Key takeaways:
- Bitcoin bulls may end up buying the latest dip, hints JPMorgan & Chase analysts.
- The strategists suggest a rebound across the riskier markets as Omicron FUD settles.
- Ray Dalio and Anthony Pompliano suggests investors to tone down their cash expsosure.
NEW DELHI (CoinChapter.com) — The recent Bitcoin (BTC) market selloff led by the emergence of the Omicron virus may bring “buy the dip” opportunities for investors, hints JPMorgan & Chase strategists Marko Kolanovic and Bram Kaplan.
The two analysts cited early reports on Omicron in a note Wednesday that showed the Covid19 variant as less deadly despite being more transmissible than its predecessor, Delta. As a result, the panic sell witnessed across all the riskier markets may yield sharp trend reversals as investors assess an earlier end of the coronavirus pandemic.
“Omicron could be a catalyst for steepening (not flattening) the yield curve, rotation from growth to value, selloff in Covid and lockdown beneficiaries and rally in reopening themes,” Kolanovic and Kaplan wrote.
“We view the recent selloff in these segments as an opportunity to buy the dip in cyclical, commodities and reopening themes, and to position for higher bond yields and steepening.”
Powell brings the Bitcoin bears back
The arrival of Omicron last week was instrumental in crashing the Bitcoin price by nearly 9% in a day. It also caused similar declines across global stock markets while safe-havens like the U.S. dollar and government bonds rallied higher.
Upon entering the new week, Bitcoin pared its Omicron-led losses by rising over 10% in just first two days. The climb also appeared as investors hoped for a delay in the Federal Reserve’s tapering plans in the wake of the Omicron variant. But the U.S. central bank’s chair Jerome Powell said Tuesday that they would rather accelerate the unwinding of their $120 billion a month asset purchasing program.
Powell cited inflationary pressures behind the Fed’s decision, underscoring that the rising consumer prices in the U.S. are not “transitory” anymore. As a result, the so-called quantitative easing winners, including Bitcoin, resumed their correction.
Rebound ahead?
But some top analysts see a little hope in Fed’s tapering plans when it comes to taming down inflation, which now runs at its three-decade high. For instance, Ray Dalio, co-Chief Investment Officer and co-Chairman of Bridgewater Associates, reminded that cash remains one of the least safe investments in the face of 6%-plus inflation. Excerpts from his interview with CNBC on Nov. 30:
“You can’t raise living standards by raising the amount of money in credit in the system because that’s just more money chasing the same amount of goods. It will affect financial markets in the ways we’ve seen and it will affect inflation rate. It won’t raise living standards in an important way. As inflation then begins to bite, it has political consequences.”
Anthony Pompliano explained Dalio’s statements by putting Omicron in the middle of his lines.
“We are watching a growing concern unfold related to a new COVID variant coming out of South Africa,” the Pomp Investments founder said in a note to clients, adding:
“If we get a repeat in government response, including mask mandates, vaccine booster shots, travel bans, and potential lockdowns, then it wouldn’t be a reach to expect even more stimulus to be pushed into the economy in a variety of ways. This scenario would likely create the same effects that we have now, but just on a grander scale.”
Pompliano suggested people buy Bitcoin “rather than having inflation eat away” their purchasing power.
