Bitcoin to crash to $26k as the Fed makes a disastrous mistake – Alfonso Peccatiello

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The Federal Reserve is making a policy error by tightening this year into an already slowing economy, said Alfonso Peccatiello author of The Macro Compass Newsletter.

“The bond market has been speaking very clearly since summer last year. The economy is going into a slowdown. The growth impulse has slowed down since the summer of last year. We’re still growing, still above trend by a bit, but the impulse of this growth has slowed down,” Peccatiello told David Lin, anchor for Kitco News.

Fixed income markets are showing signs of this slowdown.

“The bond market is talking via the yield curve. The yield curve is flattening very aggressively. The spread between the 5-year to 30-year part of the yield curve has flattened to very aggressive levels. On a metric I track, it’s actually inverted two sessions ago,” he said.

Inflation should also slow down and moderate by the second half of this year due to the deceleration of the credit impulse, Peccatiello noted, meaning that the pace of new money creation is slowing down.

“We accelerated big time, like a Ferrari, in credit creation in 2020, 2021, but now we are decelerating in credit creation big time. There is no new big fiscal stimulus. There is no new big bank lending, and so we have this cliff. In every credit sugar rush, there is always a credit cliff, unless the governments continue printing at the same pace and the banks continue lending at the same pace,” he said.

When central banks tighten into an economic slowdown, risk assets tend to underperform, Peccatiello said, noting that Bitcoin is one such asset that will see a significant pull-back.

“I’m short Bitcoin in my portfolio,” he said. “I’m targeting Bitcoin to drop to $26,000. We almost went there at the beginning of the year, we went to $30,000. We didn’t hit my target yet. I’m still short and I think we’re going to see quite a drawdown, and the reason is always the same. If you tighten into an economic slowdown you reduce the marginal risk appetite people have for very high beta risk assets like Bitcoin,” he said.

For more information on stocks, demographic trends, and the yield curve, watch the video above.

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