The stock and cryptocurrency markets could be approaching a significant price correction, according to Markus Thielen, the founder of 10x Research.
In an April 16 research note, Thielen cited persistent inflation, decreasing rate cuts, and a rising bond yield as the reasons behind his outlook.
The primary trigger is the unexpected and persistent inflation. With the bond market now projecting less than three cuts and 10-year Treasury Yields surpassing 4.50%, we may have arrived at a crucial tipping point for risk assets.
Bitcoin’s price fell over 9.3% during the week to trade above the $63,400 level as of 9:15 am UTC, according to CoinMarketCap data. Thielen suggests that the reason behind Bitcoin’s decline could be the falling expectations for an incoming interest rate cut.
Most of this 2023/2024 Bitcoin rally is driven by expectations that interest rates would be cut, and this narrative is being seriously challenged now.
According to Chicago Mercantile Exchange’s FedWatch tool, Traders are currently expecting rates to remain unchanged, with 99% of market participants expecting the Federal Reserve to maintain interest rates at the current 5.25%–5.50%, up from 93.6% a month ago.
A bearish outlook on risk assets
Thielen added that his company sold all its tech stocks at the open during Monday’s trading session and only holds a few high-conviction crypto coins. Overall, they are bearish on risk assets.
A key technical indicator, the relative strength index (RSI), suggests that Bitcoin price may be “overbought.” On the weekly chart, Bitcoin’s RSI is currently at 67, down from its 2024 high of 88, hit on March 24, according to TradingView.
Investor focus has shifted to the upcoming Bitcoin halving, prompting long-term holders to start selling and moving assets off exchanges. According to a Bitfinex research report, if short-term holders continue to absorb the supply sold by long-term holders, it could indicate room for further price growth.
The report follows Hong Kong Securities and Futures Commission (SFC) recently giving the green light to the first spot Bitcoin and Ethereum exchange-traded funds (ETFs) in the region.
