The current European energy crisis is likely to force the Federal Reserve to change its monetary tightening regime. Still, with inflation showing no signs of slowing down, there could be more pain ahead before the cryptocurrency market makes a meaningful recovery. Meanwhile, a few technical indicators are pointing to the bottom of the cryptocurrency market.
“Metrics signal bottom for cryptocurrency”
Is the market bottom? This is the big question on everyone’s mind right now, from the smallest individual investors to the largest hedge fund managers. The confusion of macro signals and technical indicators makes it difficult for us to understand exactly what is going on in the economy and even faster in the crypto market. Analysts explain why the market may or may not have bottomed out. We have compiled it for the readers of Kriptokoin.com.
First, the good news. Several major technical indicators have given buy signals in recent weeks. It strengthened the possibility that the cryptocurrency market has reached its lowest point. Net Unrealized Profit/Loss (NUPL), Pi Cycle Dip, and Puell Multiple hit levels once in a historically bottomed cycle. While technical indicators like this one have sometimes had a dubious history, when they’re in a few rows as they are now, they’re definitely worth paying attention to.
What do macroeconomic indicators mean for the cryptocurrency market?
Moving away from the technical side of things, the way the crypto market reacts to macroeconomic news is also noteworthy. In June, CPI data recorded the highest level in 40 months with 9.1%. After that came a big change. Many market participants expected cryptocurrencies to initiate another drop after the news of the drop. However, the opposite happened. The crypto market has gone even higher. It caught anyone trying to short sell late. Similarly, Wednesday’s 75bps gain and yesterday’s negative GDP growth paradoxically pushed crypto higher. It indicates that the market may have “priced” the current downward economic trend.
Still, even if market participants have stopped being interested in the broader macroeconomic situation, that doesn’t mean there won’t be any more pain. The truth is, inflation is still hot. The Fed is also determined to get it back to a reasonable level. Fed Chairman Jerome Powell said it was “appropriate to slow the pace of increases” after Wednesday’s hike. However, it left the door open for an ‘even bigger’ raise if needed. Continued gains, coupled with the Fed’s sale of treasury bills and mortgage-backed securities, will tighten money flows. So it will almost certainly be a barrier to risk assets like cryptocurrencies.
The Fed is likely to have to end monetary tightening to avoid a catastrophe in Europe. There is currently a window until winter when the US can continue to raise rates. However, Europe will soon come to a breaking point. The Fed will halt or reverse its current monetary policy. That way, it will have to ease some pressure by weakening the dollar.
The ultimate question is: Can the market fall before the Fed is forced to turn? Given the massive loss of leverage that caused Bitcoin to drop below $18,000, it’s hard for crypto to hit new lows anytime soon. Still, it’s certainly possible to revisit these levels if the macro situation gets worse.
Is this the end of the downtrend?
Analyst PlanB is notorious for making some false predictions, including when Bitcoin hits $100,000. The analyst now gives good and bad news. He states that people’s expectations for markets are currently volatile.
The S2F model creator also says there is a general wave of gloom in the global market. For this reason, he notes that people are in a rather downward trend. He states that they expect the market situation to worsen as much as the 2008 financial crisis and the 2020 Covid period. According to the analyst, high interest rates are seen as the only reason for the decline in stocks and Bitcoin value.
PlanB’s S2F model predicts $500,000 for Bitcoin
In May, the former Dutch institutional investor conducted a poll on Twitter. 81% of respondents voted that Bitcoin will remain below $500,000 by 2027. But PlanB insists on forecasting the S2F model to average more than $500,000 after the 2024 halving. The analyst compares the current situation to 2019, where he made a similar prediction when BTC was below $4,000. “The majority thought the $55,000 S2F prediction after the 2020 halving was crazy,” he says.
The stock-to-flow model uses the ratio between the current supply of Bitcoin and the supply of new Bitcoin to predict the future prices of the currency. Anthony Sassano, the founder of Daily Gwei, recently made a statement on Twitter. “The stock-to-flow model is such an epic fail that Plan B should delete his (twitter) account,” Sassano said. Vitalik Buterin, co-founder of Ethereum, also agrees with Sassano. Sassano adds that PlanB’s Bitcoin indicator is not looking good at the moment, adding that it is harmful.
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