The drop in today's session brought Bitcoin back below $ 20.000. For many, this fall could lead to a more massive one. According to the US bank Goldman Sachs, Bitcoin could even drop to one quotation of $ 12.000. Let's see what the financial giant bases this forecast on.
The Fed will raise rates again
For months now, inflation and the response of central banks have been the focus of the cryptocurrency market. At the forefront of these central banks is the Fed, the real barometer of the cryptocurrency market. To break the inflationary spiral, the institution has been conducting an aggressive rate hike policy for several months.
It is precisely in relation to a new rate hike that the American bank has published this forecast, to say the least pessimistic. While markets expected a further 0,5% rise in September and 0,25% in November, the consensus appears to have changed. Therefore, in September there could be a 0,75% increase in the benchmark interest rate, while in November the increase would be 0,50%. And some already warn of a potentially larger increase. This is in particular the case of the trader known under the pseudonym of “Doctor Profit”.
“Keep in mind the Fed's upcoming decisions. An interest rate hike of 0,75% is already discounted, 1% and we are seeing the blood ”.
Within a few months, the benchmark interest rate went from 0 to a range of 2,25% to 2,50%. And the ascent is not over. The current consensus is that 86% of economic agents expect a 0,75% increase at the next Fed meeting. The rest of the respondents expect an increase of one basis point. The answer will come next Wednesday, at the next meeting of the FOMC (Federal Market Open Committee), which will announce the extent of the increase.
Bitcoin and the cryptocurrency market remain correlated with equity markets
Although this relationship has not been evident at times, it is now clear. When the Fed intervenes, all risk markets react in the same direction. Although volatility is increasingly high in the cryptocurrency market, it is clear that the two markets are moving together. For many observers, this positive correlation, especially with larger indices such as the NASDAQ Composite, poses a problem. In particular, because these are indices composed mainly of technology stocks.
Sharon Bell, a strategist at Goldman Sachs, argues that the recent stock market rallies may just be a race to the top. The US bank recently said the stock market could drop by more than 25% if the Fed accelerates its rate hike policy. And with hindsight over the past few months, it's hard to imagine the drop wouldn't have been even more violent in the digital asset market.
These warnings from one of the most powerful banks in the world also coincide with an increase in short positions in Bitcoin. While private individuals are enjoying themselves, institutional investors are also following this trend. As the latest report from the Commodity Futures Trading Commission (CFTC) shows.
