{"id":181357,"date":"2023-09-14T01:39:22","date_gmt":"2023-09-14T01:39:22","guid":{"rendered":"https:\/\/precoinnews.com\/?p=181357"},"modified":"2023-09-14T01:39:22","modified_gmt":"2023-09-14T01:39:22","slug":"bitcoin-unprecedented-liquidity-and-rate-reversal-a-perfect-storm-for-market-correction","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/crypto\/bitcoin-unprecedented-liquidity-and-rate-reversal-a-perfect-storm-for-market-correction\/","title":{"rendered":"Bitcoin Unprecedented Liquidity And Rate Reversal: A Perfect Storm For Market Correction?"},"content":{"rendered":"
Despite Bitcoin’s recent recovery to the key level of $26,100, signaling a crucial point for its future gains and preventing further decline, there are worrisome signals that could raise concerns for Bitcoin bulls in the short term. <\/span><\/p>\n The combination of factors presents a potential perfect storm for a market correction.<\/span><\/p>\n One contributing piece is the <\/span>higher-than-expected<\/span> US August headline inflation, coming in at 3.7% up from the previous month’s 3.2%. Although not a game-changer, it implies that the odds of another rate hike are marginally up, now standing at 53%. Jeroen Blokland, a multi-asset investor, highlights this development.<\/span><\/p>\n Additionally, Bloomberg’s senior macro strategist, Mike McGlone, <\/span>suggests <\/span>that Bitcoin may be leading a downward trend. McGlone emphasizes that Bitcoin is an “exceptionally liquid” asset that has experienced significant appreciation without being tied to specific projects or liabilities.\u00a0<\/span><\/p>\n However, since it emerged during a period of historically low-interest rates, its position as a potential frontrunner for a market reversion is noteworthy.<\/span><\/p>\n One key indicator highlighted by McGlone is the rollover of Bitcoin’s 20-week moving average (MA), which has implications for all risk assets.\u00a0<\/span><\/p>\n Being one of the best-performing assets in history, Bitcoin’s reversion lower is a significant observation. McGlone’s analysis reveals that federal funds futures for the next year hover above 5%, indicating limited expectations for liquidity from the Federal Reserve (Fed).\u00a0<\/span><\/p>\n A similar pattern was observed in Bitcoin’s mean reversion at the beginning of 2022 when futures began pricing for the current tightening cycle. <\/span><\/p>\n As the lower bound of the federal funds rate rapidly rises from zero to 5.2% and is expected to continue increasing, significant pressure on all risk assets, including Bitcoin, may ensue.<\/span><\/p>\n McGlone also highlights the historical relationship between Bitcoin and the broader market. Following the liquidity injection resulting from the shift to zero interest rates in early 2020, Bitcoin’s 20-week moving average reached its bottom before the S&P 500 experienced a similar trend in the third quarter of that year.\u00a0<\/span><\/p>\n Mike McGlone’s analysis raises concerns about Bitcoin’s future performance amid changing interest rate dynamics and the potential impact on all risk assets. As Bitcoin’s 20-week moving average shows signs of rolling over, investors and market participants will closely monitor its price trajectory and its ability to withstand the pressures of rising interest rates.\u00a0<\/span><\/p>\n At the time of writing, the leading cryptocurrency in the market, Bitcoin (BTC), is facing a challenge in surpassing the resistance wall at $26,400, as highlighted by NewsBTC.\u00a0<\/span><\/p>\n Over the past 24 hours, BTC has managed to gain a modest 0.3%, while the most significant gains in the last 30 days have occurred within the seven-day timeframe, with a modest surge of 1.9%.<\/span><\/p>\n Should BTC succeed in surpassing its immediate resistance, it will encounter the formidable 200-day and 50-day moving averages (MA) at levels of $27,000 and $27,100, respectively. These levels pose significant hurdles for the cryptocurrency’s prospects and potential future gains.<\/span><\/p>\n Conversely, if BTC experiences an extended decline and relinquishes its current modest gains, Bitcoin bulls must closely monitor the crucial threshold at the $25,150 level.\u00a0<\/span><\/p>\n A breach of this level could potentially drive BTC down to a seven-month low of $22,000, jeopardizing the cryptocurrency’s bull run and the gains achieved since the beginning of the year.<\/span><\/p>\n<\/p>\n
US Inflation Data And Rising Interest Rates Pose Challenges For Bitcoin Bull Run<\/span><\/h2>\n
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BTC’s Battle With Resistance, Will It Break Through Or Face A Seven-Month Low?<\/span><\/h2>\n
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