In a new interview, Charles Edwards of Capriole Investments shared his Bitcoin positions for 2023. Reflecting on the past few months, the renowned expert said these have put the market in a position where Bitcoin “offers a great position for long-term investors. ”
Like Edwards noted, nearly every sentiment metric imaginable fell into the “largest or second-largest bearish” range across macro, stocks, and crypto. “Virtually everyone would have said on Twitter last year that we are in or coming into a recession,” the analyst continued.
While Edwards acknowledged that the risk of a recession is far from gone, many key metrics have come back quite a bit. Among them is the housing market, which is slowing and often leading the overall economy.
“So there are some statistics that suggest that things are slowing down a bit. You have all the big tech names laying off workers and you see this in crypto as well. Cutbacks of 10% to 20% have not been unusual in recent months,’ said the founder of Capriole Investments.
He also pointed out an interesting fact: every time inflation peaked above 5% and then fell by more than 20%, the US central bank flipped. This observation applies to the last 60 years. “So I think there’s a good chance the Fed will stop raising or lowering rates,” Edwards concluded, going on to say:
And then we have this deep value situation in crypto that has played out over the past 3 or 4 months. […] And all of that presents a great opportunity for long-term investors in crypto and stocks, as well as risk assets in general.
Fed Pivot will push Bitcoin up within 6 months
In general, it is difficult to predict when a regime change will occur at the Fed. However, Edwards believes this will happen within the next 3-6 months. After the forced liquidations in the Bitcoin market over the past 12 months, there is currently no significant selling pressure.
Therefore, according to the founder of Capriole Investments, a liquidity crisis will arise on the sell side once larger amounts of Bitcoin buyers return to the market, which will lead to upward pressure. “And we saw that sort of short-squeeze play out in the early weeks of January.”
As for the central point of the Fed, investors should keep an eye on specific data. While the consensus now seems to be that the Fed will change monetary policy, there are still some risks. Edwards pointed to history in this regard and warned that inflation could rise again.
Inflation went on a rollercoaster ride in the 1970s and could continue to do so for the next 5 to 10 years. But I do think the base case for me this year, sometime in the next few months, is at least a rate break.
In addition, investors should be cautious when employment remains very high. This is “probably the single most important factor leading to recessions.” While this data point is still incredibly strong right now, Edwards says it could change “every month” given layoffs in the major tech sector.
Stocks are also worth considering, he said. If they hit new highs, or if earnings are very strong, if production picks up and inflation is still at 5% to 6%, then the Fed might think it can continue because everything is still fine. However, Edwards’ base scenario looks different:
I think 2023 will be a positive year overall as the price of Bitcoin is likely to be higher at the end of the year […]but there will be a lot of volatility.
At the time of writing, Bitcoin was trading at $23,115.
Featured image from iStock, chart from TradingView.com