Don Kaufman, TheoTrade Chief Market Strategist, joined “All About Bitcoin” on CoinDesk TV share Bitcoin price analysis amid global market volatility. Don also offers insight on how economic instability and fear can impact the price of oil and other assets.
Christine Lee:
Right, let's talk more about BTC price analysis with Don Kaufman, co-founder of Trading Educator, TheoTrade. Hello there, Don. Thanks for joining us. So volatility is the name of the game right now. What's your assessment on Bitcoin price?
Don Kaufman:
Well, you know what, when the geopolitical risk had first broken out and the sanctions were coming down the pipe, I was actually some short term bullish on a lot of crypto, specifically on Bitcoin. At this point in time though, unequivocally I am bearish and I've maintained, if you will I'm short term bullish and really longer term bearish. At this point in time, I still think we need to see some considerable price action to the downside.
Christine Lee:
So you're saying risk is off the table versus say an accumulation phase for Bitcoin.
Don Kaufman:
Yeah. Let me get really specific. So I'm not at all a market technician, I'm much more a quant, but there's a phrase that I've used for many, many years. And I was in the trading world in Chicago, the brokerage business, and I've been in risk management and there's a phrase that we used all the time and I just, I have not seen it inside of Bitcoin. And the phrase is, we haven't felt the fear yet. And when you start thinking about price action in a marketplace, think about oil the last couple of days.
Don Kaufman:
Oil traders, they felt the fear. And ironically, the fear was to the upside. If you were trading commodities and you were short and you got caught in that short squeeze and they felt the fear. Bitcoin needs to go through the exact same kind of, again, phrase, feel the fear. And again, if you don't, as I say, know what that terminology means, you haven't been on the wrong end of a trade before that's gone horrifically wrong. We need to wash out again some of those weak hands, feel the fear, stabilize. And right now it just, it doesn't feel like, it doesn't look like it. When you talk to crypto traders, eh, they're still hanging on right now. Again, you got to feel that fear.
Christine Lee:
Well, I would say the European central bank, they're exiting stimulus faster than anticipated. That would seem to be, you know, do you think that would have any impact on Bitcoin?
Don Kaufman:
So some of the negative implications coming up, again, being a bear, I'm going to be looking for some of the negative implications right now. First and foremost, whether you want to look at equity markets, whether you want to look at crypto markets, it's hard to find things right now to be bullish about. We're going to go through quantitative tightening. Okay. We can talk about the ECB till we're blue in the face, but for the most part inflation is running incredibly hot, obviously 7.9%, it does not even conclude the commodity burst we just had in the last few weeks since the geopolitics effectively broke out.
Don Kaufman:
Inflation's out of control. Again, it's very difficult for me to latch onto anything that wants to be bullish because from where I stand looking at crypto and Bitcoin, it's tough to not rationalize if the NASDAQ is going to see some heavy sell side activity, it's going to grip a hold of Bitcoin and pull it down with it.
Don Kaufman:
I know just a moment ago you were showing a chart with adoption of these products. And I can probably make the same argument that that adoption looked a lot like that for trading back in like 98 and 99. And we had to go through a phase where there was a love affair with the internet and a love affair with stocks and a love affair right now with ultimately with Bitcoin. That love affair is going to come to a hideous halt, okay, will bottom, and then ultimately some stronger investors can come in.
Christine Lee:
Just playing back on your phrase on feel the fear, so you're saying that hasn't come along for Bitcoin so we're due for a leg lower.
Don Kaufman:
Yeah. So one of the other ways though, as I said, I was a kind of a quantitative trader and always have been a quantitative trader, saying feel the fear is about at least quantitative as you can possibly get. I measure feeling the fear a lot in implied volatility. That's not something that you prototypically hear about when mentioning crypto markets, right? Like implied volatility because it relates to options. So one of the things I do when I'm looking at Bitcoin is I'll actually look over at Bitcoin futures markets that do have relatively liquid options, and right now we've seen about an 80% implied volatility. But ironically, that's not much higher than a lot of equity products. And I think that really that volatility in Bitcoin, it's got a rock, it's got to be north of like a hundred percent. Again, that's what I mean by feel the fear. You can feel it. It's a very quantitative metric when you're getting sheer panic in a marketplace and volumes start to surge out there and again, weak hands fold very easily.