Crypto Space May Be in for New Round of Pain, Fundstrat Says

(Bloomberg) -- As if cryptocurrencies haven’t been through enough already, they may be poised for yet another leg down.

Digital currencies are on track to retest their fourth-quarter lows in a weak technical position, Fundstrat Global Advisors strategist Robert Sluymer said in a note Wednesday. A proprietary gauge of market breadth in the space shows smaller coins are most at risk, he added.

“The price structure for most cryptocurrencies remains weak and appears vulnerable to a pending breakdown to lower lows,” Sluymer wrote. Fundstrat’s advance/decline indicator, which measures market breath for 250 small-cap cryptocurrencies, “is at risk of breaking to new lows.”

Digital currencies have had a tough time over the past year with Bitcoin, the most well-known of the lot, down more than 80 percent from its December 2017 high. In a recent report, JPMorgan Chase & Co. estimated the cost to create one Bitcoin was $4,060 globally in the fourth quarter, higher than the $3,369 level it was trading in Asia on Thursday.

Fundstrat, of course, is known more for Bitcoin bullishness than caution. Tom Lee, the firm’s co-founder, said in January 2018 that the asset could surge to $125,000 by 2022 and a few weeks later predicted new highs above $19,000 within five months. Lee and Sluymer have stood out for their willingness to work in the volatile crypto space -- creating indexes, for example, in addition to doing fundamental and technical analysis.

While Fundstrat has now stopped giving price targets for Bitcoin over specific time frames, the key level to watch for the digital currency is $3,100, Sluymer said.

“A break below the fourth-quarter lows at $3,100 would imply a decline to $2,270, while a move above $4,200 is needed to signal Bitcoin is beginning to improve,” he said.

--With assistance from Cormac Mullen.

To contact the reporter on this story: Joanna Ossinger in Singapore at jossinger@bloomberg.net

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Cormac Mullen, Andreea Papuc

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