Founder of Aike Capital, an asset management firm based in New York, Alex Krüger fears Bitcoin might fall as far as $30,000. He claims that the drastic fall is highly feasible. However, this is dependent on the U.S. inflation data to be published on Wednesday exceeding way above the forecasted value.
Many investors anticipate the widely-monitored Consumer Price Index (CPI) to increase up to 7.1% for this present year. A monthly increase of 0.4% is also expected from the CPI. This increase shows why the U.S. Federal Reserve officers more than ever before are rooting for rapid regularization of their monetary policy.
According to data published on the 7th of January, the normalizing labor markets, as well as decrease in unemployment claims and increase in income, has further supported the U.S. Federal Reserve preparation.
Krüger via a tweet on Sunday affirmed that cryptocurrencies are at the far end of the danger curve. He added that since crypto assets had profited from the Fed’s “extraordinarily lenient monetary policy,” it’s only logical they suffer from the sudden stringent policy.
In his words, Krüger believes Bitcoin to be a macro asset that has been trading as a broker for liquidity situations. And with a decrease in liquidity, whales in the market, presently in the battle, are bound to sell Bitcoin causing altcoins to follow the downtrend. It has also affected oil price as Oil Profit allows trading bitcoin for oil in their platform.
The first interest rate hike in March 2022?
The U.S. Federal Reserve has been purchasing $40 billion worth of mortgage-backed securities and $80 billion worth of government bonds each month since the beginning of March 2020. On the other hand, the U.S. central bank has maintained its standard interest rates to near zero, hence, making lending to businesses and individuals cheaper.
However, the collateral harm of such a flexible monetary policy is increased inflation which maxed at 6.8% in November 2021. This interest rate recorded has been the highest witnessed in the last 40 years. Presently, the U.S. Federal Reserve that once argued that the CPI is transitory has now changed its position. The Fed has switched positions from anticipating zero rate hikes in 2022 to reviewing different hikes while normalizing their balance sheet regularization.
The chief investment officer of BNY Mellon Wealth Management, LeoGrohowski affirmed that the recent actions from the Fed are not as dramatic as expected. He admitted that Fed’s switch to a further hawkish position has been nothing but a surprise.
He continued saying that most participants in the market were expecting less generous monetary policy and higher rates but that was not the case. The Fed implied a 90% possibility of a hike around March which is way higher than the 63% charged a day to the new year.
Mini bear market?
The senior commodity strategist at Bloomberg Intelligence, Mike McGlone, claimed $40,000 is a vital support mark for Bitcoin. He believes that the crypto sphere will eventually see the end of this present bearish trend. He also anticipates a time where more people treat Bitcoin as collateral as the world becomes more digitalized.
The Fed minute was published as Bitcoin saw a decline from its all-time high record of $69,000 attained on November 8, 2021. And since then, Bitcoin has experienced a fall of more than 40%. According to the chief executive officer at Blockforce Capital, Eric Ervin, this drastic drop has scared off recent investors leaving the market just for long-term holders and investors.
Eric asserts that the current bearish trend could be a “mini bear market”. He added that these corrections are totally normal in the crypto sphere and many investors are getting ready to go bullish soon.
Krüger also remarked that Bitcoin is already at an oversold position given its drastic drop from its all-time high. Therefore, if the CPI reason makes a surprise, the crypto market could see Bitcoin price surge and pop for some time.
Krüger believes that the price of Bitcoin should range between $41,000 and $44,000. Until then, the direction of the market cannot be fully determined. Time will definitely tell.
Please note that the opinions and views expressed by these experts are not financial advice but their honest assessment of the market. They could be right or wrong as the market is highly volatile. Crypto trading involves significant risks so ensure you do your research before investing.
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Stephanie Braga
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