"Bitcoin won't do anything until the macro madness between the Fed and Credit Suisse is resolved"
October is off to a good start in the major financial markets after a nightmarish September for stock markets and the bond market. Despite the fact that cryptocurrencies seem to be going their own way, experts stated there will be no significant moves until the madness on the macro and fundamental front is resolved. Bitcoin holds around $19,500 on Monday and spent the weekend between $19,000 and $20,000, after last Friday's U.S. labor market figures hit the digital token and caused it to take a distance from this latest price level, which experts considered psychologically relevant.
There are several issues to overcome. In addition to the movements of the US Federal Reserve (Fed) and the rumors of whether or not it will turn around its restrictive monetary policy of recent times, the bond market and Credit Suisse´s case are also dominant. Bitcoin has proven to be highly correlated with the US central bank and will not be left on the sidelines if an event similar to the Lehman Brothers bankruptcy occurs with the aforementioned Swiss bank.
"On the fundamental side, what matters is the dollar index and the Fed's monetary policy stance," commented Naeem Aslam, an analyst at Avatrade. The strength of the US dollar weighed on Bitcoin´s price and cryptos and the US employment data, which despite showing that employment remains tight, evidence that unemployment is declining, "will give more confidence to the Fed to take a more aggressive approach with monetary policy to control inflation. This scenario may not be healthy for Bitcoin´s price," he noted.
The US central bank and rumors about a halt in interest rate hikes or at least the start of their reduction have given investors new opportunities. "A turn in this direction would be bullish for the market," stated Lark Davis, founder of The Wealth Mastery. The expert also believes that the US inflation data to be released on October 13 will be a key market-moving event that will give a clearer picture of whether the central bank will stay the course or not.
Still in the realm of monetary policy, central banks in the UK, China and Japan have taken to intervening in the market, demonstrating "their willingness to print money," commented Davis, and that is no small matter and illustrates to a large extent "the madness" of the current moment.
On top of that, Credit Suisse is in dire straits. The bank has $1.5 trillion of assets under management and there is talk of "a failure with catastrophic repercussions." "Many other banks are also taking big hits, including Deutsche Bank, which has 1.3 trillion in assets under management," Davis recalled. "You have to remember that many of these banks are deeply interconnected and a crisis at one of them can spread like wildfire," he added.
Finally, experts also alluded to the poor state of the bond market, which has suffered the biggest loss in market value in its history, even worse than in 2008.
"The rise of the dollar, the plunge in stocks and the chaos in the bond market indicate that something is about to break seriously and that the failure of a major bank, possibly two, could be the straw that breaks the camel's back," stressed Davis. As for cryptocurrencies, he emphasized that "we are still mired in the bear market, and things may get worse before they get better."