If Bitcoin has peaked, we should expect a brutal bleed lower,” Before adding the high probability of a bounce back, he warns.
Global Liquidity on the Rise
Coutts highlights the potential for global liquidity to spark another Bitcoin rally. He believes an upcoming inflection point in global liquidity—driven by the need to stimulate heavily indebted economies—will likely fuel the derivatives market, which he calculates to be four times bigger than the spot market.
“That’s not my outlook though. Global liquidity is ready to inflect that will re-invigorate the derivatives market (4x Spot), potentially jettisoning Bitcoin to new ATHs by May (or end of Q2 for extra padding).”
Coutts also focuses his key insights on the Global Liquidity IndexHe says that the Global Liquidity Index has contracted for an unheard-of period. “This marks the longest contraction of the Global Liquidity Index in Bitcoin’s history—three years and counting (measured from the peak). Previous tightening episodes (2014–2016 and 2018–2019) lasted
He argues that a renewed injection of liquidity is inevitable, pointing out that governments—especially those with debt-to-GDP ratios exceeding 100%—would be hard-pressed to refinance if nominal GDP lags behind rising interest costs. “The fiat, fractional-reserve, debt-based system will implode without liquidity injections. The spice must flow.”
BTC was trading at $87.703 as of press time.
Featured Image created using DALL.E and chart from TradingView.com
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Source: www.newsbtc.com
