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Matrixport Advises Long Bitcoin Position with Secure Stop Loss Strategy

Aug 29, 2023 at 03:29 pm

Crypto traders have the opportunity to engage in a bullish stance on bitcoin while implementing a closely monitored stop loss strategy, according to insights from Matrixport's Markus Thielen.

Markus Thielen, the head of research and strategy at Matrixport, has shared his viewpoint on the crypto market, suggesting that traders can consider adopting long positions in bitcoin, backed by a meticulously placed stop loss below the threshold of $25,800. He emphasizes that the movement of Treasury yields could play a significant role in influencing the trajectory of risk assets, including cryptocurrencies, in the near term.

Matrixport, a notable crypto services provider with assets under management exceeding $3 billion, has adopted a cautiously optimistic stance on bitcoin. Despite the August downturn that saw bitcoin's value drop by over 10% on August 15, the company sees value in buying into the dip using a strategy that incorporates a tight stop loss.

Bitcoin's recent price movement has been centered around the $26,000 mark following the test of the former resistance level, which has now transitioned into a support level at $25,000. Many traders have expressed concerns about further losses in the coming weeks.

In contrast, Markus Thielen believes that there's potential for a different outcome. He suggests that by employing well-calibrated stop loss measures, traders can opt for long positions on bitcoin. This expectation is rooted in the anticipation of lower Treasury yields and a rally in U.S. technology stocks.

Thielen highlights the recent 10% correction in bitcoin's price as a natural occurrence following the previous bullish trends. He recommends that traders utilize an appropriate risk management approach to seize potential opportunities in the market.

Thielen's advice to traders is to closely monitor bitcoin's price movements, particularly observing any signs of a dip below the $25,800 threshold. Such a movement would activate the predetermined stop loss mechanism, potentially safeguarding traders from further losses.

While bitcoin is currently trading at around $26,000, down roughly 11% for the month, the cryptocurrency market's volatility remains a defining feature.

Treasury yields drop

The link between Treasury yields and cryptocurrency prices is explored by Thielen. He notes that as the U.S. 10-year Treasury note yield experienced an 18 basis points decline to 4.18% within the past week, risk assets like cryptocurrencies have enjoyed some reprieve. A drop in yields often prompts investors to seek higher returns in more speculative alternatives, such as technology stocks and cryptocurrencies.

Thielen expects this trend to persist as the U.S. inflation rate gradually eases. He underlines the favorable macroeconomic conditions for risk assets, predicting potential new all-time highs in the U.S. stock market by the end of the year.

Market makers may power BTC higher

Furthermore, Thielen introduces the concept of market makers and their potential role in boosting bitcoin's price. Market makers, responsible for maintaining liquidity by continuously trading the underlying asset, could play a pivotal role in pushing bitcoin's price higher. Thielen speculates that a market maker's need to hedge their positions could drive them to buy bitcoin, potentially triggering a price rally.

Derivatives data highlights a substantial call "wall" between the price range of $30,000 to $35,000. Should bitcoin's value begin to rally, the option gamma dynamics could create a cascade effect, leading to a notable price surge. Thielen points out that this scenario is not a traditional short squeeze but emphasizes that even a minor push could set off a significant upward movement.

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