Markus Thielen Warns of Major Price Corrections in Crypto and Stock Markets
Summary:
Markus Thielen of 10x Research warns of potential significant price corrections in both the stock and cryptocurrency markets, citing persistent inflation, fewer rate cuts, and rising bond yield as driving factors. This follows a decline in Bitcoin's price over the past week, with lower expectations of interest rate cuts possibly being a cause. Meanwhile, as investors focus on the upcoming Bitcoin halving, the Bitfinex research report suggests there may be room for price recovery if new entrants absorb the supply.
Markus Thielen, the founder of 10x Research, warns that the financial markets, including stocks and cryptocurrencies, are on a precipice of major price adjustments. Thielen shared insights indicating a sell-off in their portfolio due to consistent inflation, waning rate reductions, and an upward shift in bond yield. He stated in a research note dated April 16, "Persistent inflation, emerging unanticipated, acts as the key trigger here. With bonds projecting less than three rate cuts now, and a jump over 4.50% in 10-year Treasury Yields, we could be on a verge of a critical tipping point for risk assets."
This insight comes after Bitcoin (BTC) experienced a slump of over 9.3%, leaving it hovering above the $63,400 mark as per data procured from CoinMarketCap at 9:15 am UTC. According to Thielen's note, its depreciation could be ascribed to dwindling hopes for forthcoming interest rate falls, stating, "The current Bitcoin surge, witnessed mainly during 2023 and 2024, was largely fueled by hopes for slashed interest rates, a narrative currently undergoing serious challenge."
At present, the wide consensus among traders is for an unchanged rate, with a staggering 99% expecting the Federal Reserve to stick with the current bracket of 5.25% to 5.50%, a stark rise from 93.6% last month, as per the metrics from the CME Group’s FedWatch Tool.
Thielen further stated that they divested from all tech stocks at the beginning of trading on Monday, saving only for a few high-conviction crypto coins, indicative of a strong bearish sentiment.
A major technical indicator suggests the Bitcoin market is overheating. The crypto's relative strength index (RSI) presently stands at 67 on the weekly chart, proving an 'overbought' market state, as Bitcoin's RSI has dropped significantly from its peak at 88 on March 24.
The upcoming Bitcoin halving dominates investor focus, instigating long-term holders to sell and withdraw assets from exchanges. As per a Bitfinex report, Bitcoin price recovery is possible if short-term holders continue to absorb the supply. The report noted, "A shift in Bitcoin investor base makeup is noticeable as newer participants (Short-Term Holders) buy into the share offloaded by Long-Term Holders. This is visible in the rising Market Value to Realized Value ratio amongst Short-Term holders, despite it being lower than peak levels of previous cycles. Persistent supply absorption by Short-Term Holders from Long-Term Holder sell offs could signify a potential for further price increase.
Published At
4/16/2024 12:24:36 PM
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