Investors are weighing the Bitcoin and altcoin bear market rally, according to Bank of America (BofA). That said, BofA notes that crypto buying momentum has plummeted as the risk of recession increases. BofA also says that the prospect of a hawkish Federal Reserve and interest rates remaining higher for longer isn’t exactly priced in risky assets.
Bitcoin and altcoins are experiencing a classic bear market recovery
There is uncertainty about the sustainability of the bear market bounce. Also, investors are turning away from more volatile assets due to the potential for a sharp decline. That’s why Bitcoin and altcoin investors are switching to stablecoins. Stablecoins are a type of cryptocurrency whose value is pegged to another asset like the US dollar or gold. Meanwhile, BofA said in a research podcast Wednesday that there is a recession in the US. Alkesh Shah, the bank’s head of digital asset research, comments on the podcast:
Most risky assets, including digital ones like Bitcoin, have risen strongly from June lows. However, the likelihood of the Fed taking a more hawkish stance and higher interest rates continuing for longer has not been fully priced in. Risk assets, including crypto and digital assets, are likely experiencing a classic bear market rebound after a significant sell-off.
Will Ethereum Merge be a hope for the market?
The bank’s token flow analysis points to waning crypto buying momentum. It also shows that investors are defensively turning to stablecoins. According to BofA, this is due to uncertainty over whether the broader financial markets are in a “bear market rally.” A bear market rally is described as a short-term recovery during a more widespread decline. There is also uncertainty about whether slower-than-expected growth will lead to more weakness, especially next year. The bank sees further weakness as likely for risky assets, including cryptocurrencies.
Alkesh Shah says that Ethereum Merge will be an important milestone for the digital asset industry. The Ethereum team plans to launch Merge later this month. By the way, as you know from Kriptokoin.com, Merge is the first of Ethereum’s five software updates. Experts say Merge will reduce network energy use by over 99%. According to Shah, this will remove one of the ‘main adoption barriers’ for applications like NFTs and stablecoins.
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