Crypto markets have shown little net change over the past two weeks, with prices tracking steady downtrends and recent upward moves failing to match earlier gains this year, according to Wolfe Research strategists Rob Ginsberg and Read Harvey.
In a note distributed to clients, the strategists said they now align with bearish investors on the sector. "In fact, we struggle to come up with a near - mid term bull thesis on the group," they wrote.
Drivers and market dynamics
Ginsberg and Harvey highlighted that neither a broader risk-asset rally nor episodes of geopolitical tension and rising inflation have been sufficient to reverse cryptos trajectory. They added that it remains unclear "what exactly needs to take place to turn this ship around." The strategists identified two dominant macro drivers for the sector: interest rates and the U.S. dollar.
The note points out a historical relationship in which Bitcoin tends to move inversely with real interest rates when those series are overlaid and inverted, and a similar inverse correlation exists with the dollar. This time, while elevated long-bond yields have generally pressured risk assets, the strategists observed that the brunt of the strain has fallen particularly on Bitcoin and the broader crypto market.
With the 10-year Treasury yield still on track to test 5%, Wolfe Research said that the headwind for crypto prices is unlikely to fade in the near term.
Outlook for major tokens
On Bitcoin specifically, the strategists stated that "the downtrend remains alive and well," and they expect that "the next move will be to the downside" after a period of sideways trading. They added that Bitcoin may not generate enough momentum this cycle to reach overbought territory, noting that "buyers have given up on these rally attempts."
Ethereum is expected to follow a similar pattern, with Wolfe Research forecasting another leg lower and projecting a move below $2,000.
The broker continues to monitor Bitcoins four-year cycle and reported that the current drawdown has reached a maximum of 53 percent, versus a historical average closer to 80 percent. Based on average cycle timeframes, Harvey said the bottom is likely to arrive around October.
Positioning
Despite the negative price outlook for tokens, the strategists expressed a preference for holding crypto-related equities rather than the underlying tokens themselves. They noted that even though these equities have also declined recently, their view favors equity exposure over direct token ownership.
Overall, the note frames a cautious near- to mid-term stance on crypto prices, driven by persistent upward pressure in long-term yields and dollar strength, and by the apparent lack of conviction among buyers during rally attempts.