Bitcoin Unprecedented Liquidity And Rate Reversal: A Perfect Storm For Market Correction?
September 13 2023 - 8:00PM
NEWSBTC
Despite Bitcoin’s recent recovery to the key level of $26,100,
signaling a crucial point for its future gains and preventing
further decline, there are worrisome signals that could raise
concerns for Bitcoin bulls in the short term. The combination of
factors presents a potential perfect storm for a market correction.
One contributing piece is the higher-than-expected US August
headline inflation, coming in at 3.7% up from the previous month’s
3.2%. Although not a game-changer, it implies that the odds of
another rate hike are marginally up, now standing at 53%. Jeroen
Blokland, a multi-asset investor, highlights this development.
Additionally, Bloomberg’s senior macro strategist, Mike McGlone,
suggests that Bitcoin may be leading a downward trend. McGlone
emphasizes that Bitcoin is an “exceptionally liquid” asset that has
experienced significant appreciation without being tied to specific
projects or liabilities. However, since it emerged during a
period of historically low-interest rates, its position as a
potential frontrunner for a market reversion is noteworthy. US
Inflation Data And Rising Interest Rates Pose Challenges For
Bitcoin Bull Run One key indicator highlighted by McGlone is the
rollover of Bitcoin’s 20-week moving average (MA), which has
implications for all risk assets. Related Reading: DCG And
Gemini Ink A Plan: Users To Receive All Their Crypto? Being one of
the best-performing assets in history, Bitcoin’s reversion lower is
a significant observation. McGlone’s analysis reveals that federal
funds futures for the next year hover above 5%, indicating limited
expectations for liquidity from the Federal Reserve (Fed). A
similar pattern was observed in Bitcoin’s mean reversion at the
beginning of 2022 when futures began pricing for the current
tightening cycle. As the lower bound of the federal funds rate
rapidly rises from zero to 5.2% and is expected to continue
increasing, significant pressure on all risk assets, including
Bitcoin, may ensue. McGlone also highlights the historical
relationship between Bitcoin and the broader market. Following the
liquidity injection resulting from the shift to zero interest rates
in early 2020, Bitcoin’s 20-week moving average reached its bottom
before the S&P 500 experienced a similar trend in the third
quarter of that year. Mike McGlone’s analysis raises concerns
about Bitcoin’s future performance amid changing interest rate
dynamics and the potential impact on all risk assets. As Bitcoin’s
20-week moving average shows signs of rolling over, investors and
market participants will closely monitor its price trajectory and
its ability to withstand the pressures of rising interest
rates. BTC’s Battle With Resistance, Will It Break Through Or
Face A Seven-Month Low? At the time of writing, the leading
cryptocurrency in the market, Bitcoin (BTC), is facing a challenge
in surpassing the resistance wall at $26,400, as highlighted by
NewsBTC. Over the past 24 hours, BTC has managed to gain a
modest 0.3%, while the most significant gains in the last 30 days
have occurred within the seven-day timeframe, with a modest surge
of 1.9%. Should BTC succeed in surpassing its immediate resistance,
it will encounter the formidable 200-day and 50-day moving averages
(MA) at levels of $27,000 and $27,100, respectively. These levels
pose significant hurdles for the cryptocurrency’s prospects and
potential future gains. Related Reading: This Latest Move Suggests
SEC Lawsuit Against Ripple Is Pushing The Crypto Firm Outside The
US Conversely, if BTC experiences an extended decline and
relinquishes its current modest gains, Bitcoin bulls must closely
monitor the crucial threshold at the $25,150 level. A breach
of this level could potentially drive BTC down to a seven-month low
of $22,000, jeopardizing the cryptocurrency’s bull run and the
gains achieved since the beginning of the year.
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