Bitcoin lost the $20,000 area again after a bearish weekend. The central bank has made it clear Jackson Hole Conclave that interest rates will continue to rise significantly and for quite some time, dampening expectations for risk assets that have been brightened by the improvement in some inflation indicators.
Among these risk assets, cryptocurrencies again stand out, with sharper fluctuations (both up and down) than other risk assets. Although the fall of bitcoin and its peers has been very intense in recent days, the downtrend may still have progressed somewhere, according to a note published by Sentix (an independent research institute in Frankfurt) on Monday. August promised to be a turbulent month for cryptocurrencies and so it was.
Since last Thursday bitcoin lost more than 9%., from trading above $21,800 to dipping below 20,000 on Monday. The rest of the crypto-currencies saw an even bigger drop. For example, Ethereum, the second-largest cryptocurrency by market capitalization, has fallen about 15 percent since last Thursday. despite his impressive comeback in previous weeks.
The central bank’s message in Jackson Hole was clear: monetary tightening will continue to accelerate even though there are signs of easing inflation. Although some prices could start to stunt their growth, core CPI and other broader indicators remain at historically high levels.
Another monetary policy hawkish
Javier Molina, representative of multi-asset investment platform eToro in Spain, points out that the message of the Jackson Hole meeting was clear: “Despite the fact that the market still sees some possibility of a return to expansionary policies in 2012. 2023, the illusion of a cut earlier this year has been dispelled.”
The central bank wants to put out the fire of inflation and put an end to the “irrationality” of some prices in the property market. Higher interest rates, combined with lower liquidity, create lower growth expectations at all levels, affecting more those assets with higher expected (future) growth, that is, assets whose price includes higher growth in the future than now. . A great example is cryptocurrencies. Investors are now questioning the price of these assets, causing strong selling pressure.
As such, Patrick Hussy, CEO of Sentix notes that “after a strong negative sentiment impulse last week, investors’ fear was reflected in the drop in bitcoin prices. The mood is already very negative, but for now it seems too early to bet on the end of the liquidation,” said this expert.
According to Hussy, the level of undecided investors is still very high, although prices may now look more attractive: “Neutrality (undecided investors) is too much!” The group of neutral and therefore undecided investors of 40 percentage points is still too large to see a difficult turning point in the market,” comments this expert. According to Hussy, high neutral values indicate some lack of investor confidence and “could lead to a new push from the mainstream.”
Bitcoin core areas
“If bitcoin can’t hold $20,000, then $18,900 will start,” says Antoni Trenchev, Nexo’s founder and managing partner, in a note compiled by the agency. Bloomberg.
It is not clear when the cryptocurrency correction will end, but for now, the market is seeing that “money is flowing out of risky assets. The crypto is following a strong correction that was seen in the US stock markets after Powell’s comments,” says Cici Lu, CEO of consulting firm Venn Link Partners.
“The markets didn’t like what he said, and bitcoin proves once again that it’s a high-beta asset.” European stock markets are also down this Monday.