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Monday, May 27, 2024

Billions of dollars outflow: when will the Bitcoin bottom be reached?

Bitcoin is bleeding as the Fed announces it will raise interest rates by a historic 0.5 percentage points. How far does the price fall?

The key monetary policy rate of the US Federal Reserve (Fed) has been between 0.75 and 1 percent since the middle of this week . The Fed is thus accelerating the deceleration of the economy and wants to get the galloping inflation under control. Most recently, the inflation rate in the land of unlimited price increases was a whopping 8.2 (!) percent.

Even Bitcoin did not come out unscathed from the monetary policy barrage of the central bank, which just missed its inflation target by 6.2 percentage points. The digital gold, which in view of the recent slide in prices is unfortunately not yet one, is getting a good beating with a daily minus of 9.2 percent.


The reasons are quickly outlined. Tech stocks are considered growth stocks among investors. Investors especially flock to such risky assets when interest rates are low. After all, Apple , Amazon , Netflix and Co. need cheap credit to be able to finance their rapid growth. If money becomes more expensive, the prospects for growth and prices will fall. Since the interest rate hike, the Nasdaq 100 (NDX) has been down 5 percent.

Der Nasdaq 100 im Monatschart

Bitcoin and Nasdaq: Correlation at record levels

However, Bitcoin is not a stock. So what does the stock market sell-off have to do with bitcoin? Unfortunately quite a lot. Because Bitcoin also seems to flourish, especially in times of economic prosperity. The market currently does not rate BTC as what digital gold can be one day, but also sees the asset in the ranks of risk values. In other words, Bitcoin is trending more and more congruently with the stock market these days. Most recently, the correlation to the S&P500, the most important US stock index, was around 68 percent. For comparison: In January of this year, it was less than half as high at 32 percent.

There is no question: the recent slide in prices is severe. As Bitcoin Archive writes on Twitter, there has not been such a consistent downward trend since 2014.

#Bitcoin just had 5 down weeks in a row for the first time since 2014. pic.twitter.com/taGVCGDCYa— Bitcoin Archive 🗄🚀🌔 (@BTC_Archive) May 6, 2022

However, and this is the good news, Bitcoin Hodler seem to be less bothered by the current turmoil in the market. On the contrary: At 65 percent, the 1-year Hodl wave is at an all-time high.

Translated, this means that 65 percent of the coins have been held for at least a year.

Where is the journey going?

With a view to indicators such as the Mayer Multiple, which puts the current Bitcoin price in relation to the 200-day average, one has to say: There is still room for improvement.

The May multiple is currently 0.78. It’s definitely in bear market territory, but still off the bottom. For comparison: the Mayer multiple bottomed out at 0.71 recently.

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