The stock and cryptocurrency markets are poised at a potentially critical juncture, facing the likelihood of a significant price correction, as indicated by Markus Thielen, founder of 10x Research.
Thielen, in a recent statement, conveyed his bearish sentiment by announcing, “We sold everything last night.”
He attributes this decision to ongoing inflation, fewer expected interest rate cuts, and an increase in bond yields.
In his April 16 research note, Thielen elaborated on the catalysts of his concern: “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.”
This cautious outlook follows a notable decline in Bitcoin’s price, which dropped over 9.3% last week, leaving it just above the $63,400 mark, as recorded by CoinMarketCap at 9:15 am UTC.
The research note suggests that this downturn might be tied to diminished expectations for rate cuts.
Thielen wrote, “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 sentiment aligns with this, as CME Group’s FedWatch Tool shows a dominant expectation (99% of participants) that the Federal Reserve will keep rates steady between 5.25% and 5.50%.
Amid these market movements, Thielen disclosed that his company also divested from all tech stocks at Monday’s market opening, though they continue to hold “a few high-conviction crypto coins,” affirming an overall bearish stance on risk assets.
The analysis also touches on Bitcoin’s technical indicators, pointing out potential signs of being overbought.
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The relative strength index (RSI) on Bitcoin’s weekly chart stands at 67, a marked decrease from its 2024 peak of 88 on March 24, as per data from TradingView.
The RSI serves as a gauge for whether an asset might be overvalued or undervalued based on recent price movements.
Moreover, attention within the cryptocurrency community has shifted towards the upcoming Bitcoin halving event.
This anticipation has led to long-term holders selling off their holdings and moving their assets off exchanges.
A research report from Bitfinex, shared with Cointelegraph, highlights a change in investor demographics: “There has been a shift in the makeup of the Bitcoin investor base, with new entrants (Short-Term Holders) absorbing the supply sold by Long-Term Holders (LTHs).
This is evidenced by the rising Market Value to Realized Value ratio for STHs, albeit it is still below peak levels seen in previous cycles.
If this dynamic of STHs absorbing LTH sell downs persists, then it could indicate room for further price growth.”
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