Bitcoin has once again lost the $20,000 area after a weekend marked by falls. The central bank has made it clear that interest rates will continue to rise notably and for a relatively long time, drowning out the expectations of risky assets, which had seen a ray of light due to the improvement in some inflation indicators. .
Among these risk assets, cryptocurrencies once again stand out, whose oscillations are more marked (both in rises and falls) than those of other risk assets. Although the fall of bitcoin and its peers in recent days has been very intense, the downward trend could still have some run, according to a note published by Sentix (an independent research institute based in Frankfurt) on Monday. and so it has been.
Since last Thursday, bitcoin has lost more than 9%, going from trading above $21,800 to falling below $20,000 on Monday. The rest of the cryptocurrencies have suffered even greater falls. For example, Ethereum, the second cryptocurrency by market capitalization, has fallen about 15% since last Thursday,
The message sent by the central bank in Jackson Hole has been clear: monetary tightening is going to continue at an accelerated pace, although there are signs of a drop in inflation. Although some prices, the general CPI and other broader indicators remain at historically high levels.
A more hawkish monetary policy
Javier Molina, spokesperson in Spain for the multi-asset investment platform eToro, points out that the message of the Jackson Hole meeting has been clear: “Despite the fact that the market still assigns a certain probability of a return to an expansive policy at the end of 2023, The illusion of having cuts at the beginning of that exercise has dissipated”.
The central bank wants to put out the fire of inflation and put an end to the ‘irrationality’ of some prices in the asset market. Higher interest rates, together with less liquidity, generate lower growth expectations at all levels, which affects to a greater extent those assets whose expected (future) growth was higher, that is, those assets whose price reflected future growth to a greater extent than the present. A good example is cryptocurrencies. Investors are now questioning the price of these assets, generating strong selling pressure.
In this way, Patrick Hussy, managing director of Sentix, points out in a note that “after the strong impulse of negative sentiment of the previous week, the fear of investors has been reflected in the fall in bitcoin prices. The sentiment is already is very negative, but even so it seems premature to bet on the end of the liquidation”, says this expert.
According to Hussy, the level of undecided investors is still very high, despite the fact that prices may now look more attractive: “Neutrality (undecided investors) is too high! At 40 percentage points, the group of neutral investors and therefore Therefore, undecided is still too large to see a resistant reversal point in the market,” says this expert. According to Hussy, high neutrality values hint at some mistrust among investors and “may trigger a new push from the mainstream.”
bitcoin key areas
“If bitcoin cannot hold $20,000, then $18,900 will come into play,” says Antoni Trenchev, co-founder and managing partner of Nexo, in a note collected by the Bloomberg agency.
It’s unclear when the cryptocurrency correction will end, but for now what we’re seeing in the market is that “money is flowing out of risky assets after Powell’s comments,” says Cici Lu, CEO of the consultancy Venn Link Partners.
“The markets didn’t like what he said and bitcoin is proving again that it is a high beta asset.” This Monday, the falls are also being imposed on the European stock markets.