- Scott Melker says bitcoin will likely trend sideways for a few months before moving to new highs.
- Until then, he says he’s buying dips on cryptos in genres such as DeFi, Layer-1s, and the metaverse.
- For metaverse tokens, he’s betting on platforms with quality graphics and a great gaming concept.
But cash is king and, in this case, so is bitcoin, the largest cryptocurrency by market cap . Bitcoin’s price action tends to lead the market, and Melker has been watching the developments that could have impacted its moves. While he wasn’t surprised by the correction last weekend, he certainly didn’t expect to see bitcoin dip to $48,000.
“There was quite a bit of bullish sentiment coming into Q4,” Melker told Insider. “We saw a massive move up in October in anticipation of the bitcoin futures ETF launch and have since seen a bit of dampened excitement, even though the community has expected higher and higher prices based on a lot of the models that we’ve seen.”
“I think that those have become less realistic, at least in the short term,” he continued. “And we’re now settling into a likely period of consolidation that will inevitably drive the community insane.”
He added that any time open interest is exceptionally high on derivatives exchanges and there are tons of of long (or bullish) positions, we inevitably see a liquidation cascade to the downside. And he believes that’s largely the case here. According to Coinglass data cited by Fundstrat, nearly $850 million in long bitcoin-futures positions, and $2 billion marketwide, was liquidated globally on Friday, December 3.
“The question is whether that was intentionally triggered by a whale or whether that was a result of any legitimate fundamental change in the market,” Melker said. “From what I’m reading, a single institution last Friday sold $500 million worth of bitcoin in advance of that liquidation cascade.”
Whether it was triggered by the institutional sale, the Omicron variant, or a shaky capital market is anyone’s guess, Melker noted.
But like other technical analysts, he believes the bullish case for bitcoin will be renewed after it breaks back above the key support level of $53,000. That’s a view also held by another crypto influencer and investor, Carl Runefelt, the host of The Moon on YouTube. Bitcoin opened near $50,619 on Thursday, 25% below its record high.
But Melker adds that if bitcoin breaks below $42,000 and stays there for a period of time, we could see an even steeper drop to $28,000. This is based on a previous low seen in July, after bitcoin plunged from its April all-time high. However, he says that scenario is the less-likely one.
“I don’t believe that technical analysis tells us the future,” Melker said. “I believe it’s a risk-management tool. We use technical analysis to set stop losses and orders, and nobody can tell the future just based on a few lines on the chart.”
But if this is your first time on the roller-coaster ride, don’t panic. Ultimately, bitcoin’s long-term holders shouldn’t concern themselves with the chart or the dips, he said.
“New investors naturally panic emotionally when they see a price below their initial entry,” Melker said. He advises newbies to change their perspective and instead consider this an opportunity to buy lower and bring their overall entry average down.
The metaverse, the newer frontier
Interest in the metaverse has skyrocketed since the Facebook parent Meta announced in October that it was rebranding to focus on the opportunity. More than $100 million worth of virtual land sold last week alone, and Grayscale estimates that the market for goods and services in the metaverse could eventually be worth $1 trillion.
When it comes to the metaverse, Melker says he doesn’t have as much exposure to some of the bigger metaverses like Decentraland (MANA), The Sandbox (SAND), or Axie Infinity (AXS). But he’s excited about this new gaming world.
He singled out Star Atlas, a gaming metaverse built on Solana’s blockchain, and said he holds both of its tokens: POLIS, a governance token that allows holders to influence the development team’s decisions, and ATLAS, the in-game currency that enables purchases of digital assets like land and spaceships.
Melker says he knows the team behind the project and is very optimistic about what they could create if they’re successful.
“I think they’re incredible. And I think that their vision is far beyond that of most of these projects,” Melker said. “You’re looking at something that could potentially finally bring play-to-earn gaming into the same sort of level as other video games.”
He’s referring to the game’s graphics, which he says far exceed most of the metaverse platforms that look like early adoptions of video games.
Two additional platforms he says he’s invested in are Illuvium (ILV) and Alien Worlds (TLM), because they also have high-quality graphics that have a great gaming concept and are play-to-earn.