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Real Vision Chief Crypto Analyst Jamie Coutts has sounded a stark warning for Bitcoin within the months forward. Citing his new Bitcoin Derivatives Risk Score (DRS) mannequin, Coutts contends the main cryptocurrency’s value faces one in every of two sharp outcomes: a extreme downturn or a surge to new all-time highs (ATH).
Bitcoin’s Q2 Outlook
In commentary shared by way of X right now, Coutts highlights his “first pass” on the DRS mannequin, noting that the market’s most up-to-date occasion of “Cat 5 euphoria” in Q1 2024 was adopted by a pullback of solely round 30%. He contrasts this with a comparable episode in 2019, which noticed a 50% decline—widening to 70% if the COVID shock is accounted for.
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“Looking back at Q1 2024’s Cat 5 euphoria—which I flagged back then (in February 2024)—I’m still surprised the pullback was only -30%. The only similar move outside a cycle top was in 2019, with a 50% drop (70% if you factor in the COVID shock),” he explains.
Coutts emphasizes that 2019 is a greater barometer for present market circumstances than 2021. The rationale, he observes, is that the 2019 rally preceded a serious world liquidity enlargement. By 2021, Bitcoin had already appreciated 12x off its lows whereas worldwide liquidity grew by 30%, reflecting a vastly totally different macro atmosphere.
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Assessing the market’s current threat stage, Coutts factors out that Bitcoin’s DRS metric has slid into the “low-risk quantile,” a zone he says gives minimal predictive energy for future costs. “So, where are we now? Bitcoin’s DRS is in the low-risk quantile—where predictive power is low. If Bitcoin has peaked, we should expect a brutal bleed lower,” he cautions, earlier than including that the opportunity of a rebound stays excessive.
Global Liquidity On The Rise
Coutts then underscores world liquidity’s potential to set off one other Bitcoin rally. He believes an upcoming inflection level in world liquidity—pushed by the necessity to stimulate closely indebted economies—will possible gasoline the derivatives market, which he calculates to be 4 instances greater than the spot market.
“That’s not my outlook though. Global liquidity is ready to inflect that will re-invigorate the derivatives market (4x Spot), potentially jettisoning Bitcoin to new ATHs by May (or end of Q2 for extra padding).”
Another key perception from Coutts facilities on the Global Liquidity Index, which he says has been in contraction for an unprecedented stretch. “This marks the longest contraction of the Global Liquidity Index in Bitcoin’s history—three years and counting (measured from the peak). Previous tightening episodes (2014–2016 and 2018–2019) lasted < 2yrs. How much longer will this go on?”
He argues {that a} renewed injection of liquidity is inevitable, declaring that governments—particularly these with debt-to-GDP ratios exceeding 100%—can be hard-pressed to refinance if nominal GDP lags behind rising curiosity prices. “The fiat, fractional-reserve, debt-based system will implode without liquidity injections. The spice must flow.”
At press time, BTC traded at $87,703.
Featured picture created with DALL.E, chart from TradingView.com
