March 25 REX Wire Market Outlook

With TradFi markets hitting new highs, bitcoin won't be far behind.

Is Bitcoin gearing up for another leg up?

Last week, US and UK Central banks kept rates on hold but their outlook is dovish. (In other words, lower rates are coming soon.) While inflation is still higher than either country would like, there are clear signs that they're willing to ignore that for now. Central banks won't wait until inflation is back to 2%, as Governor of the Bank of England, Andrew Bailey, said: "To cut rates, for instance, what we have to do is be convinced that it is going there. We should act ahead of time in that sense because we have to be forward looking."

Markets are more than happy with this approach. The S&P 500 hit another all-time high on Thursday, and the UK's FTSE 100 is also less than 2% from its ATH. Japanese stocks also rallied hard following the Bank of Japan's return to more normal monetary policy, as it left negative interest rates behind.

Bitcoin Gears Up

Bitcoin has been putting in a correction over the past 10 days, after peaking at $73,800. To date, it has hit a low of $60,800: a fall of $13,000, or 18%.

This is nothing out of the ordinary for bitcoin, which regularly puts in 30-40% corrections in the course of a bull market. This time around, the corrections have been shallower, with nothing (yet) beyond 20%. We might put that down to the excitement around the ETFs and the strong narrative building around Bitcoin: Dips are bought quickly, because no one wants to be left behind.

Last week saw consistent outflows from the ETFs, though that was all down to Grayscale. Every single day saw large outflows from GBTC, and the lower inflows to the other nine weren't enough to offset that. Still, the flood slowed towards the end of the week.

At time of writing, bitcoin is trading at $67,000, which is just below the 50% level from the high to the local low, so the path of least resistance in the short term is still downwards. Additionally, that old all-time high of $69,000 will act as resistance. Likely, though, this correction will not last much longer. Momentum may already be shifting after a strong close to the week.

As we've noted before, that would not necessarily be a good thing. The market has been getting very overheated, and this raises the possibility of a left-translated cycle: An early peak, then a long bear market. This would almost certainly mean a lower top for this cycle than would be the case with a more measured, sustainable rise.

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