Bitcoin’s biggest loss since August has led market expert Andre Dragosch to predict more pain for the cryptocurrency in the coming weeks. The head of research Europe at Bitwise warned that the Federal Reserve is stuck between a rock and a hard place, leading to a cautious stance on rate cuts.
The ongoing supply deficit of bitcoin presents an opportunity for investors to “buy the dip.” However, Dragosch notes that the Fed’s hawkish rate projections have roiled sentiment in traditional markets, causing a 2% drop in the S&P 500 and a 0.8% gain in the dollar index.
The risk-off mood may persist due to rising interest rates and a stronger US dollar, which discourages capital inflows into riskier assets like cryptocurrencies and stocks. Dragosch believes that inflation could follow the 1970s model, with sticky CPI readings raising concerns at the Fed about a potential second wave.
Despite this, Dragosch stresses that bitcoin’s supply scarcity is a major bullish factor over the long run. The financial tightening caused by rising yields and the dollar index will eventually force the Fed to take action, he added.
“The big macro picture is that the Fed is stuck between a rock and a hard place,” Dragosch said. “They risk a significant acceleration in inflation if they cut rates aggressively, if they do little, the economy may suffer.”
Source: https://www.coindesk.com/markets/2024/12/23/more-pain-likely-market-expert-says-after-bitcoins-biggest-loss-since-august