Mike McGlone, senior macro strategist at Bloomberg Intelligence, outlined the primary catalyst for the decline in Bitcoin and Crypto prices. In a recent analysis of digital assets, McGlone cited the US Federal Reserve’s inflation hawkish strategy as a key factor that could put downward pressure on risk assets like digital assets.
Analysts note that the crypto bear market is far from over while advising buy-and-hold investors to look for protective insurance against asset devaluation. He also said that the pullback by digital assets makes them vulnerable to future price declines.
Fed Rate Hike: Major Catalyst For Crypto Markets Downturn
While analyzing the recent downturn in financial markets, McGlone criticized the Fed’s demand to raise interest rates even though the strategy could lead to an economic recession. According to McGlone, crypto assets and equities have yet to see a decline.
This statement shows that the worst is yet to come, and the price of cryptocurrencies may continue to fall The Federal Reserve implements it the next basis point (bps) in interest rate hikes.
Bloomberg analysts say that the stock market, including crypto, is one of the most energetic forces in the world during the downturn. And the Fed’s monetary tightening amid high recession risks is a powerful catalyst for this decline. He mentioned $25,000 as the main support level for Bitcoin while adding that March will decide the fate of the crypto price.
Whether cryptocurrencies, including Bitcoin, maintain a pivot level depends on CPI data out in March. The CPI data will determine how much the recession is weighing on consumers and how the Fed’s tightening has weighed on Inflation.
If CPI data comes out low, market sentiment will increase while spiking crypto and stock prices. However, if the index is high, investor sentiment will deepen causing a large price drop in the stock and crypto markets.
Digital Assets Haven’t Seen The End, Analysts Say
McGlone’s analysis suggests that the 2022 lows recorded by Bitcoin and other crypto assets may not be the bottom line. Another danger could be with the Fed’s additional tightening in March. In the report, McGlone further notes that markets appear to be underestimating the lagging effects of monetary policy, which should be a good reason to be defensive.
As McGlone cited, the federal interest rate was zero a year ago and is now rising. He noted that risk assets like Bitcoin should prove their resilience in early March, as federal interest rates are now approaching 5%. Since Bitcoin failed to hold the key support level of $25,000 in early March, the possibility of higher interest rates will be higher.
Featured image from Pixabay, chart from TradingView.com