Markus Thielen, an analyst who accurately predicted the lowest point of Bitcoin’s value in November 2022 and its recent surge in value before the halving, now thinks that risky investments like technology stocks and cryptocurrencies might be in for a fall.
Reasons for Concern
Thielen’s concern stems from rising inflation, which is causing bond yields to go up. This means that investors might start favoring safer investments over risky ones like tech stocks and cryptocurrencies.
Action Taken
To prepare for this, Thielen sold all the tech stocks in his portfolio because he noticed that the Nasdaq (a stock market index heavily weighted towards technology companies) wasn’t doing well. He only kept a few cryptocurrencies that he believes strongly in. Overall, Thielen is expecting a drop in the value of risky assets.
Changing Expectations
At the start of the year, many traders thought that the Federal Reserve would reduce interest rates several times in 2024, but now they believe it might happen less often—maybe only two or three times. This change is due to factors like steady inflation and a strong job market. As a result, the yield on 10-year Treasury bonds has gone up to 4.61%, making risky investments less appealing.
Impact on Bitcoin
Much of the recent rise in Bitcoin’s value was due to expectations of interest rate cuts. However, with interest rates not likely to fall as much as expected, Bitcoin’s value might not keep rising. Additionally, the excitement around Bitcoin ETFs (investment funds that track the value of Bitcoin) has died down, with no new money coming in recently.
ETF Flows Slowing Down
After a surge in investment in Bitcoin ETFs earlier this year, the flow of money into these funds has slowed down to almost zero. This suggests that investors are losing interest in Bitcoin, especially since its value hasn’t gone up much since March.
Halving Hype Fading
Some experts think that once the excitement around Bitcoin’s upcoming mining reward halving event fades, there could be a further drop in its value. This event will reduce the rate at which new Bitcoins are created, potentially affecting its price.
Current Bitcoin Value
Despite these concerns, Bitcoin is currently valued at $62,600, showing a 42% increase since the beginning of the year. The broader cryptocurrency market, as represented by the CoinDesk 20 Index, has also seen a 17% increase in value for the year.