Here’s how the Bitcoin price will be affected by the macro

[ad_1]

In a new interview, Charles Edwards of Capriole Investments shared his theses on Bitcoin for 2023. Looking back on the last few months, the renowned expert said that these have put the market in a position where Bitcoin offers “an excellent position for long-term investors”. ”

As Edwards noted, nearly every sentiment metric imaginable was within the “biggest or second biggest bearish” range in macro, stocks and crypto. “Almost anyone would have said on Twitter last year that we’re in a recession or approaching a recession,” the analyst continued.

Although Edwards acknowledged that the risk of recession is far from gone, many key indicators have come back a bit. Among them is the housing market, which often slows and dominates the overall economy.

“So there are a number of metrics that suggest things are slowing down a bit. You have all the big names in tech laying off employees and you see it in crypto as well. Cuts of 10% to 20% have not been unusual in recent months,” said the founder of Capriole Investments.

Moreover, he pointed out an interesting fact: whenever inflation peaked above 5% and then fell more than 20%, the US central bank pivoted. This observation has been true for 60 years. “So I think there’s a strong likelihood that the Fed will stop raising or cutting rates,” Edwards concluded and added:

And then we have this deep value situation in crypto that has been going on for the last 3 or 4 months. […] And all of this creates a great opportunity for long-term investors in crypto and stocks, as well as risk assets in general.

Fed Pivot will propel Bitcoin higher within 6 months

In general, it is difficult to predict when there will be a regime change at the Fed. However, Edwards believes this will happen within the next 3-6 months. After the forced liquidations in the Bitcoin market over the past 12 months, there is currently no significant selling pressure.

Therefore, according to the founder of Capriole Investments, there will be a liquidity crunch on the sell side once larger numbers of Bitcoin buyers return to the market, leading to an upward squeeze. “And we saw that kind of short squeeze play out in the first few weeks of January.”

As for the Fed’s pivot, investors should keep an eye on specific data. While the consensus now appears to be that the Fed will change monetary policy, there are still risks. Edwards recalled history in this regard, warning that inflation could rise again.

In the 1970s inflation was on a roller coaster ride and it could be for the next 5-10 years as well. But I think the base case for me is at least a break in rates this year, at some point in the coming months.

Moreover, investors should be cautious when employment remains very high. It is “probably the most important factor leading to recessions”. While that data point is still incredibly strong right now, it could change “month to month” given layoffs in the big tech sector, according to Edwards.

Equities are also worth considering, he said. If they hit new highs, or earnings are very strong, manufacturing picks up, and inflation is still in the 5-6% range, the Fed might think it can continue because all is well. However, Edwards’ base case looks different:

I think 2023 will be a positive year overall as Bitcoin price is likely to be higher at the end of the year […]but there will be a lot of volatility.

At press time, Bitcoin was trading at $23.115.

Bitcoin Price Above $23,000, 4-Hour Chart | Source: BTCUSD on TradingView.com

Featured image from iStock, chart from TradingView.com

[ad_2]