Bitcoin Plunges 13% Amid U.S. Recession Fears & Yen Market Dislocation
In a weekend shakeup, Bitcoin experienced a 13% drop as global equity markets reacted to U.S. recession fears and Yen market dislocation. Analysts at Bernstein noted that Bitcoin's initial reaction as a 'risk off' asset is not surprising, citing similar patterns during past events like the March 2020 flash crash.
Despite the recent downturn, Bernstein remains bullish on Bitcoin's future. They anticipate that if rate cuts and monetary liquidity become the norm in response to U.S. recession fears, "hard assets" like Bitcoin (Digital Gold) will see a repricing upwards. Additionally, with the advent of Bitcoin ETFs that are now highly liquid and trading around $2 billion daily, investing in Bitcoin has become more accessible.
Bernstein also pointed out Bitcoin's connection to political dynamics, labeling it a "Trump trade" due to the crypto market's favoritism towards Trump as a crypto-friendly candidate. They expect the market to remain range-bound until the U.S. elections, with catalysts like the Presidential debate and final outcome influencing its movement.
Moreover, ETFs have witnessed significant inflows, with almost $1.2 billion pouring in over two weeks. However, outflows from Grayscale’s ETHE have offset some of these gains. Looking ahead, Bernstein believes that Bitcoin and crypto markets will trade based on macro and election cues throughout Q3 2024. They recommend that investors seeking exposure to the "Trump trade" should consider adding Bitcoin or Bitcoin equities to their portfolios.
In conclusion, if broader equity markets rebound due to a Fed response, Bernstein anticipates that Bitcoin and crypto markets will follow suit. It's crucial for investors to stay informed about these market dynamics and consider their implications on their financial decisions.