In light of recent market dynamics, Markus Thielen, a prominent analyst known for his accurate forecast of Bitcoin’s surge, is now predicting a downturn for Bitcoin and broader risk assets, according to a CoinDesk report on Tuesday. Thielen, leading 10X Research, has issued a warning about a likely significant market downturn triggered by persistent inflation and the bond market’s response.
Thielen stated, “We offloaded all our tech stocks yesterday at market opening due to poor performance and the Nasdaq’s reaction to increased bond yields. Currently, our portfolio maintains only a select few crypto assets with strong convictions. In general, our stance on risk assets, including stocks and cryptocurrencies, is quite bearish.”
He further explained, “This year’s Bitcoin rally, presumed to continue into 2024, has largely been propelled by the expectation of reduced interest rates—a hypothesis now facing serious challenges.”
Investor expectations for Federal Reserve rate cuts have been adjusted, with forecasts now predicting fewer than three cuts this year—down from an earlier expectation of six, per CMEGroup data. This realignment, coupled with enduring high inflation and a strong job market, has driven the 10-year Treasury yield to its highest point since November 2023, reducing the attractiveness of riskier investments.
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Thielen noted a slowdown in investments flowing into spot exchange-traded funds (ETFs), with the five-day average of net inflows dropping to zero. Despite the initial boost in January following the SEC’s approval of multiple spot BTC ETFs, enthusiasm has waned this month.
As anticipation for the upcoming Bitcoin mining reward halving on April 20 begins to wane, market analysts are bracing for a potential correction. This event will decrease the reward for mining new blocks, slowing the rate of new Bitcoin entering the market. Despite these concerns, Bitcoin has still managed a 42% increase year-to-date, with the broader CoinDesk 20 Index up by 17%.
Significance of the Downturn:
Thielen’s bearish outlook arrives at a crucial time for the cryptocurrency market, amidst a complex interplay of investor sentiment and economic indicators. At a recent Miami event, finance experts expressed skepticism about Bitcoin’s long-term prospects, despite last year’s endorsement by BlackRock Inc. Furthermore, while the upcoming halving event traditionally boosts Bitcoin’s price, its impact this time remains uncertain. Crypto.com’s CEO Kris Marszalek has even predicted a possible rise in Bitcoin sales around the halving date. Yet, with Bitcoin having already achieved a record high in mid-March, the market’s reaction is still up in the air.
By Andrej Kovacevic
Updated on 14th July 2024