Bitcoin and Global Market Review Update: 13.06.2022

We are waking up to a new Bitcoin lows. All risk assets are selling off as Friday brough higher than expected US inflation reading. So far, the sell-off in the crypto market appears to be far more drastic than equities. But that’s to be expected given how influential leveraged trading is on short-term price moves in crypto.

We’re starting to see the global liquidity growth is declining just as policymakers are gearing up to tighten their monetary belts to combat inflation fears. It’s more likely that BTC and crypto assets will struggle rather than thrive until inflation is brought under control. This can take some time.

So, what now, when to buy – where will the next wave of demand come from and what level do we need to hit for it to wake up the bulls? 

We argue that mid-to-high 30′ are where Bitcoin can get in the near-term and we know that institutions would take every opportunity to capture the upside from these low price levels, even if it takes a year or longer to realize such gain on their investments. That is why we firmly believe BTC looks attractive at these levels, especially, for those with a long enough time horizon when compared to traditional alternatives to park your investment capital.

What happened last Friday?

On Friday we saw the U.S. CPI hit new four decade high, rising to 8.6% in May YoY while core inflation excluding food and energy rose 6%, both higher than estimated. The headline inflation rate was the fastest since late 1981, as a broad array of products and services including rents, gas, used cars and food became sharply more expensive. So far, we are seeing the FED’s actions do not show signs of curbing inflation convincingly, therefore more rate hikes are now more than likely this year. Central bankers are raising interest rates to make borrowing money more expensive, hoping to cool off consumer and business demand and give supply a chance to catch up, setting the stage for more moderate inflation and, consequently, reaching the 2% inflation target.

Over the last few days, both crypto and fiat worlds sold off as an effect of last week’s higher than expected US inflation reading. Before that reading, BTC went up with Gold compared to the equities markets, where we saw some of them fell by more than 5% prior to the CPI reading. After the reading was published on Friday, all markets sold-off sharply and ended the week in red. We continued to see price pressures over the weekend, as the low weekend liquidity appeared to exacerbate the consequences for all risk assets. Markets are now pricing-in stronger than expected central banks’ reaction to inflation.

Price of Bitcoin

Curiously, Bitcoin still outperforms stocks and has remained resilient in recent weeks as its share of the overall crypto market cap continues to rise. The Bitcoin dominance indicator stands at 47%, a level last seen in October 2021. Having spent much of 2022 in an area traditionally reserved for market bottoms, Fear & Greed has yet to convince anyone that a floor could be in.

Institutional investors helped drive up crypto prices during 2021, with the sector’s market capitalization growing 185%, so it will be important to closely monitor the stock markets for clues about trends for crypto. Looking at the Bitcoin’s performance, we argue that BTC will still outperform the stock market when volatility takes over but, at the same time, remain watchful over further developments with inflationary pressures.

ECB Monetary Policy Meeting

Watch out for 21^st July – ECB Monetary Policy Meeting and 26-27^th July 2022, when the FED reconvene on the US monetary policy progress. It is expected they both will raise interest rates by 25 basis points and 50 basis points, respectively. It also appears to be warranted that both central banks will continue rising rates in September and October to teem the inflation.

Remember, the market tends to be 1-step ahead of any major event, so do not miss new opportunity and stay alert of the market developments. It will be important to remain selective on your investments during this monetary policy shift, and as it is with every market correction, be ready to enter the market at much lower valuations.

Know when to enter the market – be ready – get more insights, trends, and research reports at altFINS.com.

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