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Bitcoin’s slide below $30,000 has spurred fears that it will fall under $20,000 in the near future, but is such a large decline possible given current macro fundamentals?
Bitcoin (BTC) prices have recently fallen below the critical psychological support level of $30,000.
While the cryptocurrency’s move downhill prompted many analysts, including Luno exchange’s Vijay Nayyar and Kinetic Capital’s Jehan Chu, to predict a further depressive move below $25,000, Anthony Pompliano offered a contrasting bullish outlook.
Risk-on markets were faced against fears of the fast-spreading Delta form of COVID-19, according to Morgan Creek Digital Assets’ creator. Should the new coronavirus strain spread at the same rate as the Alpha variant, he predicted that countries would implement “more aggressive monetary stimulus” measures.
“While history does not always predict the future, it is difficult to foresee a situation in which a second wave of lockdowns would not be accompanied by more robust monetary stimulus initiatives,” Pompliano wrote in a newsletter.
“If that occurred, we would likely see all assets continue to go higher and higher.”
In saying so, Pompliano envisioned that the road to more dollar liquidity would like come in seven successive stages, as shown in the snapshot below:
Risk-on FOMO expected
On July 2, Pompliano’s words appeared as the Bitcoin market collapsed in lockstep with other risky assets throughout the world.
For example, all three Wall Street indexes — the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average — have dropped to their lowest levels in weeks. Gold also dropped to $1,795.12 an ounce before recovering to $1,812.145 an ounce.
Meanwhile, United States government bonds rallied alongside the dollar, showing that investors are heading for safe-havens amid the global market turmoil.
Behind the rout, global media outlets reported, was a growing list of worries about economic recovery. The Delta variant of COVID-19 has spread rapidly, reigniting the dialogue in several countries about whether authorities should reimpose lockdown and curb economic activity.
“The hope was that [COVID-19] vaccines would provide us with the endgame,” Mohammed Kazmi, a portfolio manager at Union Bancaire Privee, told the Financial Times. “Now investors are looking at the UK and there’s a bit of fear with regards to reopening so aggressively when cases are still so high.”
Markets are already drawing back from prospects of a V-shaped rebound, according to Kazmi, and are concerned about the future of their economies.
Pompliano’s remarks came as the Federal Reserve considered raising its near-zero lending rates by the end of 2023 in order to combat growing inflation.
Additionally, several central bank officials also favored the idea of tapering their aggressive $120 billion per month asset purchase program, although Fed Chairman Jerome Powell clarified that the Fed intends to run the quantitative easing policy hot until the U.S. economy recovers completely.
Even though the Bitcoin industry has experienced downside volatility during this current market cycle, the fundamentals that have driven the value of Bitcoin and other markets higher throughout 2020 remain unaffected, according to James Wo, founder and CEO of global blockchain and digital asset investment firm Digital Finance Group. He continued, ”
“Any combination of narratives that have brought digital assets to this discounted price can be checked off of lists of FUD that would have eventually affected the price of the whole market.”