Ruslan Lienkha, the head of markets at fintech platform YouHodler, has provided an analysis and forecast on the crypto sector in relation to the complex macroeconomic situation in the USA. The US Federal Reserve’s monetary policies have a significant impact on the fate of markets. Dollar inflation is still high, although it has decreased since the start of the year, and it seems that the Fed’s quantitative tightening phase will continue until the end of 2023. It is unlikely that any rate cuts on government bonds will be implemented until mid-2024.
The consequences of these dynamics for the crypto market are worth examining. Let’s delve into the details together.
Crypto markets and the USA economy: the Fed does not expect any interest rate cuts until mid-2024
Ruslan Lienkha, head of markets at YouHodler, has analyzed the macroeconomic environment in the US and its potential impact on the crypto market. Despite warnings of possible recession risks, the US economy remains strong as we enter the fourth quarter of 2023. This follows a period of interest rate hikes by the Federal Reserve over the past two years to slow down economic stimulus.
The US is currently facing financial challenges due to an ongoing war and uncontrollable dollar inflation. While there has been a slowdown in inflation over the past year, it remains at a high level comparable to the early 1990s.
According to projections from the FedWatch tool, there is an estimated 36% probability of a reversal in monetary policy by mid-2024, leading to quantitative easing. This would inject liquidity into various markets including cryptocurrencies.
Inflation in Europe is even more concerning, and upcoming European Central Bank meetings are expected to result in further rate hikes. Several European countries are already in recessions with ongoing housing crises and declining industrial production. China’s economic slowdown and problems in its banking and real estate sectors pose a greater risk of crisis and contagion in global markets.
While the US real estate market is not in a critical state, there are concerns about the debt ceiling crisis and banking issues. However, Wall Street analysts are less worried now compared to a few months ago, shifting from fears of an imminent recession to speculation about a soft landing.
The consequences for the crypto market: analysis and forecasts from YouHodler
Ruslan Lienkha and YouHodler have analyzed possible scenarios for the crypto market based on the Federal Reserve’s restrictive policy of increasing or maintaining interest rates until mid-2024. The cost of debt plays a significant role in speculative markets, as investors are incentivized to lend their capital in the bond market for high returns at low risk.
It is likely that Bitcoin and the overall crypto market will only experience strong price increases once the first rate cut occurs, which is estimated for June 2023. In the best-case scenario, BTC could reach $35,000 to $40,000 by the end of 2023. In the worst-case scenario, it is unlikely to fall below $20,000 due to key psychological resistance.
The performance of the crypto sector in the next three months will be influenced by the SEC’s decisions on a spot ETF for cryptocurrencies. Approval of the first ETF by Gary Gensler and his team is expected in late 2023 or early 2024. January or March 2023 are potential dates where multiple deadlines converge for SEC responses.
Despite short-term concerns about downward price trends and low trading volumes on exchanges, the long-term outlook for blockchain technology and institutional investor interest remains positive. By mid-2024, there could be a return of the bull market with Bitcoin’s fourth halving coinciding with issues related to the Fed’s monetary policies. Holders should stay patient during this period.
Hot Take: The Future of Crypto Amidst Complex Macroeconomic Conditions
The crypto market’s future is intertwined with the macroeconomic conditions in the US and globally. The Federal Reserve’s monetary policies, including interest rates and quantitative easing, have a significant impact on cryptocurrencies. Dollar inflation remains high, but a reversal in policy is not expected until mid-2024.
The consequences for the crypto market are dependent on various factors such as inflation, recessions in different regions, and regulatory decisions. While there may be short-term challenges and uncertainties, the long-term outlook for cryptocurrencies, particularly Bitcoin, remains positive.
Investors should consider the potential effects of the Fed’s monetary policies and other macroeconomic factors when making decisions about their crypto investments. Staying informed about market trends and regulatory developments will be crucial in navigating this complex landscape.
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