Markus Thielen, the founder of 10X Research, suggests that the cryptocurrency market may be reaching a critical turning point and could undergo a significant price correction. Thielen identifies unexpected and persistent inflation as the primary trigger for this adjustment. As the bond market forecasts fewer interest rate cuts and the 10-year Treasury Yields exceed 4.50%, the risk assets in the market may have reached a crucial tipping point.
After experiencing a pullback, Bitcoin managed to maintain its price above $28,000. However, CoinMarketCap reports that the price dropped by over 9.3% during the week, trading above $63,400. Thielen’s research note highlights that the recent rally in Bitcoin, expected to continue until 2023/2024, is primarily driven by the anticipation of interest rate cuts. However, this narrative is now being seriously challenged.
Market participants, as indicated by the CME Group’s FedWatch Tool, expect interest rates to remain unchanged. Currently, 99% of traders anticipate that the Federal Reserve will maintain interest rates between 5.25% and 5.50%, an increase from 93.6% a month ago. In response to these market conditions, Thielen reveals that his company sold all of its tech stocks during Monday’s trading session.
Thielen further emphasizes their bearish stance on risk assets as they have invested in very few high-conviction coins. Additionally, a technical indicator suggests that the price of Bitcoin has become overbought. The relative strength index (RSI) for BTC on the weekly graph is now at 67, indicating that it may be overextended given its recent surge. The RSI is a popular momentum indicator used to assess whether an asset is oversold or overbought based on recent price changes.
Investors are currently focused on factors such as the upcoming Bitcoin halving, the decline in hash rate, and the sell pressure from major holders on exchanges. These elements are shaping the current trends in the market.