Crypto Analyst Warns Bitcoin's Impending Correction As Rally Falters: 'We Are Bearish Risk Assets'

Amid fluctuating market signals, a renowned analyst who previously anticipated Bitcoin’s BTC impressive rise is now forecasting a downturn across risk asset classes.

What Happened: Markus Thielen, the analyst celebrated for his precise prediction of Bitcoin’s ascent, has shifted to a bearish perspective on risk assets, encompassing both tech equities and cryptocurrencies, CoinDesk reported on Tuesday. Thielen, who helms 10X Research, has voiced his alarm over a probable substantial market correction, spurred by unyielding inflation and the bond market’s forecasts.

"We sold all our tech stocks last night (at the open) as the Nasdaq is trading very poorly and reacting to the higher bond yield. We only hold a few high-conviction crypto coins. Overall, we are bearish risk assets (stocks + crypto)." Thielen said.

“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.”

Market participants have recalibrated their expectations for Fed rate cuts, envisioning fewer than three for the current year, a decrease from the previously expected six, as indicated by data from CMEGroup. This adjustment, combined with persistent inflation and a robust labor market, has propelled the 10-year Treasury yield to its highest level since November 2023, thus diminishing the allure of riskier investments.

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The recent surge in Bitcoin, largely fueled by the prospect of interest rate reductions, is now under scrutiny. Thielen pointed out that the flow into spot exchange-traded funds (ETFs) has stalled, with the 5-day average of net inflows falling to zero. Although the U.S. Securities and Exchange Commission (SEC) greenlit several spot BTC ETFs in January, which initially attracted substantial investment, enthusiasm has tapered off this month.

As the fervor surrounding Bitcoin’s imminent mining reward halving, slated for April 20, starts to fade, market observers are bracing for a potential correction. This event will slash the reward for mining new blocks, thereby decelerating the pace at which new Bitcoin enters circulation. Despite these jitters, Bitcoin has still recorded a 42% gain year-to-date, and the broader CoinDesk 20 Index has risen by 17% for the same period.

Why It Matters: The bearish outlook from Thielen comes at a time when the cryptocurrency market is facing a complex mix of investor sentiment and economic indicators. On Monday, skepticism about Bitcoin’s long-term viability was voiced by finance professionals, despite BlackRock Inc.’s endorsement of the digital currency in the previous year. This sentiment was echoed at a Miami event, where investment experts maintained reservations about Bitcoin.

Furthermore, the upcoming Bitcoin halving event, which historically tends to boost Bitcoin’s price, is now being met with uncertainty. Crypto.com’s CEO Kris Marszalek predicted a potential increase in Bitcoin sales around the halving date of Apr. 20. However, with Bitcoin having already reached a record high in mid-March, the market’s reaction to this event remains uncertain.

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