The previous decade saw a trend where buying the dip and riding the typical corrections in Bitcoin proved to be profitable. However, it is unlikely that this strategy will continue to yield positive results in the future. According to analyst Nicholas Merten, there is a growing concern about the potential dangers in the upcoming years when it comes to trading and investing in Bitcoin, cryptocurrencies, and stocks.
The recent weakness in the short term, as indicated by the cumulative volume Delta and market order flow, suggests a shift in market behavior. People are now withdrawing their Bitcoin holdings and converting them into cash, indicating a decrease in liquidity and a lack of enthusiasm to buy the dip. This shift is not solely due to stablecoin liquidity issues but is also related to changing macroeconomic factors, particularly global central bank liquidity
He also discusses the historical trend of bond yields over the past few decades. He explained that there has been a downward trend in bond yields since around 1988, with interest rates on government bonds decreasing from an average of around 8-9% to just 0.5% over the past 30-35 years.
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The analyst said, “If Bitcoin is rallying from sixteen thousand to twenty six thousand, right, what do you think Jerome Powell is thinking right now? What do you think’s going through his mind when he sees Financial assets propping up like this? He sees that there’s still too much money in the system, too many people speculating and buying assets that they don’t really need to be buying right now during what should be a recession or contractionary period.”
Merten highlights the impact of central bank actions, particularly the Federal Reserve (Fed), in lowering interest rates and implementing stimulus measures during periods of economic downturn. However, the recent increase in bond yields, as represented by the blue flip on the U.S. 10-year yield chart, poses challenges for investments such as Bitcoin, cryptocurrencies, meme stocks, and Dogecoin.
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