Bitcoin (BTC) from September 7 rose 20% to nearly $22,500. However, the risks associated with a bull trap in the long run, they abound as Elon Musk and Cathie Wood sound the alarm about a possible deflationary crisis.
Cathie Wood: Budding Deflation
Tesla’s CEO tweeted over the weekend that a big rate hike by the Federal Reserve could raise the possibility of deflation. In other words, Musk says that as unemployment rises, the demand for goods and services in the United States will decrease.
Bitcoin (BTC) since September 7 rose 20% to nearly $22,500. However, the risks associated with a bull trap in the long run, they abound as Elon Musk and Cathie Wood sound the alarm about a possible deflationary crisis.
A big Fed rate hike risks deflation
– Elon Musk (@elonmusk) in 2022 September 9
Las raising rates This year has generally been bad for Bitcoin. In light of this, the period in which the Fed raised its benchmark interest rates from near zero in 2022 March. to 2.25-2.50% in 2022 in August, coinciding with the price of BTC falling more than 50%.
So far, the labor sector has been very resilient. However, a recent report from the Bureau of Labor Statistics sample that the unemployment rate rose to 3.7% from 3.5% in August. Including Alphabet (Google) warned so that she can lay off work soon to remain 20% more efficient.
But Fed Chairman Jerome Powell has Confirmed so that the central bank can continue to raise interest rates to bring inflation down to the desired 2% target.
In July, the US Consumer Price Index (CPI) was 8.5% y/y. August inflation data will be released on September 13, and a Reuters poll of economists provides drop to 8.1 percent, due to the recent decrease in energy prices.
That figure is still far from the Federal Reserve’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. Therefore, an aggressive Fed can cause unemployment to rise and a economic recessionmuch like Musk predicts deflation.
Also, Ark Invest CEO Cathie Wood, who believes that Bitcoin by 2030 will reach 1 million USD, cited the latest data from Mannheim, noting that used car prices fell 4% in August and are expected to fall by 4% by 2022. – about 50%. Again, the metrics show a decline in users. demand.
Deflation in the works, targeting PPI, CPI, PCE Deflator: from post-Covid price peak, wood -60%, copper -35%, oil -35%, iron ore -60%, DRAM -46%, corn -17%, Baltic country freight rates -79%, gold -17%, silver -39%. https://t.co/nVpU1cdf1L
— Cathie Wood (@CathieDWood) in 2022 September 12
Bitcoin may feel the pain of a deflationary downturn, as Ecoinometrics analyst N says cash-strapped companies aren’t diving into volatile assets until the economy bottoms out.
Here’s how he explains it:
“From 2020 to 2021 a huge number of new entrants entered the digital asset space, almost doubling the total number of treasures. And when the market slowed, everything stopped.
Retail investors could follow a similar strategy, draws attention to Q.Ai, a Forbes-approved investment service.
In other words, higher interest rates would increase people’s monthly income to pay off debt (mortgages, credit cards, etc.), reducing their cash allocation to riskier assets like Bitcoin.
¿Bitcoin to $14,000?
Macroeconomic fundamentals can also trigger critical Bitcoin technical indicators, especially on the daily chart.
Bitcoin appears to have formed a bearish cup and inverse handle reversal pattern, confirmed by an inverted U-shaped price trend (cup) followed by a brief uptrend (handle), all above the usual support levels known as necklines.
According to the rules of technical analysis, the profit target of the inverse cup and handle pattern is measured by subtracting the price of the neckline from the maximum height of the cup as shown below.
So, from a technical perspective, BTC price in 2022 could fall to $14,000, which is about 37.5% from the current price.
Also, Filbfilb, creator of the trading suite DecenTrader, who accurately predicted Bitcoin’s bottom in 2018. dijo and Cointelegraph that BTC may fall to $11,000 later this year based on historical volume at this level.
“Bitcoin price is currently strongly correlated with the ‘old’ markets, especially the NASDAQ, which we know is under tremendous pressure from the Fed’s monetary policy,” he explained. “So this time it’s ‘a little different’ due to high correlation and external economic forces.”
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