Recommended by Christopher Vecchio, CFA
Download the full Bitcoin Q4 forecast!
All things considered, 3Q’22 wasn’t too bad for cryptocurrency markets and Bitcoin prices in particular, which have fallen around -4.5% over the past three months. Admittedly, it was better than 2Q’22 when Bitcoin took a discount of more than -50%. While some may see this as a silver lining – losses are slowing – the truth is that the factors that drove cryptocurrency markets in 2022 remain in place as 4Q’22 approaches.
Fundamental analysis doesn’t matter…
We could spend this time trying to make a fundamental argument for why cryptocurrency markets and Bitcoin prices have better days ahead. We could highlight the increase in the number of active addresses (as sender or receiver) during 3Q’22, or that the total hash rate of the Bitcoin network has increased since the beginning of July.
Yet the fact is that none of these prospects matter as long as Bitcoin prices continue to trade like a high-beta tech stock: the 50-day correlation between Bitcoin prices and the US Nasdaq 100 was +0.90 on September 23.
…as long as central banks raise rates
The current harsh reality is that the cryptocurrency and Bitcoin markets represent, or at least are treated as, a highly speculative risk asset. It should be noted that Bitcoin is treated as a long-lived asset. In a world where central banks, especially the Federal Reserve, continue to hike interest rates, long-lived assets will suffer. It’s a single trade right now: rising Fed rate hike odds push up US Treasury yields, which are supporting the US dollar, weighing on gold prices, stocks and cryptocurrency markets. Until the macro environment changes, there is little reason to believe Bitcoin prices will be able to stage any sort of meaningful recovery. The 4Q’22 will probably be a continuous work, no different from the 3Q’22.
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