🤫 Bitcoin Sell-Off Averted, Market Breathes a Sigh of Relief

Summary: According to last night’s inflation data, the US CPI declined below expectations from 3.7% to 3.2%, and according to the model, US inflation could fall to 1.6% in 2024. The result would be an ongoing rally in risk-on assets – such as tech stocks and crypto. But despite our bullishness, there was some near-term risk, and we are not surprised that Bitcoin sold off after last night’s bullish inflation number. The US House of Representatives has just passed the stopgap bill – which secures funding for the government into the New Year.

See what you missed: This Cheap Bitcoin Mining Stock might have +330% Upside.

👇 1) We turned bullish on Bitcoin a year ago and published several reports explaining our thesis. During presentations that stretched from Hong Kong to Singapore to Vietnam to Thailand, we described how Bitcoin tends to make a low 14-16 months before the halving (which could justify a price target of $63,000 by May 2024). It was time to buy Bitcoin sub $20,000. Thousands have read our reports.

👇 2) On December 2, 2022, we wrote, ‘With a macro tailwind, Bitcoin might be at $29,000 in 2023’. Crucially, this report correctly predicted that US inflation would decline materially, setting off a massive risk-on rally in stocks and crypto. The Nasdaq is up +35% year-to-date, and Bitcoin is up +114%. Hardly anybody else predicted this.

👇 3) According to last night’s inflation data, US CPI declined below expectations from 3.7% to 3.2%, and according to the model that had guided us for many years (notably a year ago when we published those bullish reports with confidence), US inflation could fall to 1.6% in 2024. Based on our analysis, this is a high-probability event and would allow the US Federal Reserve to cut interest rates materially (150-200 basis points).

👇 4) The result would be an ongoing rally in risk-on assets – such as tech stocks and crypto. But bonds would also rally, turbocharging lower-quality tech stocks and second/third-tier crypto coins – a taste we have seen during the last two weeks.

👇 5) In response to last night’s lower-than-expected inflation report, we have seen traders bringing their estimates forward when they expect the first rate cut – from June to May. While the March FOMC meeting might sound too early, we expect the rate cuts to be pretty persistent as soon as inflation falls nearer to 2.0%. We will be seeing a 2-handle very soon – based on our analysis.

👇 6) But despite our bullishness, there was some near-term risk, and we are not surprised that Bitcoin sold off after last night’s bullish inflation number - which helped stocks but not crypto.

👇 7) The US House of Representatives has just passed the stopgap bill – which secures funding for the government into the New Year. If a shutdown had occurred, all non-essential government work would have paused – including the US Securities and Exchange Commission (SEC) work on any potential Bitcoin ETF approval.

👇 8) Previous shutdowns during the last decade lasted for 17 days; on average, with the previous government shutdown in December, no work was done for 34 days. This would have seriously jeopardized any Bitcoin approval, even in January 2024.

👇 9) The result would have been that Bitcoin would see some more profit-taking, potentially drop -10 %, and implied volatility would have been crushed. We were also ready to give up on our long-held view that Bitcoin would rally to $45,000 by the end of this year. While this target appeared unreachable when we published it on February 2, 2023 (Bitcoin traded at $22,500), the House passing the government funding bill keeps this year-end price target alive.

👇 10) Hence, a Bitcoin sell-off was averted, and the market could see a relief rally as expectations for a Bitcoin ETF approval occurring any moment are kept alive.

You might also like: Bitcoin on the Verge of an Explosive Breakout?

You might also like: Will The Fed pause cause a +300% Bitcoin Rally?

SHARE WITH A FRIEND

Thanks for reading. If you liked today's brief, we'd love for you to share it with a friend.

Partner with us

DeFi Research is much more than just this newsletter: we’re a full-blown one-stop shop for engaging with modern investors. Mail us for partnership deals: [email protected]

WANT TO SPONSOR THIS NEWSLETTER?

Over 10,000 subscribers are throwing a party, and your brand is invited!

Tap into our network of savvy (and good-looking) crypto & Web3 enthusiasts eager to learn and invest.

All content provided by DeFi Research is for informational and educational purposes only and is not meant to represent trade or investment recommendations.