Home CryptocurrencyAltcoin Elon Musk, Cathie Wood Sound ‘Deflation’ Alarm – Is Bitcoin at Risk of Falling Below $14,000?

Elon Musk, Cathie Wood Sound ‘Deflation’ Alarm – Is Bitcoin at Risk of Falling Below $14,000?

by SuperiorInvest

Bitcoin (BTC) has rebounded 20% since September 7 to nearly $22,500. the risks of the bull trap they abound in the long run as Elon Musk and Cathie Wood sound the alarm about a potential deflationary crisis.

Cathie Wood: “Deflation in the pipeline”

Tesla’s CEO tweeted over the weekend that a big increase in interest rates by the Federal Reserve could raise the possibility of deflation. In other words, Musk is suggesting that demand for goods and services in the United States will fall against rising unemployment.

Typical, the rate hike was bad for bitcoin this year. In the context of that period, when the Fed was raising its benchmark rates from near zero in March 2022 to 2.25%-2.50% in August 2022, it coincided with a more than 50% drop in the price of BTC.

So far, the labor sector has been very resilient. However, the latest Bureau of Labor Statistics report shows that the unemployment rate rose to 3.7 percent from 3.5% in August. Even Alphabet (Google) he warned that they could soon move to layoffs to remain 20% more efficient.

However, Fed Chairman Jerome Powell said the central bank could raise rates further to reduce inflation to their preferred target of 2%.

In July, the US consumer price index (CPI) was 8.5% year-on-year. August inflation data is expected to be released on September 13, according to a Reuters poll of economists forecasting it would fall to 8.1%, citing the recent drop in energy prices.

That’s still far from the Fed’s 2% inflation target, which according to David Blanchflower, a former member of the Bank of England’s rate-setting committee, will lead to a hard landing. The hawkish Fed could thus announce rising unemployment and economic recessionmuch like Musk predicts deflation.

In the same vein, Ark Invest CEO Cathie Wood, who sees Bitcoin Attacks $1 Million to 2030, citing the latest data from Mannheim, noting that used car prices fell 4% in August and roughly 50% in 2022. Again, the metric shows declining consumer demand.

Bitcoin could be feeling the pain of a deflation-led recession, with Ecoinometrics analyst N designing that cash-strapped companies wouldn’t dip their toes into a volatile asset until the economy bottoms out.

He explained:

“From 2020 to 2021, there was a large number of new entrants in the digital asset space, which pretty much doubled the total amount of funds in the coffers. And as the market slowed down, everything came to a standstill.”

Bitcoin treasury holdings as of 2020. Source: Ecoinometrics

Retail investors could follow a similar strategy, comment Q.Ai, an investment service backed by Forbes.

In other words, higher interest rates would increase the flow of people’s monthly income towards paying off debt (mortgages, credit cards, etc.), reducing their allocation of cash to riskier assets like Bitcoin.

Bitcoin at $14,000?

Macro fundamentals can also trigger bearish technicals for Bitcoin, especially on the daily chart.

Bitcoin appears to have been forming an inverse bearish cup-and-handle reversal pattern, confirmed by an inverted U-shaped price trend (cup) followed by a brief uptrend (handle), all at a common support level called the “neckline”. ”

Related: Bitcoin Is ‘Wild Card’ To Outperform – Bloomberg Analyst

As a rule of technical analysis, the profit target for the inverse cup and handle pattern is measured by subtracting the price at the neckline from the maximum cup height as shown below.

BTC/USD daily price chart with inverse cup and handle setup. Source: TradingView

Technically, therefore, BTC price risks new multi-year lows below $14,000 in 2022, a 37.5% drop from September price.

Additionally, Filbfilb, creator of the DecenTrader trading suite, who accurately predicted Bitcoin’s bottom in 2018, told Cointelegraph that BTC may fall as low as $11,000 later this year based on historical volume around that level.

“Currently, the price of Bitcoin is highly correlated with the ‘legacy’ markets, particularly the NASDAQ, which we know is under tremendous pressure due to the Federal Reserve’s monetary policy,” he explained. “So this time ‘it’s a little different’ because of the high correlation and external economic forces.”

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Cointelegraph.com. Every investment and trading step involves risk, you should do your own research when making a decision.

Source Link

Related Posts

%d bloggers like this: