Crypto Won’t See Bull-Run Anytime Soon, Expert Explains Why
The crypto market is stuck in a tight range as major cryptocurrencies fail to break above key levels of resistance. The sector has been largely biased to the downside since September when Ethereum completed “The Merge”.
At the time of writing, Bitcoin (BTC) is trading at $19,500 with a gain of 2% in the last 24 hours, while Ethereum is registering a gain of 3% over the same period. Other cryptocurrencies are following a similar trajectory during today’s trading session with XRP and Cardano among the worst performing assets in the sector.
Crypto and global markets near the bottom, but far from a bull
The successful completion of “The Merge” left the crypto market without a narrative of its own. Thus, the nascent asset class has moved in step with traditional shares and major indices.
Macroeconomic forces have dominated price action in risky assets, mostly crypto and stocks, as the US Federal Reserve (Fed) rushes to curb inflation. The financial institution has raised interest rates and triggered a bear market that has rippled through the financial world.
In this situation, every market participant wants to know when crypto will finally bottom out. For this to happen, stocks must first find a bottom, and oneaccording to Jurrien Timmer, Director of Macro for Fidelity, this may be close to happening.
Via his official Twitter handle, Timmer compared the current situation with the inflationary periods from 1940 to 1947 in the United States. The North American country went through a period of high inflation after World War II.
Timmer referred to this situation as a fiscal/monetary cocktail, the country was recovering from a major conflict with most of the world in ruins, still damaged from the massive consumption and low resources. At the time, the S&P 500 saw a 30% decline.
Right now, this index is nearing its lows as it follows a similar trajectory. As shown in the chart below, the S&P 500 continued to move sideways for several years as inflation peaked at 19.6%. In comparison, today’s inflation of 8.9% was the highest month-on-month. Timmer said:
The 1946-49 bear market had a nominal decline of 30% and a real decline of 46% (average 20% inflation). It was entirely driven by valuations. The analogy suggests that we are close to the bottom, but far from the next bull.
Other experts expect a similar scenario for Bitcoin and the crypto market. This may be positive news for long-term owners looking to accumulate at current levels, but not for those betting on another bull run in 2022 or even 2023.
