The Base, Bull And Bear Cases For Bitcoin Returns In 2022

Darius Dale is the Founder and CEO of 42 Macro, an investment research firm that aims to disrupt the financial services industry by democratizing institutional-grade macro risk management processes.

Key Takeaways

The distribution of probable economic outcomes — and by extension, financial market outcomes — is as flat and wide as it has been in recent years. 42 Macro’s base-case scenario of deflation calls for an expected return of -10% annualized for bitcoin. Our bull case scenario of deflation plus policy rate decreases calls for an expected return of +29% annualized for bitcoin. Our bear case deflation plus quantitative tightening calls for an expected return of -37% annualized for bitcoin. Critically, all three scenarios are equally probable over the next three to six months. If we sounded highly convinced issuing sell warnings at every lower high in bitcoin’s price from early-December through July, we should sound equally unconvinced today.

figure for July obviously stole the show from a market response perspective. The reacceleration in the three-month annualized growth rates for headline (+40 basis points to a three-month high of 3.5%) and private payrolls (+30 basis points to a three-month high of 3.7%) is suggestive of a domestic labor economy that is not responding to the policy tightening we have accumulated thus far. With the three-month annualized growth rate of private sector average hourly earnings slowing modestly (-20 basis points to a two-month low of 5.7%) alongside unchanged private sector average weekly hours growth of -1.2%, it is clear the +10 basis points uptick in aggregate private sector monthly earnings — to a three-month high of 8.3% — was largely driven by more workers finding work. 

Analyzing Federal Reserve policy decisions in addition to data from the purchasing managers’ index can give us three scenarios for the bitcoin price.

(Chart by 42 Macro)

Analyzing Federal Reserve policy decisions in addition to data from the purchasing managers’ index can give us three scenarios for the bitcoin price.

(Chart by 42 Macro)

This is a guest post by Darius Dale. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

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