We've sold everything. Expert names reasons for crypto market downturn
Analyst at 10x Research Marcus Thilen suggests that risky assets, including cryptocurrencies, are on the verge of a significant correction due to high inflation in the United States.
Analyst at 10x Research Marcus Thilen, known for his accurate forecasts of Bitcoin price declines in November 2022 and spikes in prices to new record highs before the April halving, has changed his position and now predicts a downturn in risky assets, including cryptocurrencies. CoinDesk reported on this.
According to Thilen, the main catalyst for this downturn is unexpectedly high and sustained inflation. The tightening of the monetary policy of the US Federal Reserve in response to inflationary pressure negatively affects the cryptocurrency market.
The rise in yields on 10-year US Treasury bonds by 40 basis points to 4.61% this month, the highest since November 2023, makes high-risk assets such as technology company stocks and cryptocurrencies less attractive to investors.
"The bond market also signals a possible trend change. Forecasts of the Fed rate cut in 2024 have changed: now less than three cuts are expected, which were predicted earlier. The yield on 10-year US Treasury bonds exceeded 4.50%," the expert wrote in a note to investors on Tuesday.
Thilen believes that these factors may mean the onset of a critical moment for risky assets, including stocks and cryptocurrencies.
The expert announced that among crypto assets, he left only a small portion of "blue chips" in his portfolio and sold all his shares of technology companies, citing the negative dynamics of Nasdaq and rising bond yields.
"Yesterday we sold everything," wrote Thilen, explaining his step by persistent inflation, slowing pace of interest rate cuts, and rising bond yields.
According to Thilen, most of the bitcoin rally in 2023-2024 was driven by expectations of interest rate cuts, but now this hypothesis is seriously doubted. He also added that the inflow of funds into spot exchange-traded funds (ETFs) is drying up. Since SEC approval in January this year, Bitcoin ETFs have attracted nearly $12 billion.
The average net inflows into Bitcoin ETFs over five days fell to zero, the expert noted.
"After the initial surge of enthusiasm caused by the novelty of cryptocurrency ETFs, fund inflows usually dry up in a stagnant market. Unfortunately, since the beginning of March, we have not seen sustainable price growth," Thilen explained. Price declines in cryptocurrencies ranging from 2% to 17% in recent months have likely prompted many investors to adopt a wait-and-see attitude.
10X Research experts believe that miners forced to sell bitcoins to cover expenses after the halving could exert significant pressure on the price of the first cryptocurrency in the summer months.
"According to our calculations, miners may sell bitcoins for $5 billion after the halving," said Marcus Thilen. "This excess supply on the market can last from four to six months, which could lead to a stagnation of the bitcoin price, as has happened before."
Earlier in his long-term forecast, the expert allowed the Bitcoin price to rise to $70,000 by the end of 2024 and named investments in Bitcoin ETFs as a catalyst for its further growth. Among other factors driving the price of the first cryptocurrency, Thilen mentioned the macroeconomic environment, monetary policy, and the US election cycle.
