More troubles ahead for Bitcoin (BTC) & cryptos as cash holdin…

Key Takeaways:

According to Bank of America, cash holdings among investors and fund managers have gone up.
Amid the increasing inflation and recession fears, people are unwilling to invest, shifting to the USD
According to Peter Eberle, CIO of digital investment firm Castle Funds, increased cash holdings is bullish for Bitcoin

According to Bank of America, cash holdings among investors have increased, causing bearish risks for Bitcoin (BTC) & the crypto market. — According to Bank of America, investors are pulling their cash out from the markets. Image by pasja1000

YEREVAN (CoinChapter.com) – As the markets go through times, their troubles may be far from over. According to Bank of America, investors are pulling their cash out from the markets. This could cause further bearish risks for Bitcoin (BTC) and the larger crypto market. Furthermore, as per the report, cash holdings of global fund managers went up from 5.5% to 6.1 on average. This is the highest level in over two decades, echoing extremely bearish sentiments in the market.

Major stocks have been tumbling since the year began. For example, the Nasdaq has lost nearly 25% in 2022. The S&P 500, on the other hand, continues to be down for six consecutive weeks, floating around 16% lower than its all-time high of 3389.78 on 18 August 2020.

“I think we’re in one of those very difficult periods where simple capital preservation is I think the most important thing we can strive for…You can’t think of a worse environment than where we are right now for financial assets,”
Paul Tudor Jones, an American billionaire hedge fund manager and founder of Tudor Investment Corporation told on CNBC’s “Squawk Box.”

Slow economic growth, the ongoing war in Ukraine, and the Covid-19 pandemic have created an inconducive environment for investment. Moreover, investors are worried about stagflation fears, fueled by the US Federal Reserve’s 50-basis point raise earlier this month. The findings published by the Bank of America come as no surprise.

Bank of America Fund Manager Survey:

– Cash holdings to highest level in two decades
– Hawkish central banks (31%) and global recession (27%) were the two biggest tail risks among investors
– May survey was "extremely bearish" but still missing "full capitulation" pic.twitter.com/uJnF8KHBiJ
— Market Index (@MarketIndexAU) May 17, 2022

What does this mean for Bitcoin (BTC) and crypto markets

When the future is uncertain, investors and fund managers opt to ensure themselves by moving to USD cash instead of investing. Like stock markets, cryptocurrencies like Bitcoin (BTC) will experience a drop in demand. In addition, people will look to liquidate their crypto holdings, pushing prices further down.

However, as Peter Eberle, CIO of digital investment firm Castle Funds explains, this may be a costly move long term. With current inflation at 8.3%, as measured by CPI, purchasing power is dropping quickly. As a result, hoarding money will lead to losses for fund managers. Because investors and hedge funds cannot sit on cash holdings forever, they will eventually invest in Bitcoin (BTC).

Cash holdings are currently around 9/11 levels pic.twitter.com/WM41LNKBs0
— Anneka Treon (@AnnekaTreon) May 17, 2022

According to Kusz, Bitcoin (BTC) will benefit in the long run, beating both stocks and bonds to become the number one choice. Moreover, since Bitcoin has a finite supply, investors will turn to it in inflationary times despite the risks.

“This massive amount of cash will eventually find its way back into riskier assets such as cryptocurrency. This current high level of cash is actually very bullish for Bitcoin because this cash has to be invested eventually as fears subside,”
Peter Eberle told CoinChapter.

However, while Bitcoin and the larger crypto market may stand to benefit, it may take longer than expected. With experts warning of a global recession, the markets are in for a bumpy ride.

Meanwhile, the price of Bitcoin (BTC) continues to remain under $30,000, according to CoinMarketCap.