Markus Thielen from 10x Research announced a change in his crypto approach due to increasing financial strains and market volatility, according to a recent investor update. Thielen, a prominent figure in the analysis field, expressed concern over risk assets, including tech stocks and cryptocurrencies, being negatively impacted by unexpected and persistent inflation.
Based on Bank of America’s predictions, US headline inflation as measured by the Consumer Price Index (CPI) could hit 4.8% by the time of the November 2024 election. Over the previous three-month period, the average increase in CPI has been 0.4% per month. This rate of growth would more than double the Federal Reserve’s desired inflation level of 2%.
Why 10x Research Sold (Almost) All Crypto And Risk Assets
Due to recent economic changes, 10x Research chose to sell off risky assets. The US bond market now predicts fewer than three Federal Reserve interest rate reductions in 2023, a notable shift from earlier optimistic predictions. According to the CME FedWatch tool, most investors believe that the Federal Reserve will not lower rates before their September meeting of the Federal Open Market Committee.
This month, the 10-year Treasury Yields have hit a high of 4.61%, which is the highest rate since November 2023. This development makes the investment climate more challenging for riskier assets such as technology stocks and cryptocurrencies.
“Thielen expressed worry in his note that risk assets, including tech stocks and the Nasdaq, could experience a large price decrease soon. In response, we sold all our tech stocks last night, and currently hold only a few strongly believed-in crypto coins. Our outlook remains negative towards risk assets.”
The pessimistic viewpoint towards Bitcoin is reinforced by the underperformance of Bitcoin ETFs listed in the US. Although the SEC gave the green light to over a dozen such ETFs in January, leading to a significant increase in Bitcoin prices, the rate at which money has been flowing into these funds has noticeably decreased. In fact, this month, the average daily net investment into these ETFs dropped to zero, a significant shift from the approximately $12 billion that had poured into them earlier in the year.
Thielen’s remarks additionally discussed the larger consequences of the forthcoming Bitcoin network’s quadrennial halving, set for April 2021. During this occurrence, the remuneration for mining a Bitcoin block will be cut in half, from 6.25 BTC to 3.125 BTC. Typically, these halvings have ignited optimistic feelings and price surges because of the perceived scarcity of Bitcoin. However, Thielen proposes that the present market circumstances may weaken any possible rallies.
“It is essential to understand that trading is a continuous game with high-conviction opportunities. The key is to keep analyzing the markets and uncovering those opportunities when the odds are in your favor. There are times when we advocate for a total risk-on approach and when the priority is safeguarding your capital, enabling you to seize opportunities at lower levels,” Thielen stated.
During an intriguing conversation with Matthew Graham of Ryze Labs, Thielen boldly defended his company’s trading approach in the face of accusations for supposedly unpredictable actions. Graham brought up 10x Research’s inconsistent Bitcoin predictions as evidence, referring to a research note from early April that forecasted a possible surge to $80,000, then a more cautious perspective, and the recent market downturn.
Thielen answered, “To be honest, we haven’t taken any action since March 8th. When our triangle breakout didn’t pan out, we set a stop loss at $68,300 as part of our risk management strategy in crypto trading.” This explanation underscores the inherent volatility of cryptocurrency markets and the importance of being adaptable to swift market shifts.
Thielen expressed confidence, looking forward to a robust return to the market when conditions improve: “I’ll be buying heavily at $52,000 – my word.”
At press time, BTC traded at $63,045.
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2024-04-16 16:16