Hedge Fund Manager and Market Technician Agree Bitcoin Has Found a Bottom

Pantera Capital Management’s Dan Morehead and Fundstrat’s Robert Sluymer believe the worst is over for the bitcoin price. Bitcoin has fallen from glory in 2018 and is currently hovering at about the $7,400 threshold after racing to nearly $20,000 in 2017.

Morehead, whose hedge fund Pantera Capital is dedicated to investing in bitcoin, altcoins and blockchain companies, is urging investors not to miss the boat and to buy bitcoin at these levels. Hedge fund traders know how to uncover opportunities in just about any market environment, but when a cryptocurrency market technician echoes a similar sentiment, it’s got the makings of a trend.

Time to Buy

Morehead isn’t at all spooked by the 65% drop in the broader cryptocurrency market this year. Instead, he calls the market “cheap” and suggests investors take a position now so they can ride the wave when the rally shows up.

“Many institutions are essentially buying the rumor and selling the fact. Getting invested now so that in three, four, five months when the institutional, quality-regulated custodians that we’re hearing about come online, they’ll already have their positions,” Morehead told CNBC.

Indeed, there are custody developments in the works to make crypto assets more secure, and institutional investors are watching and waiting. But regulators appear no closer today to unveiling a framework by which blockchain firms should operate than they were at the start of the year. There has been lots of talk but little action.

Morehead, a former foreign exchange trader, tipped his hand to technical signs, saying it’s a good idea to invest in a currency that’s broken through its long-term moving average of 230 days. This is where Fundstrat’s Sluymer comes in.

Technical Analysis

Sluymer on CNBC pointed to a support line dating back to Q4 2017 that touches bitcoin’s lows in February and April 2018, as illustrated in the below chart. The first sign that bitcoin has bottomed is evidenced by the bitcoin price in the past couple of days bouncing off the $7,000 level.

Source: CNBC


The momentum is also on bitcoin’s side, with the Relative Strength Index showing that it’s oversold and “starting to bottom.” Now the ball is in bitcoin’s court and it’s got to “rally through the downtrend” in order to convince the market that the price has, in fact, found a bottom. At Fundstrat, they’re looking to the 15-day moving average, which is suggesting that the bitcoin price must push through the $7,800 level to get out of the woods.

“Overall when we step back we see the first phase starting to happen. We think bitcoin is starting to bottom of some very key support around $7,000. And we think it’s going to start a recovery process here,” Sluymer told CNBC.

Sluymer’s got a word of caution for traders who are shorting bitcoin, cautioning them to “reduce short exposure” while recommending that the current price is an attractive entry point for long exposure.

Feature image courtesy of Shutterstock.

Gerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.