LMAX Digital’s Joel Kruger argued that current crypto market weakness is “more about a sell-the-news effect and overdue technical correction than anything else.”
But there’s more at play, of course, as uncertainty around the US economy’s outlook spurs a risk-off wave.
As YouHodler markets chief Ruslan Lienkha points out: Last year showed that bitcoin’s consolidation phase can last several months (even half a year) before the next upward move.
But, he argued, the current market environment presents more complexities.
“Pessimism has prevailed in the US stock market, and concerns about a potential recession in the US are growing,” Lienkha said in an email. “Given these factors, the current consolidation phase could evolve into a medium-term bearish market.”
Indeed, Donald Trump talked of a “period of transition” when asked about a possible recession. The S&P 500 and Nasdaq Composite indexes were down 2.8% and 4.3% on the day, respectively, as of 2:10 pm ET.
Still, Kruger believes bitcoin is getting closer to finding a bottom before a recovery in Q2. And the asset “should be exceptionally well-supported” at the previous resistance area between $69,000 to $74,000.
Kruger previously told me BTC’s store-of-value narrative could help it break away from “misleading” correlations to traditional risk assets.
But Lienkha notes: “While bitcoin has the potential to evolve into a hedging asset in the future, it is currently perceived by investors as a high-risk asset, often reacting to broader market sentiment even more strongly than traditional financial markets.”
So we’ll be watching the stock market.
After the European Central Bank cut rates for a sixth time last week, industry watchers also continue to keep an eye on how economic data could impact the Federal Reserve’s rate-cutting cycle. And the ripple effect of that.