In mid-February 2022, the leading cryptocurrency seemingly recovered after its earlier nosedive, moving upwards into the $35,000-$45,000 area and hitting new highs. Market players expected the Federal Reserve to increase the key interest rate gradually. Now, in April 2022, the Fed is forecasted to hike the rate by 50 basis points at its May meeting. The outlook for high-risk assets is very cloudy.
As a result, trade volume in the futures market has fallen by 59%, with spot bitcoin trading also being moribund. The high correlation between NDX and BTC indicates that investors see bitcoin as a high-risk asset that has lost its yield due to lower volatility and a prolonged sideways trend. Dan Morehead, CEO of Pantera Capital, thinks otherwise. He expects crypto assets and BTC to become the most stable financial instruments in the market.
According to Morehead, the Fed's policy will have a negative impact on the stock market, as well as other instruments. Cryptocurrencies, on the other hand, are under active development. Thanks to its new economic opportunities, the crypto market is attracting more investors than any other financial market. "If we're even partly right, bond yields are going to go to five percent or higher, obviously that crushes bond prices, but it has to impact stocks and real estate and anything else that has a discounted cash flow," Pantera Capital's CEO said. Morehead is certain that crypto assets will outperform other financial instruments in the near future.
At this point, the situation does not match Dan Morehead's bullish outlook. BTC is correlating with stock indexes, making it dependent on movements in the stock market. On the other hand, rising bond yields and stronger USD are not expected to affect the overall situation in the macroeconomic and geopolitical spheres.
The world and the global economy are facing a stagflation. Fiat currencies could become an unprofitable investment due to disrupted supply chains, the militarization of major economies, and interest rate hikes by central banks worldwide, as well as inflation, growing unemployment, and changing investment priorities.
In this situation, cryptocurrencies and bitcoin could become a breath of fresh air for investors - their architecture makes them independent from regular currencies. At this point, the stagflation rate allows governments some room for maneuver. As the war drags on and the economy becomes more militarized, bitcoin would attract investor demand. Cryptocurrencies could become the main save haven asset amid the tectonic geopolitical shifts of 2022 - one of the most volatile years of the 21st century.
Currently, BTC is facing resistance in the $40,000 area after forming two bullish candlesticks. As expected earlier, the range of fluctuations is steadily falling, indicating that bearish traders have the upper hand. Trading volume is quite low across all bitcoin markets, indicating that the BTC could descend into the $32,000-$37,000 area next week. Low trading activity during the weekend could allow bitcoin to rise above the $40,000 mark, but it is very unlikely that BTC would hold onto this level for a long time.