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The Aura Around PEPE Isn’t Good For The Market, Especially Bitcoin – Here’s Why

Pepecoin (PEPE) has been exhibiting a surprising level of calm in its price movement lately. However, contrary to what many may assume, this could be a red flag for Bitcoin (BTC) and the entire cryptocurrency market.

According to a Bloomberg report, when an asset experiences an extended period of calm, it can be a sign of market euphoria and an overheated market.

This raises concerns about the sustainability of the current market trend, especially in the context of the cryptocurrency landscape.

Let’s dive deeper into what an overheated market means and how it could impact the king of cryptocurrencies and the market as a whole.

PEPE And The Implications Of An Overheated Market

As reported by Bloomberg, the current market behavior of PEPE is causing concerns for the broader cryptocurrency landscape, particularly for Bitcoin.

This is due to the fact that the rise of PEPE was accompanied by a surge in speculative trading and a frenzy of buying activity, which could indicate market euphoria. 

Coinciding with this, the alpha coin has experienced a drop in value and a period of consolidation.

When the market becomes overheated, it means that the prices of assets have risen to an unsustainable level, fueled by excessive optimism and speculation.

In such a scenario, investors tend to overlook the fundamental value of the assets and focus more on the potential for quick profits. 

Pepe

This results in a significant increase in demand, which drives up the prices further, creating a bubble that is bound to burst at some point.

In an overheated market, the prices of assets are often overinflated and do not reflect their true value.

This creates a risk of a sharp correction, which could result in significant losses for investors who have overvalued their investments. 

Moreover, such a correction could lead to a chain reaction that could affect the entire market, causing panic selling and further price drops.

PEPE’s Correction, BTC’s Struggles Emphasize Asset Valuations In Volatile Markets

The report noted that the current drawdown in the cryptocurrency market has impacted investors’ ability to chase opportunities with other assets.

This means that investors are becoming more cautious and less willing to take risks, as they recognize the potential risks of an overheated market. 

Despite PEPE’s impressive 2,8931% hike in the last 30 days, it has since corrected, indicating that investors are starting to be more mindful of market fundamentals.

PEPE’s price on CoinGecko currently sits at a measly $0.00000169, having undergone a 24-hour slump of 2.7% and a seven-day decline of 11.5%.

Meanwhile, BTC is currently priced at $27,207.23, experiencing a 24-hour slump of 0.8% and a seven-day decline of 1.9%, highlighting its recent struggles in maintaining its upward momentum.

The current behavior of PEPE and the decline of BTC serve as a reminder of the potential risks that come with overvaluing assets and ignoring fundamental values. 

As the crypto market continues to evolve and attract more investors, it is essential to maintain a realistic perspective on asset valuations and not be swayed by market euphoria.

By doing so, investors can protect themselves from potential losses and contribute to a more sustainable and stable market in the long run.

(This site’s content should not be construed as investment advice. Investing involves risk. When you invest, your capital is subject to risk)

-Featured image from Ride Time

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Bitcoin Poised To Resume Its Inclination To Outperform, Says Bloomberg Senior Analyst

After the Bank of Japan (BOJ) announced a surprising turnaround in its monetary policy today, the Bitcoin price managed to rise near the important resistance level of $16,900. The BOJ announced that it will drastically widen its yield curve control band to 0.50%. At the same time, it announced that it will significantly increase the number of government bonds it will buy each month.

According to Bloomberg senior commodities analyst Mike McGlone, this trend could continue. McGlone shared his insights via Twitter and said that a “warm spell” is ahead for Bitcoin.

As the analyst notes, BTC has taken a beating as a risk asset in 2022 with most other cryptocurrencies, but “appears poised to resume its inclination to outperform.” This will happen when the U.S. Federal Reserve eases monetary policy and completes its pivot.

Bitcoin Is Set To Outperform When…

According to the chart from a Bloomberg Intelligence report, the levels that BTC and the Nasdaq 100 stock index have been resisting have now turned into support.

According to the analysis, the BTC price soared in 2020 and 2021 due to unprecedented fiscal and monetary stimulus, allowing it to outperform the stock index. McGlone further elaborated:

At a Bitcoin/ Nasdaq ratio of 1.5x on Dec. 16, what’s been consistent for most of the benchmark crypto’s history is its declining relative risk vs. the stock index. At 2x, Bitcoin’s annual volatility at the end of 2022 compares with 4x at the end of 2021.

In the coming year of 2023, McGlone expects that it will be a matter of how much lower global economies fall. Investors should by no means underestimate BTC then, as the risk/reward ratio is in favor of the leading cryptocurrency.

“Risk vs. reward appears to argue against under-allocating or estimating the propensity for Bitcoin to continue its trajectory toward becoming digital collateral,” McGlone claimed.

In other words, the Bloomberg analyst predicts that as soon as the U.S. Federal Reserve fires up its money printer again, cuts interest rates and returns to monetary easing, Bitcoin will “outperform” the rest of the market again.

In another tweet, McGlone predicted that the leading cryptocurrency will outperform the Tesla stock. “The near-certain decline in Bitcoin supply compared to the rising number of Tesla shares outstanding favors cryptocurrency outperformance when the rules of economics apply,” McGlone said.

BTC Price At Crucial Level

Meanwhile, the BTC price needs to crack the extremely crucial $16,900 level in the short term and could then have a strong continuation. If so, investors should then keep an eye on the next vital resistance in the $17,350 area.

Bitcoin BTC USD 2022-12-20

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U.S Federal Reserve Set To Hike Rates Above 400 BPs – How Will Crypto Market React?

The United States Federal Reserve is tightening, and interest rates hike has heavily impacted on the crypto market. Earlier this month, Bloomberg Analyst McGlone said Bitcoin would outperform traditional stocks as interest rates hike. However, to this point, Bitcoin does not seem to follow Bloomberg’s predicted trend.

As a matter of fact, despite Bloomberg’s bullish standpoint, Bitcoin and other cryptocurrencies are still in a crash. For example, BTC and ETH dropped by 2% after the Fed’s announcement and bounced back. But have now crashed again. BTC is currently trading below $19,000.

Bitcoin trends sidways below $19,000 l BTCUSDT on Tradingview.com

The Fed Reserve’s Federal Open Market Committee manages the economy during inflation and recession by controlling the money supply in the country. The Fed maintains the money supply via quantitative tightening and easing of reserves. As a result, a rise in interest rates triggers volatility in the market.

Inflation Would Drop To 2% By 2025, Says Federal Reserve

The Federal Reserve revealed its plans to tackle inflation at Thursday’s Federal open market committee meeting. The Fed 75bps interest rate hike is just the tip of the iceberg as it plans to raise the rates as high as 400bps by the end of 2022.

In August, the CPI indicated 8.3% YoY inflation, but the Federal Reserve forecasts inflation to come down to 2% by 2025. The Fed Reserve plans to bring inflation down to 5.4% by 2022 and 2.8% by 2023. Reports show that Fed raised this year’s interest benchmark by four times. The current rates are between 2.25% to 2.50%.

From the CNBN Fed Survey for September, Fed’s interest hike would remain at the peak rate for 11 months. John Ryding, the Chief economic advisor at Brean Capital, commented in response to the survey.

Ryding said the Fed has finally realized the inflation problem is critical. He thinks the Fed’s monetary tightening rate is a ‘positive real policy rate.’ The economist advises Fed to increase the current rate by 5%.

The survey reported that among 35 survey respondents, some economists, strategists, and fund managers think Fed might overdo its tightening.

Recession Would Hit Global Economy – World Bank

The World Bank says recession would hit the global economy because of the war-like monetary policies of the world economy.

Svan Henrich, the founder of Northman Trader, thinks interest rates would depend on recession than inflation in the next year. He thinks Jerome Powell, Chairman of the Fed Reserve, emulates Paul Volcker. Henrich further advised Powel to pivot before hitting the 40bps rates target. Paul Volcker is the former Chairman of the U.S Fed Reserves.

Jerome refused to say much about the recession, saying he didn’t know the depth or when the recession would occur. Meanwhile, Fed dismissed all speculations of recession.

Everyone awaits the release of the following inflation data in the Consumer Protection Index for September. In addition, the next Federal Open Market Meeting will take place on November 2.

Featured image from Pixabay, charts TradingView.com