The latest headlines on regulation of bitcoin have added insult to injury for the No. 1 cryptocurrency, according to Fundstrat analyst and bitcoin bull Thomas Lee.
"It has been a challenging few weeks for bitcoin as the combination of negative headlines coupled with weak prices have added to further worsening of investor sentiment," said Lee in a note Thursday, March 15. "And when sentiment is this weak, the market is increasingly 'fire, ready, aim' -- meaning, any headline today is likely to trigger selling."
Lee's Fundstrat colleague Rob Sluymer noted in the commentary that the short-term technical picture for bitcoin is anything but rosy. He said that bitcoin is set to break below another support level at $8,370 this week -- shortly after Sluymer's analysis was sent to clients, bitcoin traded below that level. The cryptocurrency exchanged hands for $8,014.43 around 12:40 p.m. ET. According to Sluymer, the next support levels are $7,535 then $5,875.
Over the past eight days bitcoin has broken below a support level at $9,325 and on Thursday broke beneath the important $8,370, "reinforcing the corrective trend that began on March 6," Sluymer wrote.
The next support level for bitcoin is $7,535, followed by a low at $5,873 set in February. "Our expectation is BTC will begin to show evidence of bottoming short-term closer to $5,873," Sluymer concluded.
But Lee remained at least somewhat optimistic.
"Our strategy since the start of the year has been to rotate out of alt-coins and focus on large-cap/quality tokens," Lee wrote. "And even as bitcoin has sold off sharply, we think it's important to keep the negative sentiment/headlines/price in perspective."
He noted that Fundstrat's Bitcoin Misery Index is at 18, which is the lowest level it's seen since 2011. Plus, future returns for bitcoin appear strong per Fundstrat's forecast.
Lee added that bitcoin "currently trades essentially at the break-even cost of mining a bitcoin," which is currently at $8,038 based on a mining model developed by Fundstrat. Lee said it is "pretty unusual" for bitcoin to trade below mining cost.
Lee also added that March is "seasonally the worst month" for bitcoin. It has risen in March only one of the last seven years. April, though, is one of bitcoin's strongest months -- it has risen five of the last seven Aprils.
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