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Bitcoin (BTC) is again on the losing end as the ever-increasing list of macro uncertainties outweighs traditional risk assets.
At the time of going to press, the number one cryptocurrency was trading near $ 38,450, the lowest since March 15 and falling nearly 3.5% in 24 hours, according to CoinDesk data.
Global stock markets are a sea of red, with European stocks hovering at a one-month low, and futures linked to the S&P 500 are down 0.7%. Commodities also suffered heavy losses, putting an end to their recent resilience. Gold, a traditional safe haven and inflation hedge, fell nearly 1% to $ 1,917 per tonne. ounce.
The US dollar is the only one climbing, proving its dominance as a safe haven. The dollar index, which tracks the value of the dollar against majors, peaked at 101 for the first time since March 2020. The Chinese yuan fell to 6,553 against the dollar, hitting its lowest level since November, a sign that markets are worried about a slowdown in the world – largest economy.
The renewed coronavirus outbreak in Beijing has triggered fears of a severe shutdown, which is likely to exacerbate global supply chain problems and strengthen the already rising global inflation. The Chinese authorities have relied heavily on lockdowns to control the virus, as Shanghai’s recent experience suggests.
China’s problems with coronavirus could not have come at a worse time, as fears of rapid interest rate hikes by the Federal Reserve have already brought animal spirits to asset markets.
“It’s more of the same for markets, but with a decidedly bearish mood for tradefi and crypto,” Illan Solot, a partner at Tagus Capital Multi-Strategy Fund, said in a Telegram chat. “I do not remember this level of bearishness among contacts and Twitter, even back at the recession in January. The opposite in me wonders if this is not a good time to push against the narrative.”
In fact, the mood seems rather bearish, with crypto-Twitter worried about an impending flake breakdown on bitcoin’s technical chart, a bearish pattern that would reportedly open doors for $ 20,000.
While extreme fears are often observed on market bottoms, it may be premature to catch the falling knife as long as macro uncertainty persists.
“We could potentially see BTC operations as low as $ 33,000 if macro sentiment weakens further,” said Matthew Dibb, COO and co-founder of Stack Funds. “We have observed consistent sales in line with the downside of the Nasdaq during Friday’s trading. We expect this to continue in the short term and trade closely with equities.”
On Friday, bitcoin fell below $ 40,000 as the technology-heavy Nasdaq index fell above 2% due to fears of Fed rate hikes.
Laurent Kssis, CEO and head of Europe at cryptocurrency exchange trading firm Hashdex, said: “I still see a general downward pressure with intermittent short pushes producing very little and being knocked down due to long liquidations. (Around $ 25 million in BTC and $ 8 million in ether today). I remain technically bearish on BTC in the short term. “
Bitcoin’s daily chart shows that the fall of the cryptocurrency below $ 40,000 has revealed the trend line connecting the lows of January 24th and February 24th. At the time of writing, trendline support stood at $ 37,420.
Although the short-term outlook looks bleak, the worst may be behind us in terms of the inflation scare and market prices for Fed rate hikes, according to Tagus Funds’ Solot. Last week, Fed Chairman Jerome Powell outlined his most hawkish approach to controlling inflation, setting at least two or more half percentage points (50 basis points) rate hikes, calling the labor market overheated.
“We are not far from the highest inflation hysteria, especially after the further frontloading of the Fed tightening last week,” Solot said. “There should still be a lot of destruction of demand waiting for the cycle of higher commodities and mortgage rates, and the impact of a + 5% DXY appreciation this year should alleviate some pressure.”
The jury is out on where bitcoin would bottom out when the hysteria disappears.