tested its lowest level since early March last week, touching $37,364. And although buyers managed to regain their footing on Wednesday and attempted to push the price back above $39,000, the future prospects of Bitcoin vaguely.
The entire cryptocurrency industry remains under pressure due to the Fed’s monetary tightening. The start of an aggressive cycle of interest rate hikes, followed by the US Federal Reserve’s intention to reduce its nearly $9 trillion balance sheet, has already resulted in a significant strengthening of the US dollar. Year-to-date, the stock has recovered more than 10% to hit a 20-year high. It is worth noting that the greenback is rising against alternative assets.
Last week, total digital asset investment product outflows totaled $120 million, with the most notable outflows being in BTC, , , SOL and . Recall that most digital currencies were created to compete for the devaluation of traditional currencies, especially given the rapidly increasing risks of inflation. But although the inflation Appreciated last year at the fastest rate in more than 40 years, the US dollar nonetheless appreciated and became a more attractive investment than its own Blockchain-based counterparts.
Meanwhile, BTC is still positively correlated with the US stock market, most notably the technology sector index. This indicates that the most popular cryptocurrency the world has not become a safe haven whose demand is likely to increase in times of economic uncertainty. Instead, Bitcoin mimics the dynamics of risky assets, just like these, driven by market sentiment.
In other words, the more aggressively the US regulator raises interest rates and the higher Treasury yields rise, the lower the chance of BTC bouncing back above $50,000. On Tuesday, the yield surpassed 3%, hitting its highest level since 2018. With such debt market indicators, it’s not surprising that traders are finding the stock market less and less attractive.
It is worth noting that an economic situation in which indices and bond yields are rising at the same time is impossible. Given that the Fed is serious about guaranteeing a neutral policy rate somewhere in the 4.5-5.5% range as soon as possible, the regulator is only at the very beginning of its policy tightening.
Such prospects bode well for an extended period of negative investor risk sentiment, leading to large sell-offs in the US stock market. The dollar and Treasuries will be the only beneficiaries that Bitcoin cannot compete with, at least for now. With this in mind, we recommend short selling with a target of $30,000.
Source: Crypto News Deutsch