The pound and euro crisis: What does it mean for Bitcoin? | Alessio Rastani

The strong rally in the dollar has obviously put downward pressure, not just the pound. The next few weeks are going to be absolutely critical on the stock market and Bitcoin.

A few days ago the British pound dropped to all time lows against the dollar after controversial tax cuts were announced. Following the crash, market data showed that UK investors were increasingly turning to Bitcoin. Crypto fans are saying that the fall of the oldest fiat currency could be a game changer for Bitcoin. To understand the implications of the sterling crisis and its effect on Bitcoin on the short term and the long term, we sat down with Alessio Astani, a crypto analyst and forex trader. Before we get started, as always, consider leaving a like and subscribing to our channel. I'm Giovanni, your host. Welcome to another cointelegraph interview. We saw the British pound collapsing at record lows against the US dollar this week after the government announced a controversial tax package that also sparked turmoil in the bond markets. So what do you make of these latest events?

Yeah, thanks Giovanni. Good question. The main driver of this decline in the pound has been the strength in the US dollar. The strong rally in the dollar has obviously put downward pressure, not just the pound. We've seen the euro dropping, we've seen gold dropping, but of course the pound has seen a bigger declined recently. But I think that's most of it. Most of it driven by emotion, sentiment. I don't believe that the cause of this decline was what happened with Liz Truss or the Prime Minister or her decisions. Even again, I actually think that the pound just recently dropped into a capitulation zone or capitulation region. In other words, an area or region where I think we could see a bottom in the British pound. Also sentiment again, I'll show you the chart of sentiment. Majority public opinion is very bearish on the pound, extremely bearish. I think levels not seen since 2020 and perhaps in 2016. Even so, that's another factor which is in the pound's favor. The fact extreme bearishness, pessimism on the pound. Every time this has happened in the past, this has been a turning point, a bullish turning point for the pound. And we are at support, we are at 1985 lows and we're getting very close now to parity on the pound.

So there was a very interesting phenomenon this week after the collapse of the British pound. We noticed a spike in the trading volume of the BTC GBP pair which seems to indicate an increasing interest from UK investors towards bitcoin. So what Is your reading of this phenomenon. Do you think that British investors are dumping the, their fiat currency to put their investment into Bitcoin?

I think it just goes to show the levels of panic among traders, among the public. But people seeing the pound collapsing, they're hearing all the news out there about pound, you know, collapsing to, you know, even lower levels. They're panicking and they say they're, they're thinking, oh, okay, the money's going to get destroyed. They're going to see devaluation of currency. And this sentiment and this thought fear that is spreading among the public and among traders is causing them to ditch the pound and move into something like, something that they believe may preserve the value of their assets or the currency. In other words, something like Bitcoin or maybe potentially gold or something like that.

So we must say that the pound is not the only loser in this situation. The US Dollar is still on an upward trend since the beginning of the year against all these currencies like British pound, Euro, yen. How long do you think this dollar rally is going to continue and what is going to be its impact on bitcoin?

I think that you're absolutely right. The strength in the US Dollar, which again I saw coming last year, in the summer of last year, has put downward pressure. Obviously, the euro trades inverse the dollar, and so do many other currencies, one of them being the British pound and also gold, gold and silver. They are also impacted by the strength in the US Dollar, again, inverse relationship often. So I think the best way to answer the question is to look at the chart of the US Dollar, the weekly chart of the dollar, and essentially, again, without a doubt, we're overbought, extremely overbought on every level. But here's what's really interesting about this. Firstly, I'm looking at a weekly chart and we're reaching a trend line resistance, a trend line which if you connect the highs, if we connect the highs of 2009 with the highs of 2015 and the highs of 2016, what we get is a trend line resistance which is meeting us right now. As a matter of fact, we reached that level very recently. I put a blue line, horizontal blue line in my chart. That is the 1618 extension. So if we measure, I quite like to use Fibonacci extensions. And there's one extension that I really like. It's called the golden ratio 1.618 extension. And these numbers occur in nature, which is why they're so important. If you measure the rally from 2018 to 2020, so if you measure the 2018, 2020 rally and you project that from the lows of 2021, we actually reached that 16:18 extension, the golden ratio extension just recently at 114.77. Okay. That's a key level of resist, by the way. That's merging now. Merging with a trendline resistance which I have a purple line on my chart. Okay. And I'll put it there so you, so everyone can see it. So we're reaching two key levels of resistance meeting together. Basically. I think we're reaching. My point is that I think we're reaching a very, very strong level of resistance on the dollar. Now. Could it extend higher? Yes, it could. As long as the dollar remains above 110, 111, it's possible the dollar could still extend a bit higher to the 116 to $117 level. Sorry, 217 level. I think a pardon, 1, 716 levels on the dollar index. Okay. So as long as the dollar remains above 110,111, I think we could still see extensions to the one hundred and sixteen, one hundred and seventeen level. Once we see a clean break, a sustained break of 111.5 and 110 levels on the dollar index, then I think the top is in for the dollar. And then I'm looking for a multi month decline in the dollar back to 104 to the 100 level.

So what do you think? Is the depreciation of all these currencies against the dollar a net positive for bitcoin?

As far as the bitcoin, as far as bitcoins is concerned? Again, if there are strong bulls, strong, you know, bitcoin bulls. Watching this video, they'll probably say of course bitcoin is going to be a better preservation of your money and wealth. Personally, I'm not convinced. The reason is that we've seen before that bitcoin can cease strong again in a bear market. It can fall, as we've seen before in the past, 70%, 80%, 90% as happened in previous bear markets. So I don't necessarily think that putting your money into bitcoin is going to be safer in that respect. Personally, I prefer to as a safer bet. I think gold and silver are better, personally. I guess my own personal perspective.

Well, or maybe the dollar itself, or.

You could argue that. But I don't think the dollar is a safe bet now because I think we're reaching a likely top in the dollar. So I wouldn't think the dollar is necessarily safe. Personally, I think gold is a Safer play right now because once the dollar tops, and I think it will do in the next few weeks, or even potentially sooner, once the dollar tops and drops, gold is going to blast higher and so will probably silver as well. So I'm personally feel safer putting my money into gold and silver now. Could it have a positive impact on bitcoin too? Yeah, absolutely. I think it could be. But we have to wait for the stock market also to. I think the S and P, the stock market also need to show signs of strength because there's a strong correlation between Bitcoin and the stock markets.

Yeah, it seems like that as long as the macroeconomic picture doesn't change, we are likely to see a strong recovery in risk on assets.

Giovanna, just to make a point about that, you make a very good point. One thing I'm sure you know, Giovanni, is that sometimes macroeconomic conditions take a while. In other words, they sometimes lag the market. So sometimes you see price action moving ahead of macroeconomic conditions. There's a chart I'll show you which I'll send to you. And I'm sure you've seen this yourself, Giovanni, which is Bitcoin has a strong correlation also with pmi. Okay, so the PMI figures as well. So you're right. Macroeconomic conditions. If we see macroeconomic conditions improve. You're correct, Giovanni. We'll see bitcoin. That will be a better environment for bitcoin as well. But usually the S and P and bitcoin typically bottom before the PMI bottoms and before macroeconomic conditions improve.

In the last few weeks we heard a lot about the risk of a recession. How likely is this possibility and what is going to be the impact on Bitcoin if we are really heading towards a recession?

Yeah, I think there are strong clues that we've already entered the recession. I think you've probably seen that data yourself and probably your audience and your viewers have seen that too. I think we are probably very likely already in a recession. A lot of indicators are already showing that. We've already seen 2/4 of negative GDP growth, which also is a likely indication of a recession. Of course, a recession only gets confirmed officially by the nber, but that takes usually months later before they confirm that. But the signs are there. We've already entered a recession. What is not clear is whether this is going to be whether this is going to be a recession similar to the one in 2020, which was very short and quick before the market quickly recover or whether are we entering a more prolonged bear market. I Think the only opinion that really matters is, is the stock market specifically I'm talking about the S and P. The S and P is approaching some key support levels. Let's say the stock market declines into the 200 weekly average. Again that's near 3590, maybe even go to 3500, 3400 levels that range that region. Then let's say we get a bounce, which is normal between late October to December. Let's say we get a bounce or a rally, which I'm also expecting to happen after. Or if we drop into those levels, the 3500, 3400 range. Let's say we get a bounce and that bounce or rally fails. If that bounce or rally fails and drops back down again, then very likely, very likely we're entering a long term recession and something very close to similar to 2008. Okay. Or the year 2000, the.com crash. So in other words, what I'm saying is the next few weeks are going to be absolutely critical on the stock market and bitcoin. All right. And knowing whether we're heading into towards a temporary recession followed by quick recovery or a much more prolonged sustained recession and bear market similar to 2008, similar to the year 2000.

Okay, so when you talk about a long term recession, what kind of timeframes are we looking at? Is it six months, one year or more?

Yeah, I mean, I forget exactly the average period for a recession. It could be something along the lines of 12 to 18 months. So at least for a year. I mean this could be something that could last for over at least going into 2023, 2024. But again, I'm waiting for confirmation by the stock market there.

Okay, so final question, Alessio, is what is your reading of the current situation in the bitcoin market? What are the key levels of support and resistance we should look at in order to interpret the movements in following weeks and months?

As far as the bitcoin chart is concerned, here's what I'm going to say. Keep it, keeping it simple, keeping it simple. So that range between 20,400 to 22,400 is very important for me, should be very important for everybody watching this about bitcoin because if bitcoin manages to get above that range, that region of 20,422, 22,400, the September highs, then I think the bottom probably would be in for bitcoin. All right, so above those levels then potential bottom has likely been reached on bitcoin. However, if bitcoin continues to remain below those levels, if bitcoin continues to stay below 22,400 and 20,400 in the next few days and weeks, then pressure and the trend still remains to the downside. If bitcoin now takes out, if Bitcoin takes out 18k in a sustained way, then we're looking at that level near 14K, 13,850 to potentially 12,030. 12,300. Okay. And this is the final thing I want to say here, Giovanni. Bitcoin needs to keep above that level. If bitcoin drops down to that range, 12,300, 12,030 or 13,850, it needs to protect that level. It needs to hold that level. Because if it doesn't hold that support, that, that range of support, then, yeah, it's going to be very bad for bitcoin. But my personal viewpoint is, my personal view is if bitcoin does drop, I think this is more like, this is more likely. If bitcoin does drop to 13,850 to a 12K, I think we're going to hold that level. I think we're going to see a bounce, strong bounce from those levels, potentially even form a bottom from that level as well. Okay.

So I think that we're going to look very carefully at the movements in the market in the following weeks. As you said, those might turn to be key for understanding how the market will evolve in the next months. So, yeah, Thanks a lot, Alessio. That was a very insightful conversation. I hope to see you soon on our show so that we can comment on the outcome of your prediction.

Thank you, Giovanni. I really appreciate it. And thanks for having me on your program, Sam.