The Impact of Liquidity Contraction and Federal Reserve Hawkish Policy on the Cryptocurrency Market
Date: 2023-09-23 Author: Dima Zakharov Categories: CRYPTO PAYMENTS
Nicholas Merten on the Cryptocurrency Crisis: Causes and Consequences
1.Analysis of the Current State of the Cryptocurrency Market
Recently, the crypto community was shaken by a warning from renowned observer Nicholas Merten, who, on his YouTube channel with over 500,000 subscribers, shared a grim forecast for the future of Bitcoin and the cryptocurrency market as a whole. According to him, the capitalization of Bitcoin could shrink by an astronomical $440 billion, and the price of the most popular cryptocurrency will drop by 43%.
At the time of publishing this news, the total cryptocurrency market capitalization stood at $1.1 trillion, with Bitcoin's price at $26,584. Moreover, over the past week, Bitcoin has only lost 0.8% of its value. These figures raise questions about what is truly happening in the market.
2.The Hawkish Policy of the Federal Reserve and Its Influence
Merten believes that the primary reason for the impending crisis in the crypto market is the reduction in liquidity. This process is driven by the Federal Reserve's hawkish policy, which is leading to a weakening of the stock market. The reduction in liquidity may result in decreased investments in cryptocurrencies, as many investors may prefer to keep their funds in more stable assets.
Evidence of this theory can be seen in the decline of stocks of giants like Apple and Microsoft. Additionally, bond yields are rising, making them more attractive to investors, while the dollar is becoming scarce.
3.Outlook for Bitcoin and Other Cryptocurrencies
Nevertheless, Merten hints at some optimism. He claims that the best-case scenario for investors who have already invested in cryptocurrencies is that the market will find support at previous lows. For Bitcoin, this is likely to be around $15,000 to $16,000.
Merten also emphasizes that Bitcoin and other cryptocurrencies perform best during periods of monetary expansion. Such periods are characterized by the emergence of new money and credit in the economy. Therefore, if the global economy recovers from the current downturn and returns to growth, it could contribute to the recovery of the crypto market.
Nicholas Merten's current troubling forecasts and warnings require investors to exercise caution and be prepared for possible changes in the cryptocurrency market. However, like any other financial market, cryptocurrencies are subject to cycles of growth and decline. The key is to stay informed, analyze data, and be prepared for any scenario.
