Currently, traders are trying to puzzle out what policy moved the US Fed will take and how fast it will raise interest rates this year. One thing is obvious that aggressive monetary tightening will cause a large correction in the US stock market. However, someone is certain that the crypto market and bitcoin in particular will benefit from the Fed's hawkish policy. Experts at Allianz believe that the Fed's counter measures against soaring inflation will lead to the bullish trend of bitcoin, ethereum, and other altcoins. As soon as investors realize everything about inflation, they will have to cushion their savings, analysts at Allianz noted.
Analysts at the think tank point out three problems: persistent runaway inflation, a serious lag of the Federal Reserve from the real economy (talking about interest rates); the lack of tools for smooth taming and slowing down inflationary pressure. Let me remind you that quite recently the investment bank Goldman Sachs warned that there is a 35 percent chance of a recession in the US in the next two years.
Against this background, the long-term prospects for the cryptocurrency market do not seem to be as bad as many analysts foresee. In fact, the problem is not only in inflation, but in the challenge to the dollar's dominance in the world market. The recent plunge in the bitcoin value and its divergence from gold, and BTC's more serious correlation with the US stock market, has already made a lot of noise. For the time being, investors have so far classified bitcoin as a risky asset, and it has completely lost its status as an "inflation fighter", which gold has not lost yet.
However, the main argument in favor of cryptocurrency is diversification. At the time of sky-high inflation, this is very attractive. Considering that cryptocurrency has never played a serious role in this process, it is possible that it is the new progressive direction that will become the key for investors when choosing and searching for assets in which it is safer to sit out jitters unfolding.
Allianz believes that the reason why crypto, unlike gold, has benefited so much from all the liquidity injections is a tug of war between recognizing that liquidity is leaving the system and attractive investment opportunities in crypto as a diversifier. In simple words: free global liquidity is already gradually starting to flow into the crypto market where it is now in abundance. This will push prices higher and higher. As cryptocurrencies are recognized, the demand for them will only increase and the current prices are more attractive than ever before. In 3-5 years, it will not matter whether you bought bitcoin at $40,000 or at $50,000.
Allianz is sure that both gold and bitcoin will enjoy the maximum popularity among investors in the next few years. In this context, we will watch a rapid rally of these assets and it cannot be avoided.
Technical picture of bitcoin
The bulls entered the market urgently when BTC price retreated to the April lows. Although investors' still voice concerns, keeping the price above $39,000 calmed them down a bit. The bull market, which has been going on since the beginning of March of this year, has not gone away. Yes, the downward correction is quite large, but the bulls made it well and pushed the price above $41,200. This price action changed everything dramatically. The 200-day moving average around $48,550 doesn't seem so far away anymore, but active action around the 100-day moving average at about $41,220 is needed for the bulls to regain control over the market. Only a breakout of this range will open the door to the highs at $43,200 and $43,530. The fact that bitcoin is already receiving more support from large players may soften its fall after the recent data on inflation in the US, which seriously affected the US stock market, which is highly correlated with the cryptocurrency market. In the event of a decrease in the trading instrument, only a breakout of the level of $39,290 will push the trading instrument lower to a low at $37,500 and deeper to $36,000.
Technical picture of Ethereum
The focus remains on the new resistance of $3,140. A breakout of this level will quickly return Ethereum to $3,306, very close to a 200-day moving average, which is in the $3,480 area. If the price settles above this level, ETH will continue the uptrend. A breakout of $3,480 will serve as a new impetus that will open the door to higher levels: $3,540 and $3,685. If ETH comes again under downward pressure, traders might go long in the area of a major support of $2,950 where big players will again enter the market.
