Key Takeaways:
- Analytical platform Ecoinometrics was bearish on Bitcoin, citing the current macroeconomic climate.
- Bitcoin strengthened its correlation with risk-on assets, such as the stock market.
- The ahpla crypto sank below $40,000.
- Babel Finance expert agrees with the bearish outlook.
YEREVAN (CoinChapter.com) – Crypto analytical platform Ecoinometrics posted a report on Bitcoin’s (BTC) turbulent price action and the reasons behind it, including fiat economy instability, growing inflation, and the Fed’s reluctance to take action. Given the current market situation and previous drawdown statistics, the study concluded that Bitcoin would “not likely” recover anytime soon.
Additionally, the analyst underscored the correlation between Bitcoin and the stock market, noting that the two are in “lockstep.”
Also read: Bitcoin drops alongside risky assets, Gold steady as Fed confirms aggressive rate hikes.
In detail, Ecoinometrics suggested that for Bitcoin to recover, the Federal Reserve has to stop purchasing bonds, shut off the “money printer,” and face the near-8% inflation.
Bitcoin, stocks and inflation
Bitcoin’s latest decline mirrored the bearish outlook in the U.S. stock market. Several experts and institutions noted the correlation between the two risk asset categories, including Bank of America.
Additionally, Wall Street reporter Sonali Basak and Joey Krug, the co-CIO of Pantera Capital, emphasized the parallels, as CoinChapter recently reported. Typically, the capital inflow into risk markets tends to fall against the growing inflation and destabilization of the U.S. dollar and vice versa.
Thus, the indecisive results of the Feb. 16 Fed meeting sent risk assets tumbling. Moreover, Simona Mocuta, chief economist at State Street Global Advisors, agreed with the outlook, calling the results “anticlimactic.”
Also read: Bitcoin market shares increased correlation with other risk assets, says Bank of America.
While the inflation persisted and the stock market declined, along with Bitcoin, Ecoinometrics put forth a strategy for traders to sidestep losses. First, the platform suggested that investors be ready for the day Bitcoin ends the drawdown.
You want to be ready when that day comes. And that means building a position now. Imho dollar-cost averaging when the market is down is the best time from both a psychological and ROI [return on investment] perspective. This is the chilled-out way of getting those 5x to 10x returns.
said the analyst.
Meanwhile, BTC…
…traded at around $38,400 on Feb. 21, after a sell-off near $45,000 led the price down 14% since the Fed meeting on Feb.16. Additionally, the digital asset has not yet bottomed out, as it failed to hold the $40,000 support.
Also read: Bitcoin mining stocks could grow 10x in coming years — analyst.
Furthermore, Bitcoin formed a bearish Double Top near a local top at $45,000. The pattern entails two consecutive tops around the same level and a moderate dip in-between. However, BTC dropped lower than predicted and headed toward the support at $37,600, or possibly further to $34,000.
Despite the 44,5% crash from the Nov. ATH, Robbie Liu, researcher at Babel Finance, sees a BTC “Renaissance” in H2 2022.
After the market adjusts to the pace of the Fed’s rate hike, growth stocks and bitcoin will resume their upward trend, that is we will see strong performance of both in the second half of 2022.
Historically, per Goldman Sachs, growth stocks have been the worst-performing sector in the three months before and after the first rate hike.
said the researcher.
Also read: Bitcoin (BTC) becomes legal in Ukraine as the country prepares for a possible war.
Furthermore, he confirmed Bitcoin’s correlation to the risk assets, which recently hit a record high of over 0.75.
Mr. Liu also noted that given the “strong correlation” between Bitcoin and growth stocks, especially the synchronized downward trend of the two assets since December, it might be difficult for the flagship crypto to move upside in the three months following the first rate hike.
